Reuters — Two of North America’s biggest fertilizer companies reported large drops in quarterly profit on Wednesday, and warned of tough times ahead as abundant supplies weighed on prices.
At U.S. nitrogen producer CF Industries, second-quarter profit fell 87 per cent — more than expected — and it warned prices would likely remain weak into next year.
Canadian firm Agrium recorded a 16 per cent profit drop, as its farm retail business softened the blow of weak nitrogen and potash prices, but it lowered its profit guidance for the year.
Nitrogen prices have been pressured by China’s growing exports of urea and new capacity coming on stream in North America. CF’s expanded plants in Louisiana and Iowa may start producing in the current, third quarter, the company said.
CF shares dipped five per cent after normal trading hours on the New York Stock Exchange, while Agrium was unchanged.
CF CEO Tony Will said the company would suspend share buybacks and allow its current authorization to expire in December.
Net earnings for CF’s second quarter fell to $47 million, or 20 cents per share, from $352 million, or $1.49 per share, a year earlier (all figures US$).
Excluding items, it earned 33 cents per share, lower than average analysts’ estimates of 68 cents, according to Thomson Reuters I/B/E/S.
Net sales fell 14 per cent to $1.13 billion, matching the average analysts’ estimate.
Agrium’s net earnings fell to $564 million, or $4.08 per share, in the second quarter, from $674 million, or $4.71 per share, a year earlier.
The Calgary-based company reduced its forecast for 2016 profit of $5 to $5.30 per share from its $5.25 to $6.25 range earlier.
On an adjusted basis, Agrium earned $578 million, or $4.18 per share, surpassing analysts’ average estimate of $4.08 per share.
Revenue fell eight per cent to $6.4 billion, below the average estimate of $6.6 billion.
— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.