Agrium to Expand Potash Mine - Analyst Blog

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Agricultural products and fertilizer producer Agrium Inc. ( AGU ) announced that its board has approved an expansion at its Vanscoy potash mine in Saskatchewan, Canada. Besides, the company is also quadrupling its semi-annual dividend as it sees stronger profits and production ahead.

According to Agrium, the one-million-tonne expansion at Vanscoy will raise capacity by 50% at a cost of about $1.5 billion. Construction is scheduled to begin in 2012 and complete by the second half of 2014.

Further, Agrium also stated that the dividend increase of 22.5 cents a share reflects strength in its retail and wholesale businesses.

The announcement is a great step forward in the execution of Agrium's strategic objectives, which helped the company to meet an ever growing global demand for potash, while providing significant economic benefits to the people of Saskatchewan.

The engineering and construction of the mine will be conducted by a Joint Venture between SNC Lavalin Inc. and PCL Industrial Management Inc.

Last month, the company released its third-quarter 2011 results. The company's net earnings increased three folds to $293 million or $1.85 per share in the third quarter of 2011 from $61 million or 39 cents in the prior-year quarter.

The third-quarter results include a pre-tax gain of $1 million on natural gas and other hedge positions and a pre-tax recovery of $46 million or $0.21 diluted earnings per share on share-based payment expense.

Results benefited from record high crop prices and overall strong fundamentals for agriculture and crop input market.

Revenues in the quarter rose 52.0% year over year to $3.1 billion. The company's gross profit increased by $390 million to $888 million, primarily due to higher gross profit across all major products.

With strength in markets across most products and services, Agrium expects a solid fourth quarter and believes industry fundamentals will remain strong in 2011. Agrium expects fourth-quarter 2011 EPS to be $1.80 to $2.30 diluted earnings per share. This excludes any estimates for hedging gains or losses or share-based payments expense in the fourth quarter.

Agrium faces stiff competition from CF Industries Holdings Inc. ( CF ) and Potash Corp. of Saskatchewan Inc. ( POT ).

Currently, Agrium maintains a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.

AGRIUM INC ( AGU ): Free Stock Analysis Report

CF INDUS HLDGS ( CF ): Free Stock Analysis Report

POTASH SASK ( POT ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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