Agricultural nutrients maker Agrium Inc. (AGU, AGU.TO) on Tuesday posted a steep decline in fourth-quarter profit, hampered by lower selling prices. However, the company said it sees increasing signs of strong demand for crop nutrients and other crop inputs.
The Calgary, Canada-based company's fourth-quarter net income was US$30 million or US$0.19 per share, compared to US$124 million or US$0.79 per share in the prior-year quarter.
The most recent quarter results comprised losses of US$35 million or US$0.17 earnings per share on gas and other hedge positions and a US$34 million expense in stock-based compensation. On average, 14 analysts polled by Thomson Reuters expected the company to post earnings of US$0.24 per share. Analysts' estimates typically exclude special items.
Quarterly sales fell to US$1.50 billion from the previous year's sales of US$1.99 billion. Net sales, which include direct freight, for the latest quarter slipped to US$1.44 billion from US$1.94 billion reported a year earlier, and fell short of the US$1.55 billion revenue consensus estimate of nine Street analysts.
Mike Wilson, President and CEO of Agrium, said, "The fourth quarter of 2009 saw the initial stages of recovery in the crop input sector. We have seen increasing demand for domestic potash and a tight supply situation for nitrogen and phosphate products. Wholesale sales volumes were substantially higher this quarter across all products than the fourth quarter of last year, despite the shortened fall application season."
The company's Retail segment generated fourth-quarter net sales of US$738 million, compared to US$1.0 billion in the fourth quarter of 2008. Within this segment, Crop nutrient net sales were US$431 million, down from US$631 million a year ago. The company noted that lower crop nutrient prices for the primary nutrients more than offset an increase in sales volumes compared to last year. While crop nutrient sales volumes were above last year's levels, they were still 20% below expected volumes due to the shortened fall application season.
Crop protection net sales dropped 19% to US$234 million from US$288 million last year, largely due to lower sales prices for glyphosate, which was partially offset by an 83% growth in glyphosate volumes. Net sales for seed, services and other declined 29% to US$73 million from US$103 million a year earlier, and seed sales plummeted 65% to US$16 million due primarily to less wheat acres being planted.
Wholesale segment's net sales were US$716 million for the fourth quarter of 2009 compared to US$982 million for the fourth quarter of 2008. Potash sales volumes were 353,000 tonnes, up 25% from the prior year, while Phosphate sales volumes climbed 69% to 232,000 tonnes. During the most recent quarter, nitrogen sales volumes grew 35%.
Fourth-quarter net sales for the Advanced Technologies were US$95 million, up from the previous year's US$76 million, boosted by the inclusion of the new turf and ornamental business that was transferred from Retail to Advanced Technologies in 2009.
For the full-year 2009, the company reported net income of US$366 million or US$2.33 per share, compared to US$1.32 billion or US$8.34 per share in 2008. Analysts expected earnings of $2.42 per share for the full year.
Annual sales for fiscal 2009 decreased to US$9.33 billion from US$10.3 billion, while net sales totaled US$9.13 billion, compared to US$10.0 billion in the twelve months ended December 31, 2008. Thirteen Wall Street analysts had a consensus revenue estimate of $9.29 billion.
In addition, the company said it continues to be fully committed to acquiring CF Industries Inc. and intends to continue to press the CF board directors to engage in discussions with Agrium to execute a mutually beneficial merger agreement for our respective shareholders.
Looking forward, the company said it sees continued improvement in the seed market due to the trend in adoption of new seed varieties, and a stronger crop protection market versus last year, reflecting increased usage of glyphosates, crop health products and increased weed resistance resulting in expanded use of alternative crop protection products.
Further, Agrium noted that industry experts expect India and Latin America to import more phosphate in 2010 versus 2009. Demand in the potash market showed significant signs of recovery at the beginning of 2010.
Wilson added, "We are seeing increasing signs that demand for crop nutrients and other crop inputs will be strong in the coming spring, despite some recent weakening in crop prices following the revised yield estimates from the USDA. Agrium is looking forward to a significant recovery in the crop input markets in 2010."
Agrium shares, which have been trading between US$29.59 and US$71.11 in the past 52 weeks, closed Monday's trading session at US$57.77. In the pre-market session, the stock is currently trading at US$58.90, up US$1.13 or 1.96% on NYSE. AGU.TO closed Monday's regular trading session at C$62.02.
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