|
Agrium doubles profits in first quarter Strong fertilizer market boosts profit to $24 million for quarter; Kenai expands production, but Oct. 31 shutdown still scheduled Steve Sutherlin Petroleum News Associate Editor
Agrium Inc. had net earnings for first quarter 2005 of $24 million, or 18 cents diluted earnings per share, more than double its earnings for the comparable period last year of $11 million, or 8 cents diluted earnings per share, the company said in a May 4 statement.
“We had a great first quarter and expect an excellent second quarter,” said Mike Wilson, Agrium president and CEO. “Demand and pricing for both urea and potash have continued to strengthen and were the major contributors to the increase in our earnings, in what is normally a seasonally slow quarter.”
Wilson said urea and ammonia sales for the first half were expected to be above last year’s levels due to strong North American markets. Kenai facility operating at higher capacity Agrium’s nitrogen fertilizer plant on the Kenai Peninsula in Southcentral Alaska is currently operating at higher capacity than the company anticipated it would at this time. The plant is scheduled to shut down in November if new gas supplies are not found to replace its supply contract with Unocal, which expires Oct. 31. The company had planned to operate the plant at half capacity until the shutdown.
Agrium Kenai spokeswoman Lisa Parker said Agrium was operating both of its Kenai ammonia plants and its Kenai granular urea plant at full capacity.
“It’s been an excellent year for our commodity market,” she said.
Agrium said the Kenai facility operated at 58 percent of capacity in the first quarter, but the company now expects to be able to continue to operate the Kenai facility at 85 percent of capacity from April 1 through Oct. 31, with the majority of the gas to be supplied by Unocal at contract rates.
“We have been able to secure some additional gas,” Parker said, adding that the extra gas was not from Unocal; it was from “other Cook Inlet producers." Shutdown looms Agrium still has secured no gas to operate the Kenai facility past Oct. 31, Wilson told Petroleum News. The company has a request for proposals out to buy gas, and until it expires, the long-term fate of the Kenai plant is not known, he said.
Cook Inlet gas producers have until May 13 to respond to Agrium’s request for additional gas to feed its Kenai nitrogen plant. Agrium extended the deadline from the initial deadline of April 15, because some of the producers asked for additional time to respond.
In the March request, the company offered $3 per thousand cubic feet of gas to Cook Inlet producers, a significant jump over the historic $2 per mcf average gas price paid for delivered supply to the Kenai plant. The higher offer was made possible by higher nitrogen prices.
Agrium has not made any attempt or proposal to buy state royalty gas, and it is putting its focus on the request for proposals it sent to Cook Inlet producers in March, Parker said.
Recent discussions regarding state royalty gas did not originate from Agrium, but rather from a suggestion made at a meeting of Gov. Frank Murkowski’s Agrium task force, Parker said, adding that Agrium did not, and does not see state royalty gas as a viable solution to its current supply needs at the Kenai plant. Future While Agrium must continue to map out plans for a shutdown of its Kenai plant, its goal is to find the gas to continue to operate the facility, Wilson said.
There have been positive signs for the future, Wilson said, adding that meetings with the state and Gov. Murkowski have been positive, and producers have shown interest in providing the gas.
Due to the fact that the company has a facility there, Agrium would be delighted if North Slope gas came to the Kenai Peninsula, Wilson said. However, Agrium sees North Slope gas delivery on the Kenai to be at best a five-year distant plan — if it happens at all.
“We’ve been talking about North Slope gas since 1974,” Wilson said.
Coal gasification is another long-term supply option in the works, but like North Slope gas, it is a solution that is at least five years away, Wilson said. Stock buyback According to Wilson, Agrium’s recently announced share buyback doesn’t signal a reduced focus on growth at the company, nor does it affect the company’s ability to grow.
Agrium is committed to growth, but the company is very disciplined, Wilson said, adding that Agrium maintains its focus on long-term profitability growth in areas that are a good fit for the company.
“It’s easy to double the size of a company,” Wilson said.
In the near term, the company primarily will build on its strengths in North America, improving its position in both distribution and retail, he said.
Agrium is expanding its retail presence in South America as well. Agrium recently made an acquisition of a small South America retailer, Wilson said.
Agrium will buy back up to 10 percent of its outstanding shares on the open market, the company said in an April 28 statement. The repurchases will be funded from existing cash. Agrium received approval from the Toronto Stock Exchange for the repurchase through a normal course issuer bid commencing May 3 and terminating May 2, 2006.
| 