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Yara aims for 10 percent market share; Wall Street gives nod to fertilizer stocks
Yara International ASA told investors last week that it is aiming for a 10 percent share of the global fertilizer market, compared to its current six percent. Like several Wall Street analysts, Yara is seeing good fundamentals for the fertilizer industry in the next few years, particularly in light of ethanol/biofuel demand for corn and current corn and wheat prices.
“Current demand fundamentals make the fertilizer industry an attractive business for strong players,” said Yara President and CEO Thorleif Enger. “Historically low grain stocks-to-use ratio and high grain prices point to an increase in planting and fertilizer applications in the next season. Strong growth in biofuel demand and a limited increase in new fertilizer capacity before 2010 further underpins the overall healthy supply-demand balance in the nitrogen fertilizer market.”
Yara says the 10 percent goal will require both organic growth as well as step growth initiatives. Three categories of step growth are envisaged;
- an increased production capacity in low-cost gas areas.
- an expansion of market positions in high-growth markets, such as Asia and Latin America, specialty fertilizer and industrial applications.
- the pursuit of merger and acquisition opportunities in mature markets where the acquisition valuation mainly depends on distribution and market positions, and less on production assets.
“Our recent growth initiatives in Fertibras, China BlueChemical and the Qafco-5 expansion, show that the combination of Upstream’s technical expertise and global sourcing, Downstream’s unique distribution and marketing system and Yara’s product knowledge, make our company an attractive growth partner,” says Enger. “Through these initiatives we are expanding our presence in two of the world’s biggest and fastest-growing nitrogen fertilizer markets, where there are also future consolidation opportunities.”
In the meantime, analysts have been giving the nod to major North American fertilizer companies. This is quite a respite for the North American industry, which in the past year has been wracked by Katrina-spurred high gas prices, lower 2006 spring demand, and a slow-to-start fall season. Yara is hopeful that it saw the high for European gas prices this past summer, and North American producers are hoping again for another mild winter to keep 2007 economics rosy.
Agricore terms SaskPool offer as “hostile,” forms committee to further analyze proposal
Agricore United, Winnipeg, the diversified agribusiness that is the largest seller of fertilizer, seed, and crop protection products in Canada, is taking a cautious look at the hostile acquisition offer earlier this month by Saskatchewan Wheat Pool Inc. (GM Nov. 13, p. 1), according to Agricore officials. A special committee of independent directors has been appointed to conduct the evaluation, along with looking at other alternatives, including continuing as a stand-alone company.
Agricore, which received a stock-and-cash proposal Nov. 7 from Regina-based SaskPool valued at more than $580 million, has advised shareholders the offer was a hostile proposal, not a merger, since Agricore has had no conversation with SaskPool on the proposal. “So far, we have only an announcement of an intention to make an offer and very few details,” the company said in a letter to shareholders, who were advised not to tender their securities to the hostile offer before any response was delivered.
The special committee is chaired by Jon Grant, and includes Wayne Drul, Maurice Lemay, James Wilson, and Terry Youzwa. Scotia Capital Inc. and Blair Franklin Capital Partners Inc. have been engaged as financial advisors, with Davies Ward Phillips & Vineberg LLP as legal advisor. The board of directors will make recommendations and comments after receiving a report from the special panel.
Combined, Agricore and SaskPool have an estimated $1.33 billion in agricultural input sales annually, with sales made through approximately 300 locations, according to statistics compiled by Green Markets (GM Nov. 13, p. 1). Estimates are that a combined Agricore/SaskPool would control over half of the grain handling capacity in Western Canada, according to the Canadian press.
Petcoke a priority, says CF, but no final decision
Long Grove, Ill.-CF Industries Inc. continues to study the possibility of running its Donaldsonville, La., nitrogen complex using petroleum coke gasification; to date, however, it has not pulled the trigger on that option. This according to CF spokesman Chuck Nekvasil last week, in response to rumors that CF would be involved in a $700 million petcoke facility in 2007 with The Energy Capital Group Inc., (ECG) Houston. “For the record, we continue to study this option, and it is a priority for us,” said Nekvasil, “but no decision to proceed has been made, and we have not established any timetable for such a decision.” ECG confirmed that it was in the midst of discussions that it intends will result in its building, owning, and operating gasification facilities in the chemical, petrochemical, and refining industries. However, it said the discussions are covered by confidentiality agreements that have prevented it from issuing press releases at this point. In the meantime CF, citing high run-up in equipment and construction expenses, says costs of building a greenfield ammonia and UAN complex in Trinidad can’t be justified. It has taken a step back from that project, but will continue to assess the project in light of an attractive natural gas contract. CF says it must be assured an attractive return before proceeding.
PotashCorp seeks additional SQM shares
Saskatoon-Potash Corp. of Saskatchewan Inc. made a play last week to buy additional shares in Sociedad Quimica y Minera de Chile S.A. (SQM), the Chilean specialty fertilizer maker. PotashCorp took out advertisements in Chilean newspapers seeking to buy 4.48 million Series B shares for US$58.8 million. The offer was open until Dec. 20. If successful, PotashCorp would add 1.7 percent to its existing 27 percent stake in the Series B shares. The company increased its stake to 27 percent in October, acquiring 2 percent, or 6.1 million shares, at a cost of $75.5 million (GM Oct. 23, p. 1). At the time, PotashCorp said that the move did not signal a takeover attempt, that it simply saw an opportunity to add to its investment and took it. PotashCorp Manager of Investor Relations Tim Herrod reiterated this point to Green Markets again Nov. 22, saying PotashCorp has excess cash and is simply taking this opportunity to increase its investment. Herrod explained that PotashCorp was simply making a tender offer for 1.7 percent of the Series B shares and that some have made a big deal out of the incident. He noted that if PotashCorp attained 32 percent of SQM it would be required to tender for the entire company. As for control, he noted that it is currently pretty even, with a group that includes Yara International ASA holding four board seats and PotashCorp three, with one independent Series B director.
KBR raises $508 M in IPO
Houston-KBR, the engineering, construction, and services subsidiary of Halliburton, said Nov. 21 that it has closed its initial public offering of 32,016,000 shares of common stock at a price of $17.00 per share. The number of shares of common stock issued at closing included 4,176,000 shares subject to the underwriters’ over-allotment option. KBR received approximately $508 million of proceeds from the offering, net of underwriting fees and estimated expenses. Halliburton will remain the majority shareholder of the company, retaining over 80 percent of the common shares (GM Nov. 20, p. 11).
Aussie AN project loses Wesfarmers
North Sydney, Australia-Dyno Nobel has confirmed that it has been informed by CSBP (Wesfarmers) that it would not be entering into a joint venture arrangement with Dyno Nobel on a prospective QNB ammonium nitrate plant at Moranbah in Queensland. “The economics of the QNB project remain attractive,” said Dyno Nobel CEO Peter Richards. “We were obligated to offer Wesfarmers the option to participate in QNB under a pre-existing arrangement but as previously stated, subject to acceptable project economics, it was our intention to proceed with the project with or without CSBP’s participation.” Richards said Dyno Nobel is in the process of finalizing its commitments with three customers, as well as other key elements of the project, which it hopes to announce soon. In August, Dyno Nobel signed a Heads of Agreement with United Group Ltd. for the engineering, construction, and pre-commissioning for the prospective plant. In addition, Dyno Nobel has a Letter of Intent with engineering firm SNC-Lavalin to play a key role in ensuring the project is completed on time and on budget. The goal is for the new plant to be up and running in the fourth quarter of 2008. Dyno Nobel continues as a 50-50 partner with Wesfarmers/CSBP in the Queensland Nitrate Project in Moura, Queensland.
IDS to distribute Yara’s Air1 in its AdBlue network
Oslo-Yara International and International Diesel Service (IDS), an operating division of Kuwait Petroleum (Q8), have signed an agreement for the distribution of AdBlue in Europe. Yara’s branded AdBlue product, Air1®, will be offered 24/7 in a range of strategically located IDS filling stations across Europe. AdBlue is a liquid urea solution that is injected into the SCR (Selective Catalytic Reduction) catalyst onboard trucks to meet new standards set by the EU, effective in October, to control emission of pollutants from heavy-duty vehicles. AdBlue is sprayed into the exhaust system and is subsequently hydrolized before the catalytic converter breaks down the nitrogen oxide (NOx) into harmless nitrogen and water. Yara said the agreement is an important milestone in the establishment of an infrastructure for the distribution of AdBlue on the road. European truck drivers will find Air1® in IDS’s filling stations next to international haulage routes, frontier posts, and at important transport and trading centers in 18 countries. The stations are unmanned and operate as 24/7 automats. IDS operates 640 filling stations on the entire continent, from the north of Sweden to the south of Italy. Yara is the world’s largest producer of AdBlue. It has developed a premium grade urea to produce Air1® at strategically located plants in Europe, including the world’s largest AdBlue production plant, Yara Sluiskil in the Netherlands, which has an annual production capacity of 200,000 mt.
GenTek closing sulfuric acid plant
Parsippany, N.J.-GenTek Inc. will be closing its Newark, N.J., sulfuric acid production plant at the end of this year. The production and shipment of other products, aluminum sulfate and ferric sulfate, currently being sold from the Newark, N.J., location, will continue without any interruptions. GenTek said the decision was prompted by the fact that the Newark Sulfur operation, already cash flow negative, was facing increasingly adverse market conditions and required infrastructure investments that would have led to material cash losses in this business. It is anticipated that shipment of product will cease during December of 2006; all closure activities are expected to be completed by the end of April of 2007. GenTek is currently negotiating with a third party on the potential sale of the site. The restructuring charges as a result of this closure include termination costs of approximately $1 million and other closure costs totaling approximately $1 million, substantially all of which are expected to be paid in 2007.
Formula online for treating anhydrous ammonia
Washington, D.C.-The Fertilizer Industry Methamphetamine Task Force has made available online the formula for treating anhydrous ammonia. The information on how much and the method to be used can be accessed on the TFI website (www.tfi.org), along with answers to more than a dozen questions raised since Iowa approved the use of the anti-meth additive several weeks ago. Nine gallons or 110 pounds of liquid calcium nitrate (CN9) are required to treat 2,000 pounds of anhydrous ammonia. The CN9 must be inserted through the liquid withdraw valve only to prevent heating and rise in pressure. If this is not done, pressure can cause the pop-off valve to release. According to the Iowa Department of Agriculture, it takes 10 to 15 minutes with a gear pump to insert the required amount of CN9 into a 1,000 gallon nurse tank; a piston pump may take considerably longer. Only nurse tanks can be used since storage, transport, or rail vessels have not been structurally tested, and there are no plans at this point to do so. Nurse tanks can be filled to 85 percent capacity with NH3; adding the CN9 will increase tank capacity by only .l8 percent. Many states, including Illinois, allow the tanks to be filled to only 85 percent capacity. The task force points out that introducing the CN9 with a total nitrogen content of 9 percent will reduce the analysis of NH3 from 82-0-0 to 78-0-0. For more information, contact John Whipple at the Iowa Dept. of Agriculture and Land Stewardship at 515-281-8610, or John.Whipple@idals.state.ia.us.