Buying UAP Paying Off For Agrium

Agrium Inc., like its fertilizer competitors around the world, is continuing to profit amid soaring demand and prices for its products, with an assist from its latest acquisition, United Agri Products (UAP).

The Calgary company says that it tallied a profit of $636 million or $4 a share in the second quarter, its strongest quarterly performance ever and more than double the previous high of $229 million or $1.70 a share a year ago.

The profit blew past analysts’ forecasts, which averaged $2.96 a share, according to a Bloomberg survey.

Agrium estimated that the acquisition of UAP Holdings Corp., which it bought earlier this year for $2.1 billion, contributed 70 cents a share to the quarterly bottom line. UAP, based in Greeley, CO, is the biggest retailer of fertilizer, chemicals, and seeds to the U.S. farming industry. Agrium Retail, followed by United Agri Products, topped the CropLife 100 list.

“Agrium’s exceptional second-quarter earnings are a result of strong performance across all business units, and the outlook for all our product lines continues to strengthen,” Chief Executive Officer Mike Wilson said in a news release. “The outlook for the second half of the year remains solid with corn, wheat and soybean prices at two to three times historic levels.”

However, Agrium and competitors such as Potash Corp. of Saskatchewan, the world’s largest fertilizer producer, have seen their soaring share prices trimmed back in recent weeks amid a commodities stock rout that has investors wondering whether the fertilizer boom may have peaked.

Agrium said its earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $1.03 billion in the second quarter, more than double the $405 million it tallied a year earlier. The key drivers were higher realized prices for seed, chemicals, and nutrients, the company said.

Agrium’s wholesale division saw its EBITDA climb to a record $682 million in the quarter from $261 million a year earlier as a result of �exceptional prices and gross margins, particularly for potash and phosphate.

In part reflecting a $177 million contribution from the UAP acquisition, Agrium’s retail business reported EBITDA of $431 million, up from $150 million a year earlier.

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