Agrium Inc. (AGU) , the third-largest producer of fertilizer on the North American continent with a market cap of $12.8 billion, gave a somber preview of its upcoming third-quarter income statement on Monday that sent shares down over 3 percent to $87.
The Calgary, Canada-based Agrium that produces potash, phosphate, and nitrogen fertilizers, said that wholesale earnings prior to interest & taxes during Q3 would be some $200 million shy of tally for the prior-year period. The company cited lower sales volume to the tune of some 30 percent from Q3 of 2012, as well as weaker fertilizer prices for the period, as the principal reasons for the projected miss.
The announcement is significant for the fact that it speaks of a downtrend that has beleaguered the fertilizer industry in the wake of the contentious standoff between Russian potash giant OAO Uralkali (URALL) and the Belarusian government.
A dispute between Uralkali, the world’s biggest producer and the state-run Belarusian company Belaruskali regarding profit sharing has led to the former’s departure from a production agreement that essentially constituted a huge stabilizer of global potash prices. The breakdown of relations between the two has been acrimonious as the Russian CEO of Uralkali, Vladislav Baumgartner, is still languishing in a prison in the Belarusian capital of Minsk on charges of corruption.
The dispute has caused turmoil for fertilizer-producers world-wide, as it threatens to cut prices by up to $100 per ton through the second half of 2013. Fertilizer stocks have been hit hard, and Agrium has actually been somewhat lucky by comparison. The company has seen shares up 5 percent over the last quarter, while its larger competitors are feeling the squeeze; The Mosaic Company (MOS) has dropped over 20 percent, while the Potash Corp. of Saskatchewan (POT) is down 19 percent, and the smaller Intrepid Potash (IPI) is 12 percent lower on the quarter.