November 3, 2011 / 11:10 AM / 6 years ago

UPDATE 3-Agrium profit surges but shares slip

* Q3 EPS $1.85 vs $0.39 a year earlier

* Continues to see strong fertilizer demand in 2012

* Shares down about 2 pct in morning trading (Recasts, adds analyst’s comment, updates share price move. In U.S. dollars unless noted)

By Euan Rocha

TORONTO, Nov 3 (Reuters) - Agrium (AGU.TO) reported a more than threefold increase in its quarterly profit on Thursday on gains in its retail business, but its shares fell 2 percent as sales volumes at its wholesale fertilizer business were weaker than expected.

Calgary-based Agrium said its retail business was lifted in the third quarter by higher sales and gains from acquisitions. At its wholesale business, sales rose on higher prices for nitrogen-, phosphate- and potash-based nutrients, but sales volumes were weaker than some analysts had expected.

The company said volumes were lower because strong sales in June resulted in a drop in inventory at the start of the quarter. Volumes were also hit by subdued buying by some distributors and retailers, and by lower nitrogen production volumes in the period.

Agrium, which owns the biggest farm-products retail network in North America, said that recent global economic uncertainty and volatility has not dented the strong drivers supporting demand in agricultural and crop input markets. It said it expects the continued strength in crop prices to push farmers to optimize crop acreage and yields.

“We expect the strength in our business to extend through the fall application season and into 2012,” Chief Executive Mike Wilson said in a statement. “The outlook for Agrium’s businesses and products is excellent.”

Just as larger rival Potash Corp (POT.TO) did last week, Agrium warned, however, that some fertilizer dealers may delay purchases for as long as possible to ensure they hold minimal inventories given the recent volatility in the global economy.

Many fertilizer dealers were forced to book huge writedowns on inventory held during the 2008-09 downturn and have since taken a more cautious approach on restocking. [ID:nN1E79P2GK]

“While we expect a strong fall application season will drive high near-term demand for Agrium’s wholesale fertilizer products, a continued macro overhang could result in lower than previously anticipated restocking demand,” Susquehanna analyst Don Carson said in a research note.

The company forecast fourth-quarter earnings of between $1.80 and $2.30 a share. Analysts, on average, are expecting earnings of $2.07, according to Thomson Reuters I/B/E/S.

Net income in the quarter ended Sept. 30 rose to $293 million, or $1.85 a share, up from a year-earlier profit of $61 million, or 39 cents.

Shares of Agrium were down C$1.66 at C$80.61 in morning trading in Toronto, while its New York-listed shares were down $1.69 at $79.72.

$1=$1.01 Canadian Reporting by Euan Rocha; editing by Peter Galloway

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