February 9, 2010 / 12:20 PM / in 8 years

UPDATE 4-Agrium posts lower earnings, but eyes recovery

* Q4 EPS $0.19 vs $0.79 a year earlier

* Excluding items, Q4 EPS $0.53

* Shares up more than 5 pct in Toronto, New York (Adds analyst comment, background, estimates, share price move; in U.S. dollars unless noted)

By Euan Rocha

TORONTO, Feb 9 (Reuters) - Agrium Inc AGU.TO reported a drop in fourth-quarter profit on Tuesday, hurt by lower selling prices for its fertilizer, but said it expected increasing sales volumes to boost 2010 results.

The Canadian fertilizer farm products company also said it remains committed to its hostile takeover bid for U.S.-based rival CF Industries CF.N.

The year-long battle, along with other acquisitions and M&A rumors have kept the fertilizer sector in the investor spotlight, despite a sharp market correction. [ID:nN23151086] [ID:nN14179782] [ID:nLDE60R1SH] [ID:nN19132987]

“The fourth quarter of 2009 saw the initial stages of recovery in the crop input sector,” Chief Executive Mike Wilson said in a statement. “We have seen increasing demand for domestic potash and a tight supply situation for nitrogen and phosphate products.”

Grain and fertilizer prices peaked in mid-2008, but the global economic crisis and collapse in credit markets hurt fertilizer demand and pricing in 2009. Analysts and producers expect a major rebound in demand in 2010 as farmers rush to replenish their soil nutrient levels.

“We are seeing increasing signs that demand for crop nutrients and other crop inputs will be strong in the coming spring, despite some recent weakening in crop prices,” Wilson said.

Wholesale sales volumes of three key crop nutrients -- nitrogen, phosphate and potash -- rose more than 44 percent to 2.3 million tonnes in the latest quarter.

“The volumes were very good across the three nutrients in the wholesale business,” said Atlantic Equities analyst Colin Isaac. “So that is very encouraging.”

Agrium shares rose 5.3 percent on the Toronto Stock Exchange to C$65.28 on Tuesday morning and were up 5.7 percent at $61.05 on the New York Stock Exchange.

WEAKER SALES

Quarterly sales fell 24.4 percent to $1.5 billion on significantly weaker crop nutrient prices.

The fertilizer maker and agricultural products retailer reported net income of $30 million, or 19 cents per share, down from $124 million, or 79 cents per share, a year earlier.

Excluding certain items, the company said earnings were 53 cents a share.

Analysts, on average, had forecast earnings of 24 cents a share, according to Thomson Reuters I/B/E/S.

“While operating results are better than expected, below the line items contributed substantially to the outperformance versus expectations,” Sterne Agee analyst Mark Connelly said in a note to clients.

Calgary, Alberta-based Agrium, which is already the largest agricultural products retailer in North America, remains focused on expanding its retail asset base -- in 2009 the company acquired more than 50 retail outlets.

However, some analysts noted that Agrium’s retail results were weaker than expected, as volume increases at the retail level were not as strong as those on the wholesale side.

“It’s quite an interesting snapshot of where the fertilizer industry is at the moment. There is pipeline restocking going on in the channel, but at the moment it has not come through at the retail level, because of the short fall application season,” said Isaac of Atlantic Equities.

Weather conditions in North America caused delays in 2009 spring plantings and led to a late harvest, which gave farmers a very small window for fertilizer applications over the fall.

However with the coming spring planting season, retail sales volumes of fertilizers are expected to rise sharply, in comparison to the lean application rates of a year ago. (Reporting by Euan Rocha; editing by Derek Caney, Lisa Von Ahn and Rob Wilson)

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