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Agrium posts over 19% increase Q2 profit on higher demand for crop inputs

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Fertilizer producer Agrium (TSE:AGU) (NYSE:AGU) Friday said its second quarter profit rose 19.7 per cent, as crop inputs demand remained strong through to the end of June.

The Calgary, Alberta-based company supplies crop nutrients, potash, herbicide and also fungicide to the agricultural industry.

For the quarter ended June 30, net earnings rose to $860 million, or $5.44 per diluted share, compared with net earnings of $718 million, or $4.54 per diluted share in the year-ago quarter.

Agrium said the second quarter results included a pre-tax gain of $3 million on natural gas and other hedge positions and a pre-tax share-based payment expense of $9 million. Excluding these items, net earnings would have been $864 million, or $5.47 per diluted share.

Revenue increased 10 per cent to $6.8 billion, from $6.19 billion in the year-earlier quarter.

Analysts, according to Thomson Reuters, were expecting earnings of $5.22 on revenues of $6.6 billion.

“Agrium's record second quarter results have once again demonstrated the strength of our strategic position across the agricultural value chain,” said president and CEO Mike Wilson.

“All three business units capitalized on the strong fundamentals in our sector, with Retail and
Wholesale achieving their highest [earnings before interest, taxes, depreciation, and amortization] EBITDA in history for both the second quarter and the first half of the year.

“Agrium also generated record cash flow from operations for the quarter and the first half this year.”

The company’s retail sales increased by 12 per cent to approximately $5.2 billion, due to higher sales volumes in all major product lines, with the exception of international crop nutrients.

Agrium’s wholesale sales were essentially unchanged from 2011 at $1.7 billion.

Advanced technologies sales during the quarter increased by 13 per cent to $178 million, which the company attributed to acquisition activity in the second half of 2011.

Agrium said that EBITDA for its other non-operating business unit for the second quarter of was $24-million, primarily driven by less inter-segment inventory not yet sold to external customers and a decrease in environmental remediation and asset retirement obligation expenses.

Looking ahead, the company said the impact of the severe drought in the U.S. has resulted in very strong grain and oilseed prices, and it believes crop yields are likely to be revised downward again.

“We expect high crop prices and tight grain inventories to create significant support for international nutrient demand in the coming year, as growers globally are expected to expand acreage and optimize application rates,” said Wilson.

“Inventories for most crop nutrients remain tight in North America as retailers have ended the season largely empty.

“The combination of these factors and an expected early start to the fall harvest and application season is expected to result in solid crop input demand in the back half of 2012 and Agrium will be there to provide the expertise and products necessary for growers to meet the unrelenting global growth in demand for food.”

In other news, Agrium this week authorized a $900 million substantial issuer bid to repurchase shares given its strong financial position and the “positive outlook” for its business.

Agrium is among the largest North American retailer of agricultural inputs such as seeds, nutrients and crop protection chemicals.

Shares of the company were down 0.02 per cent as at about 10:30 a.m. ET, trading at $94.57.

Quick facts: Agrium Inc.

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TSX:AGU
Market: TSX
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