Agrium reports “best ever” quarter; net earnings up over 60 percent

Agrium Inc. reported its highest ever quarterly earnings last week, with earnings for the second quarter ending June 30, 2007, of $229 million ($1.70 per diluted share) on sales of $2.09 billion, up more than 60 percent over the year-ago $142 million ($1.06 per share) and $1.87 billion, respectively. Net earnings for the first half were also a record at $218 million ($1.63 per share) on sales of $2.95 billion, up from the year-ago $94 million ($.71 per share) and $2.56 billion, respectively.

“Agrium’s record second quarter earnings were due to excellent results from all three of our strategic business units,” said Agrium President and CEO Mike Wilson. “This quarter is a reflection of both the earnings power and future potential for these businesses and we remain committed to our strategy of further diversifying and growing our businesses and products.”

Wilson said Retail operations reflect the synergies captured from the 2006 Royster-Clark acquisition, as well as strong agriculture fundamentals. The Wholesale segment had its best ever quarter, with record or near record margins across all product lines. In the meantime, results doubled at the company’s Advanced Technologies business.

Results were strong enough to offset a few negative factors, including less nitrogen production at Kenai due to colder weather in the second quarter (59 operating days this year versus the year-ago 92 days). The coldest winter in Argentina in 50 years also impacted the Profertil plant, which was down 19 days in May and June due to gas supply interruptions. This problem continued through July, and the company is hopeful the plant will return to production soon. Regardless, Agrium noted that international urea prices have been under pressure due to Chinese tons.

In the Wholesale business, second-quarter nitrogen sales were $556 million versus the year-ago $494 million, though volumes were off slightly at 1.631 million mt versus 1.651 million mt. Average selling prices were higher, at $341/mt versus $299/mt. Gross profit was $185 million, up from $116 million. Six-month nitrogen net sales were $835 million on volumes of 2.64 million mt ($316/mt) with gross profits of $239 million, versus the year-ago $709 million, 2.35 million mt ($302/mt), and $148 million, respectively.

In addition, phosphate margins have been impacted by a stronger Canadian dollar and the purchase of higher-cost Moroccan phosphate rock for the Redwater facility to supplement rock from the Kapuskasing mine. According to the company, CN rail delays from Kapuskasing were a problem in the quarter, impacting Redwater production. Agrium has been working its way through its last shipment of Moroccan rock, with no plans to buy more in the near term.

Wholesale second-quarter phosphate sales were actually up, at $145 million versus the year-ago $122 million, though volumes were down to 335,000 mt from 377,000 mt. The average selling price was up, however, at $433/mt versus $324/mt. Gross profit was up, at $35 million from the year-ago $14 million. Six-month phosphate net sales were $219 million on volumes of 532,000 mt ($412/mt) and gross profits of $45 million, versus the year-ago $170 million, 522,000 mt ($326/mt), and $19 million, respectively.

Wholesale second-quarter potash sales were up, as were volumes. Sales were $95 million on volumes of 535,000 mt, up from the year-ago $67 million and 377,000 mt. Average prices were level at $178/mt. Gross profit was $51 million, up from $36 million. Six-month potash sales were $147 million on volumes of 868,000 mt ($169/mt) and gross profits of $77 million, versus the year-ago $113 million, 643,000 mt ($176/mt), and $57 million, respectively.

Agrium has a robust outlook going into the second half, saying nitrogen is balanced, potash is balanced-to-tight, and phosphates remain firm due to strong global demand.

In other news, Agrium Inc. said Aug. 3 that it intends to file a preliminary short form prospectus with the Canadian securities regulatory authorities in each of the provinces of Canada, and a shelf registration statement with the Securities and Exchange Commission (the SEC) in August 2007. The filings will provide Agrium with additional financing flexibility to reduce outstanding indebtedness; finance future growth opportunities, including acquisitions and investments; and finance capital expenditures, as well as for general corporate purposes. The filings will allow Agrium to offer, from time to time over a 25-month period in Canada and the United States, up to US$1 billion of debt, equity, and other securities.

Should Agrium offer any securities, it will make a prospectus supplement available that will include the specific terms of the securities being offered. Agrium currently has no specific intention to offer or trade any securities under the planned universal shelf prospectus and registration statement.

Agrium also announced its intention to withdraw its existing Canadian debt shelf prospectus and U.S. shelf registration statement dated May 15, 2006, concurrent with the filing of the planned universal shelf prospectus and registration statement.