Agrium 3Q net income off 93 percent; expects excellent year in 2010

Agrium Inc. reported that third-quarter net income was off 93 percent, to $26 million ($.16 per diluted share) on sales of $1.89 billion, versus the year-ago $367 million ($2.31 per share) and $3.18 billion, respectively. This was in line with earlier estimates (GM Oct. 26, p. 10). The results included an inventory write-down of $9 million, primarily associated with Wholesale purchase for resale business.

Nine-month net income was $336 million ($2.13 per share) on sales of $7.83 billion, versus the year-ago $1.2 billion ($7.54 per share) and $8.3 billion.

Agrium estimates that North American fertilizer demand in the last fertilizer year declined 5-10 percent for nitrogen, 25-30 percent for phosphate, and 40-50 percent for potash. It expects nutrient demand at the farm level to rebound in late 2009/early 2010 to show increases of at least 5 percent in nitrogen, 20-25 percent in phosphate, and 30-35 percent in potash.

“We do not believe that farmers will put crop yields at risk two years in a row given the cumulative impact this could have,” Agrium President and CEO Mike Wilson told analysts. “If fall weather reduces fertilizer application to below normal levels, 2010 spring application is expected to be exceptional. And we believe the fundamentals are set for 2010 to be an excellent year overall for our agricultural products and services.” Wilson said if you look at everything playing out, he does not see why it will not be a “knock-your-socks-off spring.”

As for the pivotal Chinese potash contract, Wilson said that while he hopes it will settle by the end of the year, it is traditional for them to settle at the last minute. “So we do not see it happening until getting into the first quarter.” For the first nine months, Agrium potash sales were off almost 1 million mt, to 410,000 mt from the year-ago 1.4 million mt.

Third-quarter Wholesale net earnings were down, to $83 million on sales of $658 million, versus the year-ago $412 million and $1.6 billion. Nine-month earnings were $355 million on sales of $2.3 billion, versus the year-ago $1.37 billion and $3.7 billion.

Third-quarter Retail net earnings were $31 million on sales of $1.23 billion, versus the year-ago $121 million and $1.6 billion. Nine-month net income was $220 million on sales of $5.4 billion, versus the year-ago $534 million and $4.5 billion.

Advanced Technology showed no third-quarter net earnings versus the year-ago $10 million. Sales sank to $60 million from $90 million. Nine-month net earnings were $9 million on sales of $209 million, versus the year-ago $27 million and $276 million.

Agrium is providing guidance for the second half 2009 of $.30 to $.60 per diluted share.