UPDATE: Agrium 3Q Net Drops; Sees 2010 Improvements

(Adds chief executive comments in paragraphs 2-6 and share-price activity in paragraph 10.)

By Brian Truscott

Of DOW JONES NEWSWIRES

VANCOUVER -(Dow Jones)- In line with its recent warning, Agrium Inc.'s (AGU) third-quarter earnings came in well below the year-earlier level, hurt by challenges faced by the entire agriculture and fertilizer sector.

"It's been a challenging year for the agriculture industry and this may extend into the fall if weather in the U.S. (doesn't) cooperate and allow farmers sufficient time for harvest and to apply crop nutrients," said Chief Executive and President Michael Wilson said during a conference call Wednesday.

The fall season generally ends around mid-December.

Wilson said customers recognize they have been depleting soil nutrients and are anxious to apply close-to-normal application rates in the coming fertilizing year.

He said Agrium's three divisions - retail, wholesale and advanced technologies - are well-positioned to benfit from what's expected to be an exceptional spring 2010, in terms of fertilizer application.

He declined to discuss Agrium's long-standing offer for CF Industries Holdings Inc. (CF), saying only that Agrium remains fully committed to the offer and that further details on its acquisition strategy would be forthcoming. He did say CF has so far refused to engage in discussions despite an increasingly strong mandate from what he described as frustrated CF shareholders.

The big Calgary fertilizer company earned $26 million or 16 cents a share in the third quarter, down from $367 million or $2.31 a year earlier.

Excluding items, such as an inventory write-down related to its wholesale purchase for resale business, Agrium would have earned $46 million or 29 cents a share in the latest quarter. Analysts had been expecting earnings of 23 cents.

Sales fell to $1.84 billion from $3.11 billion, missing the Thomson Reuters mean estimate of $2.07 billion.

Agrium warned on Oct. 23 that third-quarter earnings would be 90-95% below the year-earlier level, hurt by significantly lower prices for phosphate, potash and nitrogen.

Agrium dropped 7% following the warning on Oct. 23. In Toronto Monday, the stock is up 46 Canadian cents to C$51.77 on 653,000 shares.

Fertlizer companies have taken a hit with the economic downturn, as farmers try to go without nutrients to scale back on spending because of weak agricultural prices. Agrium has said U.S. grower customers have indicated their plan to return to normal crop-nutrient application this fertilizer year.

For the fourth quarter, Agrium is projecting earnings of 30-60 cents a share, or 14-44 cents on an adjusted basis. It said the guidance is wider than normal given that U.S. harvests are the latest on record and the final result will depend on weather.

The company is projecting a "significant" recovery in demand across most crop inputs starting in early 2010, particularly in the retail and potash business. It also said corn prices have recovered from summer lows and are back to well above historic levels.

Agrium said it remains fully committed to acquiring CF Industries Holdings Inc. (CF). Agrium is involved in a three-way battle in the fertilizer sector. It has made a $3.7 billion takeover bid for CF, which in turn has made a similar-sized bid for Terra Industries Inc. (TRA). CF has repeatedly rejected Agrium's approaches in favor of a deal for Terra.

Company Web Site: http://www.agrium.com

-By Brian Truscott, Dow Jones Newswires; 604-669-1595; brian.truscott@dowjones.com

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(END) Dow Jones Newswires

November 04, 2009 12:45 ET (17:45 GMT)

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