Agrium Earnings Miss Estimates as Potash Sales Talks Stall

Agrium Inc., a fertilizer maker and the largest U.S. farm-products retailer, posted profit and revenue that trailed analysts’ estimates after Asian sales talks stalled and a plant restart took longer than expected. The shares fell the most in three years.

Third-quarter earnings excluding environmental-remediation and plant-closure costs were $1.34 a share, Calgary-based Agrium said today in a statement, missing the $1.81 average of 24 estimates compiled by Bloomberg. Sales dropped to $2.96 billion from $3.14 billion, less than the $3.09 billion average of 17 estimates.

Potash fertilizer volumes declined 54 percent as plentiful stockpiles undermined efforts by Agrium and other North American miners to renew contracts with buyers in China and India.

Agrium’s miss on earnings comes as it continues to fend off demands from activist investor Jana Partners LLC, its largest shareholder, to separate the company’s network of farm-supply stores. The fund also has urged Agrium to boost capital returns, improve disclosure and reduce costs and working capital, Jana’s Managing Partner Barry Rosenstein said Oct. 1 in an investor presentation.

Agrium Chief Executive Officer Mike Wilson has resisted Jana’s drive to force a breakup, saying that retaining the company’s existing structure and strategy would be best for shareholders.

‘More Detail’

Wilson said today on a conference call that his company’s earnings statement includes improved financial disclosure, including data on returns on operating capital and profit margins. Agrium also pledged to report same-store sales twice a year, in the second and fourth quarters.

Agrium plunged 11 percent to C$95.03 at the close in Toronto, the biggest decline since March 2, 2009. The shares have increased 39 percent this year.

“This quarter’s performance, and today’s share price reaction, highlight that Agrium’s strong retail business remains subject to the cyclicality of its commodity-driven wholesale business, despite the absence of any quantifiable benefits to shareholders from this combination,” Jana’s Rosenstein said today by e-mail.

Rosenstein said Agrium refused “to engage with shareholders in a real discussion about value maximization.”

‘Flawed’ Analysis

“They’ve spent nearly six months making their case to our board, to management and our shareholders and analysts,” Wilson said of Jana today in an interview.

“It’s certainly not that we’re not willing to consider their ideas, it’s that their analysis is flawed, their idea about spinning off retail, which creates significant risk, will ultimately destroy value rather than create it, ” Wilson said. “And the majority of our shareholders agree with that assessment.”

Wilson said he spoke with Rosenstein about three weeks ago and no further contact is planned.

Agrium’s net income in the third quarter declined to $127 million, or 80 cents a share, from $293 million, or $1.85, a year earlier. The company forecast fourth-quarter profit excluding one-time items of $1.50 to $1.90 a share, less than the $2.10 average of 23 estimates compiled by Bloomberg.

“India and China are integral to the global potash trade and they’ve shut their doors, at least temporarily,” John Hughes, a Toronto-based analyst at Desjardins Securities Inc., said today by telephone. “With Agrium guiding estimates lower for the fourth quarter the question becomes, How right is the street for 2013?”

The average of 28 estimates was for per-share earnings excluding one-time items of $10.02 next year.

Potash agreements with China and India may come in the first quarter of 2013, Wilson said today in the interview.

Agrium had an eight-week “turnaround” at its Vanscoy potash plant during the third quarter related to an expansion project, and said the subsequent restart took longer than expected.

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