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Agrium reports $195 M in 1Q net income; company proceeds with UAP acquisition
Agrium Inc. on May 2 reported record first-quarter net earnings of $195 million ($1.23 diluted earnings per share) in 2008, versus a year-ago net loss of $11 million ($0.08 loss per share). First-quarter net sales were $1.1 billion, up from the year-ago $821 million.
“Our impressive first quarter results are due to the excellent fundamentals for the fertilizer and broader agriculture sector, as well as to the quality of our assets that span the agriculture value chain,” said Agrium President and CEO Mike Wilson. “Our Retail, Wholesale and Advanced Technologies business units all delivered record first quarter earnings this year. We expect our earnings this spring to surpass all previous records, even without the contribution of the UAP retail operations.”
Agrium is providing guidance for the first half of 2008 of a record $3.15 to $3.45 diluted earnings per share, or $1.92 to $2.22 diluted earnings per share for the second quarter. This includes an estimated $44 million ($0.19 diluted earnings per share) in stock-based compensation expense, and excludes any contribution from the UAP acquisition or potential hedging gains or losses.
Agrium obtained regulatory clearance on its UAP transaction May 1 and will accept for payment all shares of UAP common stock tendered to the offer immediately after its expiration at midnight May 2.
Potash sales volumes were 449,000 mt during the quarter with an average price of $292/mt, versus the year-ago 333,000 mt and $156/mt, respectively. Phosphate volumes were also up, at 232,000 mt ($612/mt) versus the year-ago 197,000 mt ($376/mt).
While total nitrogen volumes were down to 768,000 mt from 792,000 mt, average prices were up at $426/mt from $294/mt. Within this sector, ammonia volumes were up at 162,000 mt ($459/mt) versus the year-ago 148,000 mt ($333/mt). Urea volumes were down at 325,000 ($458/mt) compared to the year-ago 341,000 mt ($310/mt).
Total Net Sales
| $ millions | 1Q-08 | 1Q-07 |
| Wholesale | 708 | 484 |
| Retail | 394 | 337 |
| Adv Tech | 79 | 52 |
| Other | (74) | (52) |
| Total | 1,107 | 821 |
Gross Profit
| $ millions | 1Q-08 | 1Q-07 |
| Wholesale | 273 | 96 |
| Retail | 115 | 85 |
| Adv Tech | 17 | 11 |
| Other | (13) | (4) |
| Total | 392 | 188 |
EBITDA
| $ millions | 1Q-08 | 1Q-07 |
| Wholesale | 335 | 92 |
| Retail | 13 | (13) |
| Adv Tech | 10 | 8 |
| Other | (17) | (45) |
| Total | 341 | 42 |
The Andersons acquires Douglass Fertilizer & Chemical
The Andersons Inc. said April 29 that it has acquired Douglass Fertilizer & Chemical Inc. as an addition to its Plant Nutrient Group. Douglass Fertilizer, based in Maitland, Fla., is primarily a specialty liquid nutrient manufacturer, retailer, and wholesaler. It serves a variety of agricultural and, to a lesser degree, industrial and turf markets, primarily in Florida, the southeast U.S., and the Caribbean.
“Douglass Fertilizer will be an excellent addition to our Plant Nutrient Group’s product and service offering,” said Andersons CEO Mike Anderson. “Douglass Fertilizer will nicely diversify the group’s product line offering and expand our market outside the traditional Midwest row crops and into Florida’s rich specialty crops.”
Financial terms of the sale were not disclosed. Sources with both companies said Douglass Fertilizer’s 100 plus employees would all retain their positions. Douglass Fertilizer President Joe Hodges will continue in his role running the company, but will have a new title as vice president and regional manager, south.
“In the near-term, we expect Douglass Fertilizer to continue operating ‘business as usual’ as a wholly-owned subsidiary of The Andersons,” Debbie Crow, corporate communications consultant for The Andersons, told Green Markets. “A key reason The Andersons chose to pursue this relationship is the demonstrated success of Douglass Fertilizer and future growth opportunities through collaboration between The Andersons and Douglass Fertilizer. The Andersons does not anticipate a need to make any immediate organizational changes.”
Douglass Fertilizer’s management team also expressed enthusiasm about the acquisition. “I am pleased to be able to transition Douglass Fertilizer to such a quality company as The Andersons,” added Douglass Chairman and CEO Spencer Douglass. “The two companies have very similar cultures dedicated to customer service, quality, community involvement and employee development, which Joe Hodges and I believe will be the basis for its continued success and rewarding relationships with our customers, employees, communities and suppliers.”
“This is a great opportunity for Douglass Fertilizer to further build upon the tremendous growth of our diversified business units,” added Hodges. “I look forward to combining our talented management team and dedicated employees with The Andersons and growing the newly established southern region.”
Based in Maumee, Ohio, The Andersons is a diversified company with interests in the grain, ethanol, and plant nutrient sectors of U.S. agriculture, as well as in railcar leasing and repair, turf products production, and general merchandise retailing. Founded in 1947, the company now has operations in eight U.S. states, plus rail leasing interests in Canada and Mexico.
The acquisitions extends The Andersons’ footprint well outside of its current territories, which include all or parts of Ohio, Indiana, Illinois, Michigan, western Ontario, Pennsylvania, New York, Maryland, Kentucky, and West Virginia. Crow told Green Markets that The Andersons wants to grow its Plant Nutrient business in major agricultural states, and sees the Douglass Fertilizer acquisition as a “great opportunity to team up with a company with similar values, good reputation and employees committed to customer service.” She said the two companies’ product offerings and the markets they serve are complementary to each other, providing great potential for continued growth and success.
Douglass Fertilizer’s agricultural market, serviced through its Liquid Ag Systems business unit, includes fruit, vegetable, citrus, and sugarcane crops, as well as the turf and ornamental markets. The company’s Applied Solutions & Technologies business unit serves the industrial and wholesale specialty agricultural markets. All business units are supported by five Florida production facilities at Hastings, Zellwood, Fort Myers, Clewiston, and Lake Placid, and a distribution terminal in Puerto Rico.
Douglass Fertilizer distributes about 140,000 tons of nutrients annually, and generated revenues of $48 million in 2007.
Simplot agrees to reduce discharges
The J.R. Simplot Co. and the Idaho Department of Environmental Quality (DEQ) have entered into a voluntary consent order/compliance agreement in which Simplot agrees to reduce phosphorus discharges into the Portneuf River from its Don phosphate fertilizer plant near Pocatello by 50 percent in 2013, 75 percent in 2015, and 94 percent in 2021.
In the April 11 agreement, Simplot also agrees to financially support the Portneuf Watershed Partnership. Beginning in 2008 and payable by Aug. 31, Simplot will pay $15,000 annually for 10 years to operate a monitoring station and provide $25,000 annually for four years to ensure water quality improvements on the Upper Portneuf River, assessing the most beneficial, cost-effective projects through local agencies.
In April 1999 the DEQ submitted to the Environmental Protection Agency a Total Maximum Daily Load (TMDL) for the Portneuf River, listing nutrients among pollutants that needed to be addressed in the Lower Portneuf. The phased target for total phosphorus was set at 75 micrograms per liter at Siphon Road near the Don Plant.
In January 2004, DEQ completed a water quality study evaluating the impacts associated with the adjacent Simplot and FMC phosphate ore processing plants, which are included in the Eastern Michaud Flats Superfund site. It concluded groundwater beneath the plants was contaminated with nitrate, ammonia, and orthophosphate from a gypsum stack and a phosphoric acid/liquid plant area.
It was determined that groundwater beneath the Don Plant discharged into springs and the Portneuf River. Samplings showed the measured annual median value for total phosphorus at Siphon Road from 2004 through 2007 was about 1,250 micrograms per liter, far exceeding the TMDL maximum target, and possibly causing or contributing to violations of the state water quality standard for dissolved oxygen.
In accordance with a Comprehensive Response Compensation and Liability Act (CERCLA) consent decree with EPA, Simplot operates a groundwater extraction system of wells at the site to contain the migration of contaminants of concern, especially arsenic, from a phosphogypsum stack, and reduce the extent of resulting shallow groundwater contamination.
About 250 to 300 gallons per minute (gpm) of groundwater were extracted under the first phase, which is now being expanded into the second phase that consists of a more extensive field program to obtain chemistry and hydrogeologic information needed to fill major data gaps. About 600 gpm of groundwater will be extracted under the second phase. A third phase will include the system’s design and startup, with up to 1,100 gpm expected to be extracted.
To measure compliance, DEQ will collect water samples at Siphon Road to determine the concentration of total phosphorus in the Portneuf River on a monthly basis. Simplot also will conduct monthly samplings at Batiste Road and up to 400 meters north of Batiste Road.
By April 2009, Simplot will submit a technical report that specifies a groundwater and surface water monitoring program plan and a description of the last two years of past releases, tank inspections, and maintenance activities in the Don Plant’s production area. It also must submit a remedial action plan within that time frame that includes short- and long-term actions to prevent phosphorus releases to soil and groundwater and/or reduce contaminated water entering the Portneuf River.
Simplot has agreed to pay $1,000 a day for each day it is late in meeting stipulated deadlines.
EPA concerned over Idaho roadless project, points to phosphate mining wastes
In an April 4 letter to the U.S. Forest Service, the Environmental Protection Agency expressed concerns that a draft Environmental Impact Statement regarding the Idaho Roadless Area Conservation Project fails to give sufficient information to fully assess environmental impacts.
Idaho leads the contiguous United States with 9.3 million acres of roadless area. In November 2006, it was the first state to petition the Roadless Area Conservation National Advisory Committee (RACNAC) under the Bush administration’s plan to relax roadless restrictions imposed during the Clinton administration. Environmental groups contend that Idaho’s proposed roadless plan would include 8,000 acres in addition to 10,000 acres already leased for phosphate mining in the state’s roadless areas.
In the EPA letter to Brad Gilbert (USFS team leader for Idaho Roadless Area Conservation), Susan Bromm said EPA was assigning an EC-2 rating to the Draft EIS because of insufficient information pertaining to the potential for adverse environmental impacts to water quality and aquatic resources, plus the need for measures to reduce these impacts.
“Of particular concern would be potential contamination such as selenium and radioactive wastes from phosphate mining and processing,” wrote Bromm, acting director of the EPA’s Office of Federal Activities.
Agrium, the J.R. Simplot Co., and Monsanto operate phosphate mines on the Caribou-Targhee National Forest in Eastern Idaho. A “Wild at Heart” report recently issued by environmental organizations contends the Bush administration proposes to open 251,800 acres of roadless areas in the forest to new development and associated road construction. It also would allow 12,100 acres of new phosphate mines and related road work, resulting in up to 545 million tons of phosphate extracted and transported, the report states.
In her letter to Gilbert, Bromm said the Forest Service’s final EIS should address three areas of concern:
- The impacts to surface water, ground water, and their beneficial uses from the potential adverse impacts of roads and phosphate mining.
- The lack of specific direction regarding the duration and closure of temporary roads and the potential to exacerbate already significant environmental impacts from a long-standing road maintenance backlog.
- The definition of “significant risk,” which is adopted from the Healthy Forest Restoration Act (HFRA), and its specific goals, which concentrate on the reduction of fire risk, and whether this definition should be modified for the multiple goals under the rule’s five themes.
“It is accepted that roads often reduce watershed health through habitat loss and degradation, and water quantity, through flow modification and alteration of existing hydrology, and the addition of nutrients, sediment, pathogens and invasive species. Further, there is a documented correlation between roadless areas and high integrity watersheds,” the EPA official wrote.
In recent years the Forest Service has decommissioned more miles of road than have been constructed, but there remains an $8 billion backlog of deferred maintenance on more than 386,000 miles of Forest Service roads nationally. At the same time, the Forest Service is getting less than 20 percent of the estimated funding needed to maintain its existing road infrastructure. For these reasons and the ecological significance of Idaho’s roadless areas, EPA recommends that the final EIS provide clear direction on temporary roads and specific guidelines on when and to what extent such roads should be “obliterated” consistent with the National Forest Management Act. “The proposed rule should fully consider the risks to ecosystems from the construction of new roads,” Bromm said, adding the terms “significant risk” and “ecosystem components” also should be included in the final EIS.
On April 25 RACNAC ratified a plan to reclassify 200,000 acres – including Bear Creek and Toponce Creek in the Caribou-Targhee National Forest – in Idaho’s roadless plan, protecting them from mining and roads. The move reclassifies the 200,000 acres from “general forest” to “backcountry/restoration” management. An exception to allow phosphate mining in backcountry management areas was eliminated in RACNAC’s recommendation.
Between 12,000 to 15,000 acres of known phosphate areas were reclassified into a general forest designation, allowing for mining and road work. RACNAC will draft a comment letter regarding the Forest Service’s plan within a month. The USFS is scheduled to present its final EIS and roadless management plan to U.S. Agriculture Secretary Ed Schafer by September.
UAP annual net income up 144 percent
Greeley, Colo.-UAP Holdings Inc. reported a 46.5 percent increase in fertilizer sales for the year ending Feb. 24, 2008. Sales moved up to $1.04 billion from the prior year’s $707.7 million. Company-wide, sales were up 19.6 percent, to $3.41 billion from the prior year $2.85 billion. UAP net income was up 144 percent, to $81.5 million ($1.53 per diluted share), compared to the year-ago $33.4 million ($.64 per share). UAP identified both fertilizer and seed as its potential growth areas. It said it would leverage its growth in fertilizer by nurturing relationships with fertilizer suppliers and by making investments in storage and blending facilities. Chemicals, while increasing in revenues in fiscal 2007, contributed a lower share of sales ?Çô 53 percent, down from 58 percent. Fertilizer’s percentage moved up to 30 percent from 25 percent, while seed remained at 14 percent. During fiscal 2007, UAP said it made four acquisitions and paid $8.7 million. It suspended acquisition activity once the announcement was made it was merging with Agrium Inc. UAP capital expenditures in 2007 were $24.4 million, up slightly from 2006. It said the largest projects completed were a fertilizer terminal in Plymouth, Wash., and a fertilizer terminal and warehouse consolidation project in Attica, Ohio.
UAP Sales $/millions
| Sales – Year ending | Feb. 25, 2008 | Feb. 24, 2007 |
| Chemical | 1,800.6 | 1,651.4 |
| Fertilizer | 1,036.6 | 707.7 |
| Seed | 474.9 | 410.8 |
| Services/Other | 99.3 | 84.1 |
| Total | 3.411.4 | 2,854.1 |
Total UAN Regional Sales – Year ending Feb. 25, 2008
| No. of Employees | Sales $/millions | |
| Northeast | 671 | 706.4 |
| Southeast | 816 | 910.2 |
| West | 719 | 846.6 |
| Midwest | 575 | 861.2 |
| Canada | 93 | 70.5 |
Source: UAP
Phosphate Holdings income up 147 percent
Madison, Miss.-Phosphate Holdings Inc., the sole stockholder of Mississippi Phosphates Corp., reported operating earnings of $8.9 million for the first quarter ending March 31, 2008, up from the year-ago $3.6 million. Both EBITDA and net income were off due to the inclusion of hurricane-related insurance recoveries of $14.3 million in the first quarter of 2007. As a result, first quarter 2008 net income and EBITDA were $7.3 million ($.88 per diluted share) and $14.7 million, versus the year-ago $17.9 million ($2.34 per diluted share) and $19.7 million, respectively. Net sales for the quarter were up 32 percent, to $64.3 million from the year-ago $48.7 million. “We are pleased to report solid results for our first quarter despite operational issues which significantly impacted production and sales volumes,” said Robert Johns, Phosphate Holdings president. “These problems have been corrected and the plant is now producing well. We are optimistic about the balance of fiscal 2008.” The company has had problems with a sulfuric acid plant, which has impacted DAP production.
Compass fertilizer earnings up 122 percent
Overland Park, Kan.-Compass Minerals reported a 122 percent increase in operating income from its specialty fertilizer business during the first quarter ending March 31, 2008. Operating earnings were $17.1 million on sales of $47.7 million, versus the year-ago $7.7 million and $32.1 million, respectively. Fertilizer volumes (sulfate of potash) were up 15 percent, to 123,000 st versus the year-ago 107,000 st, while prices were up 29 percent to an average of $388.47/st versus the year-ago $300.58/st. Company-wide, Compass net earnings were $49.1 million ($1.48 per diluted share) on sales of $380.0 million, up from the year-ago $26.1 million ($.80 per share) and $264.2 million, respectively. Compass also benefited from improved salt results during the quarter. Salt operating earnings were $69.5 million on sales of $329.2 million, up from the year-ago $48.1 million and $229.9 million, respectively.
SQM 1Q fertilizer revenues up 66 percent
Santiago-Specialty plant nutrition revenues were up 66 percent at Sociedad Quimica y Minera de Chile SA (SQM) during the first quarter ending March 31, 2008, to US$170.5 million from the year-ago $102.8 million. While volumes to Brazil, Mexico, and Spain were up, the bulk of the revenue increase came from extremely favorable pricing conditions. SQM said the higher price trend for the second half of 2007 continued into the first quarter, and it expects it to continue for the rest of 2008. In fact, it believes volumes for the year could be lower due to production capacity constraints, but it says the pricing trend should more than offset the volume effect. Within the nutrition group, potassium nitrate and blended fertilizer sales were $151.8 million, up from the year-ago $89.5 million, while potassium sulfate sales were $18.8 million, up from $13.3 million. SQM-wide saw a 50.8 percent increase in net income to $64.8 million ($.25 per ADR) on sales of $326.3 million, up from the year-ago $43.0 million ($.16 per ADR) and $237.1 million, respectively.
ARA testifies before committee on rail access
Washington, DC-The Agricultural Retailers Association on May 1 provided testimony before the House Small Business Committee regarding rail transportation access for small businesses and family farmers. “The railroad’s consolidation since the 1980s has resulted in abandoned service to smaller communities and increased costs for many agricultural retailers,” said Dan Weber, ARA chairman of the board and vice president of agronomy for Ceres Solutions LLP in Indiana “ARA members support a railroad system that is financially sound, but it is important to have an infrastructure in place that allows for competition and has proper government oversight.” Weber said American agriculture is currently faced with high fuel, fertilizer, and transportation costs. “As a result, if the railroads are left to operate in its present state, the agricultural industry’s productivity will be stalled and consumers will continue to be affected by increased food and energy costs,” he said. “The railroad industry’s efforts to arbitrarily change tariffs, imposing excessive fuel surcharges, favoring unit trains and creating cost barriers, will stop shipments of critical agricultural fertilizer products, such as anhydrous ammonia.” Weber concluded his testimony with six ARA recommendations, saying Congress should reform the Surface Transportation Board (STB); initiate a USDA rail study; establish increased transparency on railroad shipping rates and other fees; evaluate the new rail car design to ensure it is effective and does not adversely impact deliveries to agricultural retail operations and rural communities; maintain the common carrier obligation; and review H.R. 1650, which supports the removal of railroads’ antitrust exemption and gives STB six months to bring railroad into compliance.