Agrium sees earnings jumping on fertilizer prices

Tag : Fertilizer
Canada - (Recasts with CEO comments about earnings potential, adds commentsfrom interview with CEO)
By Roberta Rampton and Euan Rocha
WINNIPEG, Manitoba/NEW YORK (Reuters) - Fertilizer producer Agrium Inc (nyse: AGU - news - people ) has "huge" potential to dramatically boost its earnings thanksto high prices and demand for crop nutrients, its chief executivetold an investor conference in New York Wednesday.
With current fertilizer prices and costs, Calgary, Alberta-basedAgrium could earn $15 to $17 a share annually, CEO Mike Wilson saidat a Credit Suisse conference.
"It's not guidance, but it's a snapshot of what our earnings wouldbe today, with today's pricing and all today's production, and it'squite huge," he said.
Agrium earned $3.25 a diluted share in 2007, but has not yetprovided a forecast for 2008.
The world's third-largest nitrogen producer and largest U.S.retailer of fertilizer and farm chemicals, has raked in profits asrecord grain prices motivated farmers to look to boost yields.
"Our business is as strong as ever, farmers margins are as strongas ever -- they are still two three times what they (farmers) havebeen used to -- and we haven't seen any cutbacks," Wilson said inan interview in New York.
But Agrium's shares have plunged since peaking at C$116.15 in Juneon the Toronto Stock Exchange as grain prices eased and investorsturned from commodities.
The shares were down 4.6 percent at C$78.20 Wednesday.
"It's always a pleasure to come here when your stock has gone down30 some odd percent over two months and your earnings potential hasgone up likely by the same amount," he told the conference.
Wilson said nitrogen, phosphate and potash margins at today's costsand prices are more than double what they were in the company'ssecond quarter, creating strong potential for its earnings.
Farmers continue to net strong returns from crops, despite higherfertilizer costs, he said, and world grain stocks will take morethan two years to rebuild, maintaining demand.
Potash prices in the U.S. Midwest have topped $1,000 a tonne,Agrium said in data posted on its website, up from $618 in thesecond quarter.
Agrium, the smallest of Canada's three main potash producers, islooking at four sites for a new mine and will make a decision onthe project late next year, Wilson said.
Most companies are focusing on expanding potash and phosphatecapacity, he said, but there has been limited enthusiasm to buildnitrogen plants.
That could lead to nitrogen prices remaining strong in the future,he said.
"All three nutrients are looking great, but nitrogen may be thesurprise," Wilson told Reuters.
Agrium wants to double its retail operations again after a seriesof acquisitions gave it a market share of 15 percent in the UnitedStates, making it three times larger than its nearest competitor,he said.
"It's going to be a little more difficult this time," he said."Rather than doing the big moves, you may see us doing a number ofsmall moves."
($1=$1.08 Canadian) (Reporting by Roberta Rampton and Euan Rocha;editing by Rob Wilson) Copyright 2008 Reuters, Click for Restriction