CALGARY — Fertilizer giant Agrium Inc. is expecting its second-quarter earnings to be substantially better than previously predicted, thanks to strong performance in its retail segment and a bullish outlook for the sector as a whole.
The Calgary-based company (TSX:AGU) said it expects to earn between US$4.10 and $4.40 per unit, a big jump from its previous guidance of $3.38 to $3.88.
Agrium shares soared on the news, gaining 4.4 per cent, or C$3.43, to $81.44 in Monday afternoon trading Monday on the Toronto Stock Exchange.
“The strength in our earnings outlook is due to excellent performance from all three of our business units, which is particularly impressive given that the North American spring planting season has been hampered by excessively cold and wet weather this year,” CEO Mike Wilson said in a statement ahead of the company’s investor day in Denver on Monday.
“Record global crop prices are driving demand for all crop inputs, and Agrium’s strategic investment across the global agricultural value chain is capturing the benefits from the strength in these underlying fundamentals,” Wilson said.
The outlook doesn’t take into account the potential impact of share-based payment expenses and hedging.
In his presentation to investors, Agrium’s head of market research said the strength in agriculture is a lot more sustainable now than it was during its peak before the financial crisis hit in late 2008.
“So many crops are trading at such historically high levels, and it’s difficult for any one crop to steal area away from another because of such a widespread rally,” said Jason Newton.
“The dip in the last half of 2008, 2009 was driven in large part by a very unprecedented global recession and financial crisis. I don’t think that is something that anybody foresees happening again in the near future.”
Agrium produces the three main types of fertilizer: nitrogen, phosphate and potash. It also sells farm products at retail outlets across North America, with a growing presence in South America, Europe and Australia.