Agrium Inc . ( AGU ) posted record net earnings of $374 million or $2.34 per share in the fourth quarter of 2011 versus $135 million or 86 cents in the prior-year quarter, outpacing the Zacks Consensus Estimate of $2.00 per share.

The fourth-quarter results exclude an impairment of Agrium's investment of $61 million or 30 diluted earnings per share in Hanfeng Evergreen Inc.

In fiscal 2011, net earnings were $1.4 billion or $8.68 per diluted share compared with $713 million or $4.51 per diluted share in fiscal 2010.

Results benefited from record high crop prices and overall strong fundamentals for agriculture and the crop input market.

Revenues in the quarter rose 32.5% year over year to $3.18 billion. Revenue for the year was $15.47 billion, up from $10.74 billion in the prior year.

The company's gross profit increased by $320 million to $1.04 billion, primarily due to higher gross profit across all major products.

Segmental Performance

Retail: The segment's net sale for the quarter was $1.8 billion, up 38.5% year over year, driven by the addition of the Landmark business, strong price appreciation for nutrients, and increased demand for other crop input products and services this fall season across all retail operations. Gross profit was $452 million versus $351 million in the prior-year quarter. EBIT declined to $37 million versus $46 million in the fourth quarter of 2010.

Crop Nutrient net sales jumped 20.9% year over year to $1.0 billion driven by significantly higher nutrient prices and the addition of the Landmark business, partially offset by lower North American sales volumes.

Crop protection products' net sales increased 38% to $403 million, primarily due to the addition of the Australian Landmark business and higher sales across several product lines in North America.

Net sales for seeds were $83 million in the fourth quarter of 2011 compared with $54 million in the same period last year. Higher sales were backed by doubling in sales of private label Dynagro seed business over the same period last year and higher winter wheat acreage.

Services and other sales were $176 million the quarter, over two and a half times higher than $68 million in the fourth quarter of 2010.

Merchandise sales were $143 million in the fourth quarter of 2011 compared with $85 million in the fourth quarter of 2010.

Retail selling expenses in the quarter were $397 million, up $104 million from last year due to a combination of increased operating expenses associated with the Landmark operations and higher fuel and incentive costs within North American operations.

Wholesale: The wholesale segment posted record net sales of $1.5 billion in the quarter versus $1.2 billion in the comparable quarter last year. Gross profit was a record $556 million, up 64% from $340 million reported in the prior-year quarter. EBIT was $507 million, significantly higher than $315 million earned in the fourth quarter of 2010. The improvement in earnings was due to higher realized prices and margins across all three major crop nutrients and strong sales volumes despite the global economic uncertainty experienced during the quarter.

Nitrogen gross profit was $322 million the quarter, more than double of $160 million reported in the same quarter last year due to higher realized prices and sales volumes. Nitrogen cost of product sold was $258 per ton, higher than $243 per ton in the comparable quarter last year, due to higher input costs associated with production at nitrogen upgrade facilities and increased maintenance costs.

The natural gas price in the fourth quarter of 2011 was $3.47/MMBtu compared with $3.70/MMBtu in the prior-year quarter.

Potash gross profit was $121 million compared with $96 million in the same quarter last year. The significant increase was due to stronger domestic and international year-over-year pricing. The cost of product sold was $169 per ton, higher than $150 reported in the same period last year due to unplanned plant maintenance costs.

Realized phosphate price was $813 per ton versus $672 per ton for the same quarter last year. Phosphate cost of product sold was $500 per ton versus $454 per ton in the prior-year quarter.

Wholesale expenses in the quarter were $49 million, up $24 million than same period in 2010. The increase was primarily due to mark-to-market losses on natural gas and other derivatives (including foreign exchange) of $17 million.

Advanced Technologies: Advanced Technologies' gross profit was $38 million, up from $24 million in the fourth quarter of 2010. This was due to higher realized sales prices and strong demand for Environmentally Smart Nitrogen ("ESN"), as well as contributions to gross profit from recent acquisitions.

Acquisition

On December 3, 2010, Agrium acquired 100% of AWB, an agribusiness operating in Australia, for $1.2 billion in cash and $37 million of acquisition costs. On May 11, 2011, the company completed the sale of the majority of the Commodity Management businesses acquired from AWB, in accordance with an agreement dated December 15, 2010. Cash received from the sale was $694 million.

Agrium retained its Landmark retail operations, including over 200 company-owned retail locations and over 140 retail franchise and wholesale customer locations in Australia. The primary purpose of the acquisition was to expand the retail division and provide access to the growing Southeast Asia market. The acquired business is included in the Retail operating segment.

Discontinued Operations

Discontinued operations include the operation of Commodity Management businesses and AWB Harvest Finance Limited sold on May 11, 2011 along with the operations and assets. However, liabilities of the Commodity Management businesses were not included in the sale. Net loss from discontinued operations was $134 million in the fourth quarter of 2011 compared with $17 million in the same period of 2010.

Financial Position

Cash provided by operating activities was $1.1 billion in the fourth quarter of 2011 versus $575 million in the prior-year quarter. Capital expenditure was $233 million versus $135 million in the prior-year quarter.

Cash and cash equivalent at the end of December 31, 2011 was $1,346 million versus $635 million at the end of December 31, 2010. Long-term debt at the end of December 31, 2011 was $2.1 billion, flat annually.

Outlook

While the company did not provide specific estimates for its 2012 revenue and net income, it expects global demand for fertilizers and seeds to be strong throughout the year. Historically higher corn prices should boost demand for seeds, while demand for nitrogen fertilizer could rise in 2012.

Agrium expects strong nutrient demand in the first half of 2012 supported by the continued strength in crop prices.

Agrium faces stiff competition from CF Industries Holdings Inc . ( CF ) and Potash Corp. of Saskatchewan Inc. ( POT ).

Currently, Agrium maintains a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.