Canadian fertilizer and ag retail company Agrium reported a record profit for its fourth quarter on Thursday, handily beating expectations due to higher demand for crop protection products and fertilizer from farmers, ahead of a proxy battle with its largest shareholder.
Agrium shares in New York edged up 0.5 per cent following the news, after falling nearly two per cent to $106.84 during regular trading (all figures US$).
Agrium is facing a proxy contest in April with its biggest shareholder, Jana Partners, a New York-based activist hedge fund which wants to split the company's farm retail and wholesale fertilizer production divisions, and take other steps to improve the company's performance.
The Calgary-based company said retail sales rose eight per cent to $2 billion due to higher demand for crop protection products and fertilizer, after autumn weather left U.S. farmers with a larger-than-normal window for applications before winter.
Improved retail sales outweighed a seven per cent drop in wholesale sales of fertilizers, mainly because of weak international demand for potash.
A lack of potash exports to key markets China and India in the second half of 2012 hurt Agrium, PotashCorp and Mosaic Co., who collectively make offshore sales through Canpotex Ltd. Both countries have since signed new supply contracts with Canpotex.
Demand up for nitrogen, potash
Tight global grain and oilseed supplies are keeping crop prices high, offering farmers strong motivation to maximize crop production, Agrium said, noting it has seen strong demand for seed purchases leading up to the spring planting season.
Global demand for nitrogen, which farmers apply every year for crops such as corn, looks likely to increase two to three per cent in 2013, while North American nitrogen demand should be flat to two per cent higher, Agrium said.
Global demand for potash looks strong for the first half of 2013, with China committed to Canpotex purchases during the period, Agrium said. Total potash shipments on a global basis should reach 55 to 57 million tonnes, up from 52 million tonnes last year, the company said.
Net earnings for the fourth quarter jumped to $354 million, or $2.34 per share, from $193 million, or $1.20 per share a year ago. Adjusted for one-time items, earnings per share were $326 million or $2.16 per share.
Sales rose three per cent to $3.26 billion.
Analysts on average expected Agrium to earn $2.00 a share on sales of $3.2 billion, according to Thomson Reuters I/B/E/S.
Agrium's earnings per share exceeded its own guidance on Jan. 24 of slightly more than $2 a share for the quarter.
The company's full-year 2012 earnings of $1.5 billion matched a record, despite a disappointing third quarter that gave Jana fodder to build its case for change.
Regulatory filings on Thursday showed Jana has now boosted its stake in Agrium to 7.5 per cent, and several of Jana's nominees to the Agrium board have also bought about a 0.1 per cent stake.
Jana, in a letter Wednesday to Agrium shareholders, criticized Agrium brass for "shifting up the usual date of its annual meeting by over a month in an apparent attempt to cut short this debate."
Agrium last Friday booked its annual general meeting of shareholders for April 9 in Calgary.
"We believe the board should be saying yes to these opportunities to unlock Agrium's full value creation potential, rather than wasting substantial shareholder money fighting them off, and we remain confident that once our highly qualified and shareholder-focused director candidates are elected, the board will do so," Jana wrote.
Agrium chairman Victor Zaleschuk retorted Wednesday that the company AGM is scheduled a month earlier than usual "to bring this matter to a close," and reiterated the company's stance that "Jana's analysis is flawed, and its ideas would destroy shareholder value."
Agrium is the world's third-largest nitrogen producer, a significant miner of potash from Western Canada, and a producer of phosphate.
Rival nitrogen producer CF Industries on Tuesday posted record-high fourth quarter profit, but its nitrogen fertilizer sales slumped in the period and its stock fell.
-- Rod Nickel is a Reuters correspondent based in Winnipeg. Includes files from AGCanada.com staff.