Agrium warns of lower potash volumes, hikes payout

Fertilizer and ag retail giant Agrium warned its potash volumes are expected to be about 30 per cent lower than normal in the current quarter — but raised its dividend 50 per cent, saying agriculture’s longer-term fundamentals are strong.

Potash prices have slipped since mid-summer, when the biggest global producer Uralkali OAO quit its export partnership with Belaruskali and said it would seek to maximize sales volumes.

Shares of potash producers have slid sharply since then, although Agrium has lost only four per cent, since it is more dependent on nitrogen production.

Calgary-based Agrium said wholesale nitrogen and phosphate sales volumes are expected to be down 20 and 30 per cent, respectively, and customer demand has been delayed across all three nutrients for the quarter ending in September.

Soft prices, combined with lower sales volumes, are expected to hurt third-quarter wholesale results across all the three nutrients, the company said.

Agrium said outages at its nitrogen plants reduced volumes by about 100,000 tonnes in the quarter, impacting costs.

A further challenge for near-term sales is that a delayed harvest may not leave farmers in the U.S. Midwest time before winter to apply much fertilizer to fields, and may opt instead to apply it in spring.

Agrium said on Monday wholesale earnings before interest and taxes (EBIT) is expected to be about $200 million lower in the third quarter than a year earlier.

Performance is better in Agrium’s retail division, North America’s largest chain of outlets that sells chemicals, fertilizer and seed to farmers. Agrium said retail EBIT this quarter is expected to surpass earnings from a year earlier.

The company raised its dividend by 50 per cent to $3 per share on an annualized basis. The move raises Agrium’s dividend yield — a closely watched measurement of dividend as a percentage of share price — to 3.3 per cent based on its U.S. price at Friday’s close, taking it closer to Saskatoon rival PotashCorp’s 4.3 per cent dividend yield.

Belarusian Potash Co., which Uralkali quit, was one of the world’s two biggest potash trading companies, along with North America’s Canpotex, owned by Mosaic Co., PotashCorp and Agrium.

Minneapolis-based Mosaic last week cut its third-quarter outlook for the price and sales volume of potash and phosphate, saying crop nutrient markets had softened due to the breakup of BPC.

— Rod Nickel and Bhaswati Mukhopadhyay are Reuters correspondents based in Winnipeg and Bangalore respectively.

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