Before we dig into Agrium's
On Oct. 1, 2008, Agrium got approval to buy back and cancel up to 7.9 million shares, or 5% of total shares outstanding. The company only got around to buying 1.2 million shares, but at an average price below $30 per share, this was money very well spent.
I presume that Agrium dropped its buyback program around the time it chose to pursue CF Industries
All right, back to our regularly scheduled earnings review. For the quarter, consolidated gross profit was off 27% year-on-year, and net earnings were a paltry $30 million (maybe ease up on the stock-based compensation next time, gents). Everyone already knew that 2009 stank, and I don't think too many eyes were trained on the trailing results -- it's all about the 2010 outlook. Frankly, I wasn't sure what to expect, because the signals coming out of fertilizer land have been mixed.
- Supply and demand fundamentals are tight for nitrogen and phosphate products. In particular, phosphate inventories are 38% below the five-year average, and prices are up 50% from November.
- There's been a "surge" in both domestic and international demand for potash, with the latter picking up just in the past month.
- Potash remains the highest-margin fertilizer, at over $200 per metric ton in the fourth quarter.
- There should be strong demand for all three nutrients in the spring.
- Brazilian potash import demand is expected to rebound in the face of tight supplies.
That last point is in line with my view that Brazil is taking the reins from China as a key driver of the international potash market. China recently agreed to a quarterly settlement with Canpotex at an undisclosed, "competitive" rate, but at just 350,000 tons, it's not a major event.
So far in 2010, fertilizer prices appear to be faring better than the shares of the publicly traded producers, with both Intrepid Potash
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Fool owns shares of China Green Agriculture. The Motley Fool has a disclosure policy.