Agrium Inc. recently detailed for analysts its road to achieving $1.1 billion in Retail EBITDA in 2015. Retail EBITDA for 2011 was $769 million, already on a steep upward trajectory from 2010’s $524 million.
Much of the growth – 42 percent – will be organic, with some 27 percent coming from growth in the company’s seed business. Another 26 percent will come from the acquisition of Viterra Inc.’s retail outlets in Canada. Agrium will be taking 232 Viterra outlets, adding to its own, which it said was just over 60. Beyond Viterra, Agrium is anticipating another 19 percent coming from smaller “tuck-in” acquisitions, with 16 percent coming from deals in North and South America, and another 3 percent from Australia. Some 13 percent of EBITDA improvement will come from improvements in the Australian retail business.
The largest “tuck-in” so far this year occurred in late February, when Agrium’s Crop Production Services (CPS) unit acquired Ritter Crop Services, a retail leader in northeast Arkansas. The deal included seven retail locations, including Caraway, Diaz, Lake City, Marked Tree, McCrory, West Ridge, and Wheatley. Agrium said the move enhances CPS’ position in its Mid-South region, part of the company goal of being the leading agricultural input leader in each of its markets. Agrium told analysts it was able to quickly close on this deal, and as a result was able to catch spring revenues.
So far this year, Agrium says it has completed nine deals – six in the U.S. and three in Australia – adding a total of 19 retail outlets and revenues of $132 million. Projected first-year EBITDA is $9 million. In addition to the Arkansas outlets, others added in the U.S. were in Montana, East Texas, Georgia, Indiana, and Massachusetts.
Since 2007, Agrium has added some 242 retail outlets via its smaller “tuck-in” acquisitions, which accounts for $1.22 billion in sales and EBITDA of $95 million.
In March, Agrium acquired its first major retail location in Brazil – Utilfertil, in Italpetininga, in the state of Sao Paulo. As its first in the country, Agrium said it did not fit within its “tuck-in” category. It includes 40,000 mt of storage capacity and four blenders with 1,500 mt capacity per day. It also has existing import and export licenses. The location will start out as a fertilizer retail site, but the company will be layering in crop protection, seed, and application activities over the next five years. Agrium touted the location and its logistics, saying it is near 20 percent of the farmland in Brazil, which represents 27 percent of the fertilizer usage in that region. Major crops include sugar cane, corn, coffee, and soybeans.
Agrium says it is one of the world’s largest global input retailers, and the largest in North America and Australia. It said with the Viterra acquisition it will be number one in Canada. In South America, it says it is number one or two.
The North American business is responsible for some 7 million mt of fertilizer, only 1.2 million mt of which is acquired from Agrium. Some 1 million mt is sold in South American retail, and 500,000 mt in Australia.
Agrium Retail President Richard Gearheard told analysts the company likes South America. It currently has retail locations in Argentina, Brazil, Chile, and Uruguay. The current focus, however, is outside of Argentina, which he said has 30 percent inflation and has been undergoing anti-free trade moves by the government. In addition, both corn and soybean yields were off last year due to drought.
Meanwhile, in the U.S., Gearheard told analysts that USDA’s projection of 166 bushels per acre for corn is on the upside. He cited drought conditions in West Texas and the Cornbelt, and noted that the extra corn acres added this year will be on lower y