Agrium rebounds to profit, shares climb

WINNIPEG, Manitoba (Reuters) - Fertilizer producer and retailer Agrium Inc (AGU.TO: Quote, Profile, Research) returned to profit in the first quarter, the company said on Friday, as record world grain prices spurred demand for crop nutrients, seed and chemicals.

Agrium, the world's third-largest nitrogen producer, reported a profit of $195 million, or $1.23 a share, compared with a loss of $11 million, or 8 cents a share, a year earlier.

That beat analysts' average expectations of 49 cents per share, according to Reuters Estimates.

"We're obviously in an extremely heady period for fertilizer here," said Michael Sprung, president at Sprung & Co Investment Counsel. "I would expect to see a huge bounce on that."

Agrium shares were up C$3.80, or 4.8 percent, at C$83.40 on the Toronto Stock Exchange early on Friday.

Agrium's stock is up 88 percent from year-earlier levels, but has recently slid 15 percent from its peak after short-term investors took profits from the fertilizer sector.

Its strong results helped support the shares of Potash Corp (POT.TO: Quote, Profile, Research), Mosaic Co (MOS.N: Quote, Profile, Research) and CF Industries (CF.N: Quote, Profile, Research), said David Silver, analyst with J.P. Morgan, in a research note.

Agrium sales were $1.16 billion, up from $861 million a year earlier.

Calgary, Alberta-based Agrium has become the largest U.S. retailer of fertilizer, seed and chemicals after several acquisitions, including a friendly deal for UAP Holding Co (UAPH.O: Quote, Profile, Research) worth a total of $2.65 billion.

Agrium said it obtained regulatory clearance for the deal on Thursday.

Agrium said it expects a record earnings of $3.15 to $3.45 per diluted share in the first half of 2008, or $1.92 to $2.22 diluted earnings per share in the second quarter as fertilizer prices remain high amid tight supplies.

That forecast seems low based on the historical relationship between Agrium's first-quarter results and its seasonally strong second quarter, said J.P. Morgan's Silver.

The company said its outlook includes an estimated $44 million, or 19 cents a diluted share, in stock-based compensation expense and excludes any contribution from the UAP acquisition or potential hedging gains or losses.

Agrium is building a $1.2 billion nitrogen plant in Egypt that will boost its capacity by 20 percent starting in 2010, but it has temporarily suspended construction to address concerns from local residents.