Agrium reports second-best quarter, says stage set for strong fall season

Agrium Inc.’s net earnings for the second quarter ending June 30, 2010, were second best in its history. Net earnings were $506 million ($3.20 per diluted share) on sales of $4.4 billion, up from the year-ago $370 million ($2.35 per diluted share) on sales of $4.1 billion.

“We believe crop nutrient inventories for North American retailers and distributors is currently very low for virtually all products, and that major restocking will be required as we enter the fall season,” Mike Wilson, Agrium president and CEO, told analysts. “This factor, combined with the tightening world market and higher crop prices, should set the stage for a strong 2010 fall season.” He said an early harvest and high grain prices will make farmers more likely to apply fertilizer. Wilson cited USDA’s continued downgrade of world grain stock projections, as well as severe droughts in Russia and Europe.

In addition, Agrium estimates that as many as 10 million acres did not get planted in Western Canada due to wet weather. Although this impacted Agrium’s results, the company said the impact was offset by its balanced portfolio. While April saw good weather in the U.S, Wilson said May and June saw wet weather that adversely impacted seeding and application levels.

Agrium noted that it had a reduction in equity earnings in the quarter due to a retroactive change in tax status for its Egyptian investment. The government imposed a tax rate of 20 percent on earnings, resulting in a $7 million charge for the quarter. Agrium said it is protesting the government ruling.

For the third quarter, Agrium says it has sold 75 percent of its potash, 90 percent of its phosphate, 45 percent of its ammonium sulfate, and 80 percent of its nitrogen. Approximately 25 percent of the fourth quarter is sold. These forward sales were at market benchmarks occurring in the past 60-90 days.

Agrium said its retail business inventories were down about 50 percent from year-ago levels as of June 30. However, it said retail is now fairly well covered for the fall season.

Second-quarter retail net earnings were $360 million on sales of $3.34 billion, up from the year-ago $283 million on sales of $3.15 billion.

Second-quarter wholesale net earnings were $285 million on sales of $1.04 billion, up from the year-ago $215 million on sales of $950 million. The company saw a huge surge in potash volumes, to 529,000 mt versus the year-ago 61,000 mt. Average prices dropped to $355/mt from the year-ago $770/mt. Potash sales were up, at $188 million from the year-ago $47 million.

Second-quarter advanced technology earnings were $15 million on sales of $138 million, up from $8 million on sales of $82 million.

Six-month net income was $499 million ($3.16 per share) on sales of $6.28 billion, up from the year-ago $310 million ($1.97 per share) on sales of $5.9 billion.

Six-month retail income was $288 million on sales of $4.4 billion, up from the year-ago $189 million on sales of $4.2 billion.

Six-month wholesale income was $425 million on sales of $1.83 million, up from the year-ago $272 million on sales of $1.64 billion.

Six-month advanced tech income was $14 million on sales of $201 million, up from the year-ago $9 million on sales of $149 million.