Agrium Inc. reported a 93 per cent plunge in its quarterly profit Nov. 4, but the fertilizer maker and agricultural products retailer expects sales to rebound in 2010.
Calgary, Alberta-based Agrium, which is locked in a lengthy battle to buy U. S. rival CF Industries, said the sharp decline in profit was due primarily to lower prices and margins for nitrogen, phosphate and potash – the three main crop nutrients used by farmers around the world.
Fertilizer producers reported record profits a year ago as grain prices soared, driving a huge increase in fertilizer demand and a big spike in pricing. But the economic slump, tight credit markets and weaker grain prices have hit the sector, crimping both production and fertilizer company profits.
However, farmers cannot put off fertilizer application indefinitely, and this, coupled with recent increases in food grain prices, means Agrium and its peers are confident that sales volumes and margins will improve in 2010.
“We ant i c ipate that North American nutrient demand at the farm level will rebound in late 2009 and early 2010,” Agrium chief executive Mike Wilson said on a conference call. Wilson expects North American nitrogen demand to increase five per cent year on year, phosphate demand to rise 20 to 25 per cent; and potash demand to climb 30 to 35 per cent over 2009 levels.
But he said a key potash contract with Chinese buyers is unlikely to be settled until the first quarter of 2010. Potash Corp. the world’s largest producer of the crop nutrient, had expected this deal to be settled before the end of this year.
Agrium said it remains committed to acquiring CF Industries, and Canada’s Competition Bureau said Nov. 4 it had reached an agreement with Agrium to address some of its antitrust concerns.
Under the deal, Agrium would sell a 50 per cent stake in its nitrogen-based fertilizer plant in Carseland, Alberta, to Terra Industries and sell additional fertilizer product to Terra, the regulators said.
CF is itself waging a hostile battle to take over Terra, a smaller U. S. rival, which Nov. 4 rejected a sweetened $4.1-billion CF bid as inadequate. CF’s proposed bid for Terra has received regulatory clearance.