Agrium's Q3 profit soars, Q4 to flatten

Agrium Inc. posted a record third-quarter profit as soaring prices translated into exploding earnings for the fertilizer heavyweight.

The Calgary-based company made $367 million US, or $2.31 a share, for the latest three-month period, nearly a seven-fold increase compared to the July-to-September period last year when Agrium earned $51 million, or 38 cents a share.

"These impressive third-quarter results demonstrate the strength of Agrium's diverse product and asset mix, and our ability to make and integrate strategic acquisitions," said Mike Wilson, Agrium's president and chief executive officer.

Higher prices

Agrium has benefited from rising output prices as what the company sells potash, nitrogen and phosphate for jumped by the end of the third quarter of 2008 compared to 2007.

Selected output prices (US$/tonne)Q3 '08 Q3 '07 Potash 655 334 Nitrogen 594 184 Phosphate 1,321 484Source: Agrium Inc.

As well, in the past year, the company acquired UAP Holdings Inc., a move that created North America's largest retailer of crop inputs and services, and a 70 per cent stake in Common Fertilizers SA, a big European fertilizer distributor.

Both purchases boosted Agrium's sales and profit in the most recent quarter.

Agrium posted Q3 revenue of $3.18 billion versus sales of only $1.043 billion for the same period one year earlier.

Outlook cloudy

In his press statement, however, Wilson said that prices had dropped one-third in the past few months, meaning that the price benefit the company enjoyed in the quarter might begin to disappear.

Still, the food production sector, Agrium's main customer, probably will not be as hard hit as other industrial areas while the financial crisis spreads throughout the economy.

"Global financial markets, particularly commodity prices, have been severely impacted by the global credit crunch and associated economic uncertainty ... Overall, we believe that global crop fundamentals remain much more positive than current prices would indicate, " Wilson said.

As a result, the company has widened the range for its projected second-half earnings to between $3.30 and $4 a share.

Three month stock chart for Agrium Inc.

Given Agrium's third-quarter earnings of $2.31, that implies the company expects to make between 99 cents and $1.69 a share in the final three months of the year.

At the low end of that range, Agrium would see its earnings drop 44 per cent in the October-to-December period compared to the $1.24 the firm made in the fourth quarter of 2007.

At the higher end of its earnings range for Q4 2008, Agrium's profit would enjoy 36 per cent bump up versus its gain for the same period one year earlier.