Agrium’s forecast disappoints

(Dave Bedard photo)

Reuters — Canadian fertilizer and ag retailer Agrium has joined rival PotashCorp in forecasting a weaker-than-expected 2016 profit, as prices for crop nutrients remain weak.

Agrium’s Toronto-listed shares fell as much as 5.2 per cent to $110.89, its lowest in a year, as investors ignored a better-than-expected quarterly profit.

The company, which sells seed, fertilizers and chemicals directly to farmers in North America, said it expects to earn $5.50-$7 per share in 2016, slightly below analysts’ average estimate of $7.01, according to Thomson Reuters I/B/E/S.

Potash prices have fallen sharply over the past year, under pressure from bloated capacity, soft grain prices and weak currencies in major consumers such as India and Brazil.

U.S. farmers are likely to increase total crop plantings in 2016, including one million to three million more acres of corn, a crop that is fertilizer-intensive, Agrium said Tuesday. However, challenging macroeconomic conditions and weak crop prices pose risks for the year ahead, the company added.

Rival PotashCorp last month forecast lower-than-expected profit for the year and slashed its dividend, due to tanking fertilizer prices.

Calgary-based Agrium could be the only major fertilizer company to beat expectations for the fourth quarter, and the outlook shouldn’t be surprising given recent commodity prices and PotashCorp’s forecast, BMO analyst Joel Jackson wrote in a note.

Agrium’s fourth-quarter profit from continuing operations nearly tripled to $200 million, or $1.45 per share, helped by a multi-year cost-cutting program and rising production at its expanded potash mine at Vanscoy, Sask., southwest of Saskatoon.

The producer of nitrogen, potash and phosphate fertilizers said its sales volumes rose in the fourth quarter ended Dec. 31, but weaker prices dragged down total sales.

Sales fell 11 per cent to $2.41 billion, missing analysts’ estimate of $2.85 billion.

Excluding items, profit was $1.52 per share, above analysts’ average estimate of $1.38.

Reporting for Reuters by Anet Josline Pinto in Bangalore and Rod Nickel in Winnipeg.

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