Agrium shares drop, despite better-than-expected fourth-quarter earnings

CALGARY – Shares in Agrium Inc. dropped more than five per cent on Friday, even though the Calgary-based fertilizer giant posted stronger fourth-quarter results that beat Street expectations.

The stock closed down $5.61 to C$103.14 on the Toronto Stock Exchange.

Late Thursday, Agrium (TSX:AGU) posted net earnings for the last three months of 2012 of US$354 million, or $2.34 per share. That was up from US$193 million, or $1.20 per share, a year earlier.

Without one-time gains, net earnings would have been US$326 million, or $2.16 per share, which still beat the average analyst estimate of $2.02 per share, according to Thomson Reuters.

Sales were US$3.26 billion, up from $3.18 billion.

Agrium is embroiled in a bitter proxy fight with New York activist hedge fund Jana Partners LLC, its largest shareholder.

Among other things, Jana wants Agrium to split its retail division, which sells seeds, fertilizers and other products to farmers, from its wholesale segment.

Agrium says that proposal would expose shareholders to too much risk and destroy value.

Agrium’s retail segment had record sales of US$2 billion in the fourth quarter, an increase of eight per cent, compared with $1.8 billion a year earlier.

“These outstanding results were supported by robust demand for crop inputs and services and a strong winter wheat planting in the U.S. as growers took advantage of the favourable weather and an extended fall application window,” CEO Mike Wilson told a conference call with analysts.

“These significant increases in earnings, profitability and cost leverage speak directly to the success of our continuous improvement initiatives and our ability to grow our retail business both profitably and efficiently.”

Wholesale had sales of US$1.4 billion, a slight dip from the record $1.5 billion it reported during the same quarter of 2011.

Jana has also attacked Agrium for its costs, capital allocation and governance.

The fund wants to appoint five directors to Agrium’s board. Its slate includes Jana managing partner Barry Rosenstein, former Liberal agriculture minister Lyle Vanclief and three men with the executive experience in distribution that the fund says is lacking on Agrium’s board.

Last week, Agrium put forward two of its own candidates, former Viterra Inc. CEO Mayo Schmidt and former Deere & Co. executive David Everitt.

Agrium said it had been close to reaching a compromise with Jana to put an end to their dispute, but that the hedge fund “reneged” at the “last minute.”

Jana takes issue with that version of events. In an open letter to Agrium shareholders earlier this week, Jana said neither Schmidt nor Everitt have the adequate distribution experience that Agrium needs and were “pre-screened to ensure compliance with the status quo.”

Agrium sought to keep Friday’s conference call focused on its results, rather than the Jana fight. But Wilson did take a few moments to reiterate why Agrium believes Schmidt and Everitt belong on the board.

“The industry specific and retail distribution experience that these two individuals possess will contribute valuable insight and global perspective to what is already an outstanding board.”

The Jana letter also took aim at Agrium’s decision to schedule its annual general meeting on April 9, a month earlier than when the event normally takes place.

When asked about the scheduling, Wilson replied: “Let’s get this thing over with.”