Agrium annual meeting

Mike Wilson, president and CEO of Agrium, addresses the company's annual meeting in Calgary, on May 11, 2012. The company expects lower sales and profits in the third quarter because of the wet spring. (Jeff McIntosh/Canadian Press)

Fertilizer giant Agrium Inc. is warning of lower sales volumes and earnings during the third quarter, but says its longer-term outlook is sufficiently bright to hike its dividend by 50 per cent.

The Calgary-based company says nitrogen and phosphate sales volumes are expected to be down by 20 per cent and 30 per cent respectively compared to last year, while potash volumes are anticipated to be about 30 per cent lower.

It says wholesale earnings before interest and tax will be about $200 million, lower than in the same period of 2012. However, its earnings in the retail sector will be higher than during the third quarter of 2012 and in line with what they were in the third quarter of 2011.

Farmers delayed applying fertilizer

Agrium has previously said that the cold, late spring throughout much of North America caused farmers to delay applying nutrients to their crops, but that demand would pick up in the second half of the year.

Volumes from Agrium's nitrogen facilities have been curbed by about 100,000 tonnes this quarter due to outages.

Nutrient prices during the quarter are also 20 to 30 per cent below where they were at the same time last year.

Despite the challenges, Agrium says it will increase its dividend by 50 per cent starting with its next payout in October.

"The dividend increase demonstrates our confidence in the ability of the business to generate significant cash flow and is an indication of the strength of our position across the crop-input value chain," Agrium CEO and president Mike Wilson said in a statement.

More demand in fall

"Despite short-term headwinds for our wholesale business unit this quarter, the long-term fundamentals of our business remain strong and we expect significant crop input demand as we move into the fall season."

On an annualized basis, the dividend rises to $3 US per common share per year, or 75 cents US per quarter, starting with the payout on Oct. 17 to shareholders of record as of Sept. 30.

Shares in Agrium were down $2.47 or nearly three per cent in mid-day trading on the Toronto Stock Exchange, at $89.36.