UPDATE 2-Agrium warns of lower potash volumes but hikes payout

Mon Sep 23, 2013 10:59am EDT

* Wholesale nitrogen, phosphate sales volumes also seen lower

* Says customer demand delayed across all three nutrients

* Shares fall 2.4 percent in New York

* Raises dividend by 50 percent

By Rod Nickel and Bhaswati Mukhopadhyay

Sept 23 (Reuters) - Canadian fertilizer company Agrium Inc warned that its potash volumes are expected to be about 30 percent lower than normal in the current quarter, but raised its dividend 50 percent, saying that agriculture's longer-term fundamentals are strong.

Potash prices have slipped since mid-summer, when the biggest global producer Uralkali OAO quit its export partnership with Belaruskali and said it would seek to maximize sales volumes.

Shares of potash producers have slid sharply since then, although Agrium has lost only 4 percent, since it is more dependent on nitrogen production. Agrium stock fell 2.3 percent to $87.89 on the New York Stock Exchange in early trading Monday.

The company said wholesale nitrogen and phosphate sales volumes are expected to be down 20 and 30 percent, respectively,

and customer demand has been delayed across all three nutrients for the quarter ending in September.

Soft prices, combined with lower sales volumes, are expected to hurt third-quarter wholesale results across all the three nutrients, the company said.

Agrium said outages at its nitrogen plants reduced volumes by about 100,000 tonnes in the quarter, impacting costs.

A further challenge for near-term sales is that a delayed harvest may not leave farmers in the U.S. Midwest time before winter to apply much fertilizer to fields, and may opt instead to apply it in spring.

Agrium said on Monday wholesale earnings before interest and taxes (EBIT) is expected to be about $200 million lower in the third quarter than a year earlier.

Performance is better in Agrium's retail division, North America's largest chain of outlets that sells chemicals, fertilizer and seed to farmers. Agrium said retail EBIT this quarter is expected to surpass earnings from a year earlier.

The company raised its dividend by 50 percent to $3.00 per share on an annualized basis. The move raises Agrium's dividend yield - a closely watched measurement of dividend as a percentage of share price - to 3.3 percent based on its U.S. price at Friday's close, taking it closer to rival Potash Corp's 4.3 percent dividend yield.

Belarusian Potash Company, which Uralkali quit, was one of the world's two biggest potash trading companies, along with North America's Canpotex Ltd, owned by Mosaic Co, Potash Corp of Saskatchewan Inc and Agrium.

Mosaic last week cut its third-quarter outlook for the price and sales volume of potash and phosphate, saying crop nutrient markets had softened due to the breakup of BPC.

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