All Posts from May 13, 2022

Stoller Rumored to be Exploring $1.5 Billion Sale

Featured, Houston, TX, News, Specialty

The owners of the agricultural chemicals company The Stoller Group Inc. are exploring a sale that could value it at as much as $1.5 billion, including debt, according to a Bloomberg report on May 12, citing people with knowledge of the matter.

The Houston-based company, which is controlled by the Stoller Foundation following the death of its founder Jerry Stoller in 2019 (GM June 21, 2019), is working with an adviser to look at strategic options for the company, including a sale, Bloomberg reported, citing sources who asked not to be identified because they were not authorized to speak publicly. Stoller will likely receive interest from other private equity firms and peers, the sources said.

The foundation has not made a final decision on which options to pursue and its plans could still change, said the sources. A representative for Stoller and the foundation did not respond to requests from Bloomberg for comment.

Stoller was founded in 1970 and has grown to include operations across more than 50 countries with 1,000 employees, according to the company’s website. The company, now led by President and CEO Guillermo de la Borda, has products designed to improve yields of row crops, tree nuts, fruits, vegetables, and turf, according to its website.

The company has made a number of strategic moves in recent years. Stoller joined CommoditAg’s online supply network in July 2020 (GM July 2, 2020), and in May 2021 the company announced that it has acquired a stake in Cromai, a Brazilian agri-tech startup (GM May 7, 2021). In November 2017, Stoller Enterprises Ltd, a Stoller Group subsidiary, signed a distribution agreement to market and sell ag products through Nexus Ag by Univar in Canada (GM Nov. 22, 2017).

According to data compiled by Bloomberg, chemicals dealmaking in North America has kept up to last year’s pace, with 176 deals worth a combined total of about $20 billion announced since January. That compares with 162 transactions for $22.6 billion at this point in 2021.

Some of this year’s most notable deals include Celanese Corp.’s $11 billion purchase of Dupont de Nemours Inc. mobility and materials arm and Dow Inc.’s acquisition of Hanseatic Energy Hub GmbH.

Brazil’s Galvani to Expand Fertilizer Output

Brazil, News, News Briefs

Brazil’s privately-held fertilizer company Galvani Fertilizantes, Sao Paulo, is ramping up production and will double phosphate output at its plant in Luis Eduardo Magalhaes in Bahia state to 1.2 million mt in two years, CEO Marcos Stelzer said in an interview with Bloomberg.

While the expansion was planned before the latest fertilizer crisis began, the increased output will still be a welcome addition for local farmers struggling to afford the inputs they need in a runaway global marketplace.

Brazil, the top destination for Russian fertilizer shipments, currently imports around 85% of its fertilizer demand and 75% of its phosphate use. With Russia’s invasion of Ukraine causing prices to skyrocket, the Brazilian government has been looking for alternative suppliers from Canada to Iran; otherwise, it risks lower fertilizer use curbing yields and contributing to soaring food prices around the world.

In addition to the Luis Eduardo Magalhaes plant, Galvani is also a partner in an early-stage fertilizer project in the nation’s northeast, which is classified as strategic by the federal government. Known as Santa Quiteria (GM Oct. 19, 2018), the phosphate-uranium project is waiting for environmental and operation licenses to proceed, the CEO said.

If brought online, the Santa Quiteria project will introduce an additional 1.05 million mt/y of phosphate production. Together, the projects will boost Galvani’s fertilizer output to 2.2 million mt in 2026 from 600,000 mt in 2021. That would represent more than one-third of the nation’s current phosphate output.

The Galvani family retained the production unit in Luis Eduardo Magalhães and the mining units in Angico dos Dias and Irecê, as well as the Santa Quitéria project, when it sold its minority stake in Galvani Indústria to Yara International ASA, Oslo, in 2018 (GM Oct. 19, 2018). The Galvani retained assets were valued at US$95 million as of Aug. 31, 2018.

France Slashes Corn Planting

France, News, News Briefs

Corn farmers in France, the European Union’s top grower, will slash plantings to a four-year low, according to a Bloomberg report, the latest sign of how surging fertilizer costs are risking grain production. France will sow 1.46 million hectares (3.6 million acres) of corn this season, down 6% from last year, and plant more oilseeds instead, its agriculture ministry said May 10. That is an indication of the trade-offs farmers are making due to expensive fertilizers, which grains are more reliant on, it said.

Paris corn futures have soared 51% since the start of the year and are near an all-time high.

Corn farmers in the US are making similar planting cutbacks this year, according to the USDA. Ukraine, another major grower, will see its harvest sink due to Russia’s attack.

Paradeep Phosphates Proceeds with IPO

India, News, News Briefs, Phosphate

Paradeep Phosphates Ltd., Odisha, India, will sell new shares in the initial public offering (IPO) to raise a lower-than-planned 10.04 billion rupees ($130 million), while its shareholders – including the Indian government   will sell as many as 118.51 million shares, according to its red herring prospectus, cited by Bloomberg. The company filed draft papers for the IPO last fall (GM Oct. 22, 2021).

Proceeds from the sale are expected to repay debt, as well as partially finance the recent acquisition of the Goa nitrogen and NPK facility (GM Feb. 26, 2021), according to the Press Trust of India (PTI).

The shares will be sold in a range of 39-42 rupees, according to a stock exchange filing by Zuari Agro Chemicals Ltd., whose joint venture is selling shares in the IPO.

Zuari Maroc Phosphates Pvt., a jv of Zuari Agro Chemicals and OCP Group SA, owns 80.45% of Paradeep Phosphates; it will sell 6.02 million shares in Paradeep Phosphates, lower than the 7.55 million planned initially.

The Indian government, which owns the remainder in the fertilizer maker, or 19.55%, is selling about 112.5 million shares as planned. The government is selling its entire stake, according to PTI.

The IPO opens for sale May 17 and closes May 19; anchor investors can place bids on May 13.

Incorporated in 1981, Paradeep Phosphates is the second-largest maker of non-urea fertilizers among private sector companies in India, according to its prospectus. It has 1.2 million mt/y production capacity for DAP, NPK, and NP.

Unplanned Interruption Reported at Iowa Plant

News, News Briefs, Nitrogen, Western Cornbelt

OCI NV’s Iowa Fertilizer Co. reported that the Wever, Iowa, nitrogen plant experienced an unplanned interruption in production on May 9. The company hopes to return to normal operations later in the week.

The company told local residents to expect higher-than-normal flaring and noise levels, as well as steam venting, during the startup period. It said the flaring is harmless to the environment and that the company continues to meet and exceed all air quality permits and regulations regarding the flares.

Scotts’ Hawthorne Acquires Australian-Based Cyco

Australia, Eastern Cornbelt, News, News Briefs, Specialty

Scotts Miracle-Gro Co., Marysville, Ohio, announced on May 3 that its Hawthorne Group has acquired Cyco, Adelaide, South Australia, for $34 million plus contingent consideration of up to $10 million. The transaction marks the fifth Hawthorne acquisition in the past year.

Cyco is a brand of premium nutrients, additives, and growing media products that are used by growers of all sizes in the hydroponic market. Hawthorne has been the exclusive U.S. distributor of Cyco products, which also are sold primarily in Canada and Australia through select retailers and distributors.

Under the terms of the deal, Hawthorne has acquired the brand and business assets of Cyco. Although the acquisition is small – about $15 million in annualized sales – Scotts said Cyco is a strategic move to expand Hawthorne’s Signature line of nutrients and growing media, including General Hydroponics, Botanicare, Terpinator, and Mother Earth.

Hawthorne intends to expand the availability of the Cyco brand in North America, and through an arrangement with the current Australian distributor will make other Hawthorne products available to hydroponic growers in that market. Scotts told analysts on May 3 that it hopes to move some of its current excess inventories to Australia.

Despite the Cyco acquisition, Scotts said it now has a pretty limited appetite for M&A, as it is not looking for cash to go out the door. “Anything would be highly strategic and probably non-cash,” Jim Hagedorn, Chairman and CEO, told analysts.

Scotts Income Off on Late Season, Commodity Prices, Depressed Cannabis Market

Earnings, Eastern Cornbelt, News

Scotts Miracle-Gro Co., Maryville, Ohio, reported net income for the second quarter ending April 2 of $276.5 million ($4.94 per diluted share) on sales of $1.68 billion, down from the year-ago $310.2 million ($5.43 per share) and $1.83 billion, respectively. Adjusted EBITDA was $429.6 million, down from $478.9 million.

The company reported record second-quarter U.S. Consumer sales, though this was offset by an expected decline in Hawthorne Group sales, leading to company-wide sales that were 8% lower than the same period a year ago. As a result, the company has adjusted its total sales outlook to the lower end of guidance.

It said its previous guidance of $8 or more of non-GAAP adjusted earnings per share is likely unattainable. Scotts plans to further update the investment community the week of June 6.

“Spring weather, frankly, has been lousy in most markets and the season broke about two to three weeks later than normal,” said Jim Hagedorn, Chairman and CEO. “Still, we now believe the low end of our sales guidance range for U.S. Consumer of plus-or-minus 2% from last year’s performance is our most likely outcome.”

“At Hawthorne, while organic sales in the second quarter were in line with what we expected, recent trends also lead us to conclude the low end of our sales guidance range is a best-case outcome for this business,” he added. “We are taking steps to proactively reduce costs within the Hawthorne operation, with a focus on returning the business to at least its previous level of profitability as quickly as possible.” This includes shrinking the size of its supply chain network and reducing staffing levels.

Company-wide, Scotts plans to pull back on some discretionary spending and hiring decisions for the rest of the year.

Hagedorn added that over the last two years, the continued pressure from commodity prices has led to a significant margin decline despite multiple pricing actions. The company expects to boost prices again in the fourth quarter, which will be the fourth increase within a year. The company said a surge in commodity prices is expected to pressure earnings per share (EPS) in the second half.

On May 3, the company told analysts that it has about 80% of its raw materials costs locked in for the year, 90% on urea. It said diesel and pallets are the largest area of exposure. “Even if commodity prices start to ease, it will take a few years to claw back the margin we’ve lost,” added Hagedorn.

“If we sit back and wait for the commodity market to give our margins back, we could be waiting a while. So we are not going to wait. We’re going to swiftly move to make changes and better positon us for success.”

The company is currently forecasting commodities to represent 32% of cost of goods sold (COGS) this year, up from 19% in 2020.

Another problem for the company is swollen inventories, estimated at $600 million, with half of that in U.S. Consumer and half in Hawthorne. Two-thirds of that is units, and one-third cost. Hawthorne hopes to move some of that to Australia via its recent Cyco acquisition (see related story).

Hagedorn, citing Scotts own economists, is preparing for a recession, but said while not recession-proof the company is recession-resistant, noting that it has a lot of experience coming through recessions.

Six-month net income was $226.4 million ($4.02 per share) on sales of $2.24 billion, down from the year-ago $335.3 million ($5.87 per share) and $2.58 billion, respectively. Adjusted EBITDA was $421.1 million, down from $554.3 million.

  2Q-22 2Q-21 1H-22 1H-21
Net Sales ($/millions)        
US Consumer 1,379.8 1,374 1,722.2 1,782.2
Hawthorne 202.6 363.8 393.2 673.2
Profit ($/millions)        
US Consumer 428.9 435.9 439.6 481.2
Hawthorne 3.3 41.4 (2.0) 81.8

Correction

Correction

Correction: Nutrien Ltd., Saskatoon, reported that contrary to a story in Green Markets on April 29, p. 29, it has not committed to being carbon-neutral by 2050. The reference came from an April 25 press release issued by AirCapture, Berkeley, Calif., and OCOchem, Richland, Wash.

Enbridge, Humble Eye Development of World-Class Blue Hydrogen and Ammonia Facility in Texas

Blue Ammonia, Blue Hydrogen, Featured, News, Texas

Enbridge Inc., Calgary, and Humble Midstream LLC, Denver, an EnCap Flatrock Midstream portfolio company, on May 6 announced the joint development and marketing of a blue hydrogen and ammonia production and export facility, which will be located at the Enbridge Ingleside Energy Center (EIEC), near Corpus Christi, Texas.

“The plant will be a world-class facility, which typically means capacity exceeding 1 million mt/y ammonia,” Humble Midstream CEO Steven Huckaby told Green Markets. “We are still in negotiations with several potential ammonia customers, so we haven’t nailed down an exact capacity yet. Interest is very high, and we expect to easily exceed the 1 million mt/y size. We anticipate building the hydrogen section 20-25% bigger than needed for ammonia production to supply hydrogen to the regional market.”

Enbridge and Humble intend to jointly market the capacity of the facility. The construction of any facilities will be subject to sufficient customer support and receipt of all necessary regulatory approvals.

If built, the facility would cost roughly $2.5-$3 billion and could come online as early as 2026.

“This is a good example of how Enbridge is leveraging existing conventional energy assets and capabilities to extend growth and capitalize on low carbon opportunities in the energy transition,” said Colin Gruending, Enbridge Executive Vice President and President, Liquids Pipelines. “The EIEC is already the premier export facility on the U.S. Gulf Coast and will play an even greater role in global energy security and sustainability. We’re excited to work with Humble to further develop this opportunity.”

Enbridge paid $3 billion for the EIEC in 2021, providing it with a 100% operating interest and related pipeline and logistics infrastructure, along with a 20% interest in the 670,000 barrel-per-day Cactus II Pipeline.

“Humble is pleased to be joining Enbridge in this first-mover effort to develop clean energy alternatives on a world-class scale,” added Huckaby. “We believe the midstream expertise of both companies positions us well to provide affordable hydrogen and ammonia to a marketplace seeking low carbon alternative fuels. Our team is glad to be partnered with EnCap Flatrock Midstream to pursue this opportunity, a natural extension of their longstanding midstream strategy.”

Huckaby noted that the EIEC site was a former naval base commissioned during the Clinton administration and closed during the Obama administration. “Given the late vintage of those facilities, the grounds are well suited to a quick repurposing to ammonia and hydrogen production, and much had been done by Enbridge for their crude oil export business,” he said.

He said the two companies will be working to reduce the carbon intensity (CI) of both the feedstock and the utilities required to produce hydrogen and ammonia and expect that the result will be one of the lowest carbon footprints on the Gulf Coast. Initial discussions with many of the stakeholders in the area have been very productive and supportive of this development, he added.

The parties said up to 95% of the carbon dioxide (CO2) generated in the production process will be sequestered in newly developed carbon capture infrastructure, including facilities to be owned and operated by Enbridge, making this a fully integrated low-carbon solution. Enbridge’s affiliate, Texas Eastern Transmission Pipeline, is expected to provide the transportation service for feed gas that will be used for the production process. Both hydrogen and ammonia have zero CO2 emissions at the point of use.

Huckaby said the parties are several weeks away from determining the technology vendor for the project, but the efficiency in carbon capture being designed does shrink the field a bit.

Enbridge is a North American energy infrastructure company, with core businesses in oil and natural gas pipelines, distribution, and storage, as well as renewable power generation.

Humble was formed in 2020 with an initial $300 million equity commitment from EnCap Flatrock Midstream, San Antonio, which provides value-added growth capital to proven management teams focused on midstream infrastructure opportunities across North America. The firm manages investment commitments of nearly $9 billion from a broad group of institutional investors.

Doyle, Riverview to Expand Operations in Missouri

News, News Briefs, Western Cornbelt

Doyle Equipment Manufacturing and Riverview Manufacturing, both manufacturers of dry fertilizer handling equipment based in Palmyra, Mo., announced on May 6 that they are launching a joint expansion in Palmyra that will add 80,000 square feet of production space for an estimated investment of $1 million.

“By increasing manufacturing space for our Tender Product Lines and Automated Blending Systems, we will be creating new jobs in Marion County,” said Doyle Enterprises President Monty Doyle. “That means more people who will stop at local gas stations going to and from work, eat in local restaurants over lunch breaks, and shop at local stores when heading home. We have also seen more and more Illinois employees moving into Marion County.”

The two companies said the expansion will add 30 jobs to meet increased product demand. Positions for the new jobs include production assembly, production welding, fabrication, machining, product design, service, maintenance, and sales. The project will expand Doyle’s operations to more than 240 employees with 275,000 square feet of production space.

“Our state’s positive business climate continues to attract significant investment from leading manufacturers like Doyle Manufacturing and Riverview Manufacturing,” said Missouri Gov. Mike Parson. “By focusing on keeping costs low, strengthening our workforce, and investing in infrastructure, we’re helping create quality jobs. The success of these two companies is great news for our state and Missourians in Palmyra and beyond.”

For their expansion, Doyle and Riverview used the Missouri Works program, a tool that helps companies expand and retain workers by providing access to capital through withholdings or tax credits for job creation. The project is also supported by the Hannibal Regional Economic Development Council (HREDC) and Marion County, among other public and private partners.

“We’re pleased to see both Doyle Manufacturing and Riverview Manufacturing expanding their operations and creating more opportunities for Missourians,” said Maggie Kost, Acting Director of the Department of Economic Development. “This project is a testament to Missouri’s advantages, as well as the ability of our state’s economic development partners to deliver what businesses need when expanding. The growth of these companies will have a positive impact on their local economy that will benefit residents of Marion County for years to come.”

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