Agricultural nutrients and products company Agrium said earnings took off during the second quarter, as the company raised fertilizer prices in accordance with soaring commodity prices.
Agrium (nyse: AGU - news - people ) shares added 6.0%, or $4.80, to $84.45 during Wednesday's afternoon trading session as president Mike Wilson forecast continued growth across all product lines despite a recent downturn in commodity prices. Corn prices have plunged 33.0%--taking Agrium's stock price with it--since Midwestern flooding fed fears of a meager harvest, increasing pressure on global food supply. (See " Corn's Comeback, Thanks To Mother Nature.")
Richard Downey, Agrium's senior director of investor relations, said it's ironic that investors are worried about fallen crop prices since they're down from unprecedented peaks reached while floods soaked the Midwest. "Regardless of recent crop price declines from record highs, nutrient prices remain very strong and supply remains tight," Downey said.
According to the company's second-quarter report, crop prices remain two to three times higher than historic levels. "Given that global and U.S. grain inventories remain very tight, grain prices will continue to reflect growing conditions and yield potential for both U.S. and global crop production," Agrium said, citing a June report from the U.S. Department of Agriculture, which anticipates global grain and oilseed stockpiles to scrape 35-year lows through 2009.
"We've always maintained we don't need and do not require $8 [per bushel] corn price to support the strong global nutrient demand," Wilson said during Wednesday's conference call with analysts.
Agrium's net earnings more than doubled to $636.0 million, or $4 a share, from $229.0 million, or $1.70 a share. Earnings, adjusted to exclude hedging gains and compensation expenses, were $3.81 a share, beating analysts' estimates for earnings of $3.15 a share. Sales rose 90.3% to $3.8 billion from $2.0 billion, helped by both improved volume and higher selling prices. Analysts expected sales of $3.5 billion.
The company will follow what it did last year and provide earnings guidance for the second half of 2008 when it announces third-quarter earnings.
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