Agrium Inc. (AGU), one of the major retail suppliers of agricultural products and services in North America, announced that it has no plans of splitting its retail operation. The announcement comes in the wake of a suggestion to split the company’s retail and wholesale business by hedge fund JANA Partners, as per media reports.
Agrium’s board deemed the spin-off to be not in the best interest of the company and decided to abstain from it. The company also cited that the spin-off might enhance investors’ risk without really adding any benefit.
Agrium also announced that it will continue pursuing its business strategy of generating strong results and boosting shareholders’ returns consistently. Two weeks ago, the company released its second quarter 2012 results.
The company’s second-quarter 2012 adjusted (excluding one-time items other than stock-based compensation expenses) earnings of $5.43 per share exceeded the Zacks Consensus Estimate of $5.36. On a reported basis, earnings came in at $5.44 per share, up 19.8% from $4.54 reported in the year-ago quarter.
Revenues amounted to $6,834 million in the quarter, up 10.3% year over year and were higher than the Zacks Consensus Estimate of $6,549 million. The revenue growth was driven by higher agricultural sales.
The company expects crop yields to be lower in 2012 owing to severe droughts in the country, resulting in high grain prices. High crop prices and tight grain inventories are expected to create huge demand for nutrients in the years ahead.
The company, which competes with CF Industries Holdings Inc. (CF) and Potash Corp. of Saskatchewan Inc. (POT), maintains a Zacks #1 Rank, implying a short-term (1 to 3 months) Strong Buy rating. We currently have a long-term (more than 6 months) Outperform recommendation on its shares.
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