Yara International ASA said Nov. 17 that it has entered into an agreement to acquire the Vale Cubatão Fertilizantes complex in Brazil from Vale SA for an enterprise value of US$255 million. Yara said the acquisition will establish Yara as a nitrogen producer in Brazil, strengthening its production footprint and complementing its existing distribution position.
Australian-based Incitec Pivot Ltd., Southbank, Victoria, reported an increase in both Net Profit After Tax (NPAT) and revenues for the year ending Sept. 30, 2017, with the new Waggaman, La. (WALA), ammonia plant playing a major role. At the same time, the company warned that it may have to close its Gibson Island nitrogen complex in Queensland if it does not reach an economical natural gas contract.
IPL reported a 148 percent increase in NPAT, to A$318.7 million on revenues of $3.47 billion from the prior year $128.1 million and $3.35 billion, respectively. NPAT excluding individually material items (IMA), however, was up only 8 percent, to $318.7 million from $295.2 million, respectively. EBIT ex IMI was up 17.1 percent, at $501.2 million from $428.1 million.
EBIT growth came from Industrial Chemicals, which includes WALA, as well as from Explosives.
Industrial Chemical EBIT ex IMI was up 83.1 percent, to $96.5 million from the year-ago $52.7 million.
WALA delivered FY17 EBIT of $53.7 million on revenues of $142.7 million, up from the year-ago $17.6 million and $44.2 million. EBITDA was $75.3 million, up from $8 million. Production was 540,200 mt, up from 42,000 mt. While the company delivered 74 percent of nameplate for FY17, down from 80 percent expectations in June (GM May 12, p. 17), the company said it produced at 108 percent of nameplate in September and 109 in October 2017, and it is expected to achieve nameplate production in FY18. Nameplate is 800,000 mt/y.
Explosives EBIT was up 9.2 percent, to $344.4 million from the year-ago $315.3 million.
Fertilizer EBIT was off 1.8 percent, at $80.4 million from the prior year $81.9 million. IPL called the relatively flat EBIT a strong result in the face of persisting headwinds, including a further decline in global fertilizer prices and the strengthening of the Australian dollar against the U.S. IPL said the result was underpinned by increased distribution volume and cost-saving initiatives.
Going forward, the company warns that it may have to close its Gibson Island plant if it cannot come up with an economically viable natural gas contract to keep the plant open. The current gas contract expires Sept. 30, 2018. During FY17, Gibson Island produced some 500,800 mt of nitrogen fertilizer products, including urea and ammonia, up 14.7 percent from the year-ago 436,500 mt. It also produced some 74,500 mt of nitrogen-related industrial chemicals (ammonia, urea, and DEF), about level with the prior year 75,000 mt.
IPL said the carrying value of Gibson Island was written down in FY16. Its contribution to EBIT in FY17 was about $45 million. Should it be closed, the company estimates those costs at $50 million, but it said these could be offset by a sale of the land in the $40-$50 million range.
In other news, the company reports that the Phosphate Hill plant in Australia is slated for a six-week turnaround starting in mid-March 2018. Phosphate Hill produced 940,500 mt of DAP/MAP in FY17, down 6.8 percent from the prior year 1 million mt.
In the Americas, EBIT and revenues were up, mainly due to the WALA plant. Total EBIT was $173.1 million on revenues of $954.1 million, up from the prior year $118.2 million and $846.8 million, respectively. However, Explosives were up on continued growth in the Quarry & Construction segment. Fertilizer was down, driven by lower prices.
Americas Fertilizer EBIT was off 67.3 percent, to $1.6 million on revenues of $75.6 million from the year-ago $4.9 million and $97.3 million, respectively.
A planned turnaround at the company’s Cheyenne, Wyo., nitrogen plant began in September, and was successfully completed in October. For the year, UAN production at the plant was down 22 percent and urea down 5 percent. UAN production was 154,700 mt versus 198,300 mt, and urea 24,400 mt versus 25,800 mt.
Both UAN and urea production at St. Helens, Ore., were up at 15.4 and 25.9 percent respectively. UAN was 58,500 mt versus 50,700 mt, and urea at 103,500 mt versus 82,400 mt, respectively.
In total, some 341,100 mt of urea and UAN were produced at Cheyenne and St. Helens, down 4.5 percent from the year-ago 357,000 mt. Sales, however, were up 0.9 percent, to 351,000 mt from 348,000 mt.
In other news, IPL announced an on-market share buyback of up to $300 million in addition to the final unfranked dividend of 4.9 cents per share, maintaining a 50 percent payout for FY17.
In addition, as planned, Managing Director and CEO James Fazzino stepped down last week as planned, and incoming Jeanne Johns took over effective Nov. 15 (GM Aug. 11, p. 25).
|
Americas – Revenue |
|||
| US$/M | FY17 | FY16 | Change% |
| Explosives | 735.8 | 705.3 | 4.3 |
| Industrial Chem | 142.7 | 44.2 | 222.9 |
| Fertilizer | 75.6 | 97.3 | (22.3) |
| Total | 954.1 | 846.8 | 12.7 |
|
Americas – EBIT |
|||
| US$/M | FY17 | FY16 | Change% |
| Explosives | 117.8 | 95.7 | 23.1 |
| Industrial Chem | 53.7 | 17.6 | 205.1 |
| Fertilizer | 1.6 | 4.9 | (67.3) |
| Total | 173.1 | 118.2 | 46.4 |
|
Asia Pacific – Revenues |
|||
| A$/M | FY17 | FY16 | Change% |
| Explosives | 933.2 | 920.8 | 1.3 |
| Industrial Chem | 69.8 | 80.1 | (12.9) |
| Fertilizer | 1,280 | 1,261 | 1.4 |
| Eliminations | (19.2) | (14.9) | 28.9 |
| Total | 2,263.8 | 2,247.8 | 0.7 |
|
Asia Pacific – EBIT |
|||
| A$/M | FY17 | FY16 | Change% |
| Explosives | 189 | 186.1 | 1.6 |
| Industrial Chem | 25.7 | 28.9 | (11.1) |
| Fertilizer | 78.2 | 75.3 | 3.9 |
| Total | 292.9 | 290.3 | 0.9 |
K+S Group pulled back into the plus column for the third-quarter ending Sept. 30, 2017, citing enhanced product availability of specialties and higher fertilizer prices. K+S third-quarter operating earnings (EBIT 1) were €12.3 million on revenues of €726.5 million, up from the year-ago loss of €31.4 million and €687.6 million. EBITDA was €76.7 million, up from €55.9 million.
“Our earnings performance continued to improve in the third quarter, and we made further progress with important environmental and regulatory issues,” said Dr. Burkhard Lohr, K+S board chairman. “Nevertheless, 2017 will remain a transitional year in which we can’t yet fully exploit our strengths.”
As reported earlier, K+S said it is in a transformation phase until 2020. It said the tapping of synergies should lead to positive earnings of at least €150 million per year from the end of 2020. The company expects to return to positive free cash flow by 2019 and to halve indebtedness by 2020. It expects to achieve an investment grade rating in 2023.
K+S anticipates 2017 total EBIT 1 of €260-360 million, up from 2016’s €229 million. It expects EBITDA of €560-€660 million, up from €519 million.
In the Potash and Magnesium Products segment, the company reported EBIT 1 of €1.7 million on revenues of €357.7 million, up from the year-ago loss of €48.9 million and €301.7 million, respectively. The company cited better availability at the Werra plant in Germany and higher average prices. It said stable disposal of saline wastewater lifted production and sales volumes of higher-margin fertilizer specialties. Sales volumes moved up to 1.41 million mt, with an average price of €253/mt from the year-ago 1.26 million mt and €238.80/mt, respectively.
Segment volumes are expected to be 6.8-7 million mt for the year, up from 2016’s 6.1 million mt. K+S cited the positive effects of wastewater disposal at Werra, and the company expects no more wastewater-related standstills for the remainder of the year. Along those lines, the company reported that it has received approval for the early commencement of expansion of its tailings pile at the Hattorf site, and is in settlement negotiations with the Municipality of Gerstungen and BUND (the Federation for Environment and Nature Conservation Germany), relating to the company’s saline injection permit.
In addition, starting in 2018, the company expects positive effects on the disposal situation due to the commissioning of its new kainite crystallization and flotation facility (KCF), which will reduce saline wastewater at the Werra plant by about 20 percent. The company has also hired an outside advisor regarding possible specialty products that could be retrieved during the process.
The Bethune mine in Saskatchewan will add 500,000 mt of production this year, down from earlier estimates of 600,000-700,000 mt, with 2018 expectations of approximately 1.7 million mt. Bethune earnings guidance for 2017 is a loss of just below €150 million, with it becoming EBITDA positive in 2018 and EBIT positive in 2019.
K+S added that the first shipment of Bethune product has arrived in China, and the clients were very happy with the product quality.
The company said that it will soon decide when to close its Sigmundshall mine in Germany, which is currently the deepest active potash mine in the world. Currently, K+S is thinking it will be the end of 2018 or 2019. It wants to give notice well in advance, as some 780 jobs are at stake and the company will need to negotiate with work councils and unions.
K+S said Sigmundshall currently produces some 600,000 mt/y, spanning a whole range of products, including specialty industrial products, with only a slight portion being muriate of potash. Production will ratchet down during the final year. The company said that given the mine’s low efficiency and the overall production environment, the mine’s current EBIT contribution is approximately zero in 2017, with it expected to be slightly negative in 2018. The company said it cannot bring it back into the positive, and that under law the mine must be flooded after it stops production.
Salt EBIT 1 was down 8.7 percent, to €16.8 million on revenues of €328.8 million from the year-ago €18.4 million and €346.4 million, respectively. K+S said sales were moderately below year-ago levels and EBIT 1 was impacted by the effects of Hurricane Irma at the company’s Inagua site in the Bahamas.
Company-wide, nine-month EBIT 1 trailed year-ago numbers by 11.8 percent, at €178.1 million on revenues of €2.6 billion from the year-ago €201.9 million and €2.5 billion, respectively. EBITDA was €389.5 million, compared to the year-ago€424.7 million.
|
Revenues E/M |
3Q-17 | 3Q-16 | YTD-17 | YTD-16 |
| Potash/Mag | 357.7 | 301.7 | 1,218.5 | 1,133.1 |
| Salt | 328.8 | 346.4 | 1,255.4 | 1,260.2 |
|
EBIT 1 E/M |
3Q-17 | 3Q-16 | YTD-17 | YTD-16 |
| Potash/Mag | 1.7 | (48.9) | 75 | 68.1 |
| Salt | 16.8 | 18.4 | 123.1 | 145.8 |
|
Potash/Mag |
3Q-17 | 3Q-16 | YTD-17 | YTD-16 |
| Sales Vol. M mt | 1.41 | 1.26 | 4.77 | 4.43 |
| Avg Price E/mt | 253 | 238.8 | 255.3 | 255.4 |
Intrepid Potash announced on Nov. 15 that Mark McDonald has been appointed vice president of sales and marketing, replacing Jeff Blair, who will resign from Intrepid on Nov. 28 to take a position in the Midwest with an agriculture company.
Intrepid said McDonald is a “seasoned agricultural and feed sales professional” with more than 28 years of experience in the North American agriculture industry. He joined Intrepid in December 2013 as a national account manager, and has taken on increasingly challenging roles since then, including director of Industrial, Feed, and Midwest Agricultural Sales, and director of U.S. Agricultural and Feed Sales. Prior to joining Intrepid, McDonald held positions at Agrium U.S. Inc., Cargill Ltd., and Monsanto Co.
Scotts Miracle-Gro Co., Marysville, Ohio, reported that growth in its new specialty segment, The Hawthorne Gardening Group, helped boost overall net sales by 5 percent for the fiscal year ending Sept. 30, 2017. This was the first quarter in which Hawthorne, which specializes in hydroponics and also serves the cannabis market, received segment status. It was formerly listed within Other.
Hawthorne reported an annual sales increase of 137 percent, most of which was due to acquisitions, though the company said some 20 percent of the growth was organic. Scotts expects double-digit growth for the unit for several years to come. Scotts anticipates additional acquisitions in both Hawthorne and live products, though it believes major Hawthorne additions have already been achieved.
Scotts shares hit a record high after earnings were released, according to Bloomberg, but retreated after JPMorgan cut its rating to neutral from overweight, citing slow growth of EBITDA and fears that cash flow would be stressed by more deals in the cannabis market.
For the year, Scotts reported Scotts Lawn Service (SLS) Divestiture adjusted income of $236.9 million ($3.94 per diluted share) on net sales of $2.64 billion, up 7 percent from the year-ago $221.7 million ($3.58 per share) and $2.51 billion, respectively. However, net income was $218.8 million ($3.63 per share), compared to the prior year $314.8 million ($5.09 per share). Adjusted EBITDA was $560.5 million, up from $517.4 million.
Using the SLS Divestiture adjusted basis, Scotts guidance for 2018 is $4.15-$4.35 per share. Sales growth is expected to go up 4-6 percent, assuming acquisitions will add 3 percent and Hawthorne more than 1 percent, and U.S. Consumer sales growth of 0-2 percent.
The company reported record operating cash flow of $354 million, up from the year-ago $237 million. Cash flow will be used as a major Scotts measurement going forward, with the goal of delivering cash flow of at least $350 million per year.
Full-year sales in the U.S. Consumer segment were off 2 percent, due mainly to lower-than-expected sales in mass retail and lower year-over-year sales in mulch. U.S. Consumer operating profit was $521.5 million, up 6 percent. Scotts raised mulch prices in 2017, and lost volume. It expects to reverse course in 2018, expecting overall that its pricing will be net neutral, with likely increases in a few areas.
The company noted that its craft gardening products, which were previously a part of Hawthorne, have moved to the U.S. Consumer division. The Other category now consists of Canada, Mexico, a small operation in China, and revenue from a supply agreement related to the sale several years ago of the professional horticulture business.
Scotts told analysts that commodities, including urea, should be a slight headwind for Scotts in 2018, though it has nearly locked in 70 percent of its urea and diesel requirements for the year. It noted that it has seen negative pressure from both in the last two months, and pressure in resins as well. It expects a modest commodity headwind in 2018 of about a few million dollars, or $0.05 per share.
The company gained some $40 million in sales from its 2017 introduction of Roundup for Lawns, and expects to add more products in this line in 2018. The company said another piece of good news is the legalized use of cannabis in California starting in 2018, though the company noted that the industry is still awaiting firm rules on recreational use.
Fourth-quarter SLS Divestiture showed a loss of $14.9 million ($0.26 per share) on revenues of $376.7 million, compared to the year-ago loss of $11.7 million ($0.19 per share) and $348.7 million, respectively. The company reported a net loss of $33.4 million ($0.57 per share), versus the year-ago loss of $26.9 million ($0.44 per share). Adjusted EBITDA was $5.5 million, versus the year-ago $5.6 million.
| Net Sales | 4Q-17 | 4Q-16 | 2017 | 2016 |
| U.S. Consumer | 258.1 | 278.9 | 2,160.5 | 2,204.4 |
| Hawthorne | 92 | 46.8 | 287.2 | 121.2 |
| Other | 26.6 | 23 | 194.4 | 180.6 |
| Total | 376.7 | 348.7 | 2,642.1 | 2,506.2 |
| Profits | 4Q-17 | 4Q-16 | 2017 | 2016 |
| U.S. Consumer | (0.3) | 11.2 | 521.5 | 493.7 |
| Hawthorne | 9 | 5.2 | 35.5 | 11.8 |
| Other | (0.9) | (2.1) | 13.4 | 10.4 |
| Total | 7.8 | 14.3 | 570.4 | 515.9 |
Specialty chemicals company Lanxess, Cologne, Germany, announced on Nov. 15 that it has signed an agreement with Belgium-based Solvay Chemical Co. to acquire Solvay’s U.S. phosphorus chemicals business, which includes a production site in Charleston, S.C. Lanxess said the acquisition will expand its Additives segment and “fully complements” its strategy to grow its business in North America, Asia, and in mid-sized markets.
The transaction is expected to close in the first half of 2018, subject to customary closing conditions and regulatory approvals. The Solvay production site in Charleston includes six production units, where roughly 90 employees manufacture phosphorus chloride and other derivative products such as flame-retardants and intermediates for the agrochemical industry. The business posts annual sales of around €65 million.
“With this acquisition, we are benefiting from a North American platform for phosphorus-based specialty chemicals – a key component of our additive business – and are able to further drive our growth in this key region,” said Anno Borkowsky, general manager of the Additives business unit at Lanxess.
Solvay reported that all Charleston employees will be transferred to Lanxess as part of the deal. “The divestment will strengthen Solvay’s focus and resources on our existing leadership positions in phosphine gas, phosphine derivatives, and phosphorous specialties,” said Michael Radossich, president of Solvay’s Technology Solutions Global Business Unit. “With Lanxess, our Charleston employees and our customers will have a buyer with a strategic, geographic, and technical fit to expand the business and its offerings.”
Lanxess has 74 production sites globally, and is primarily focused on the development, manufacturing, and marketing of chemical intermediates, additives, specialty chemicals, and plastics. The company posted sales of €7.7 billion in 2016, and currently has about 19,200 employees in 25 countries. Lanxess’s Additives business has annual sales of around €2 billion and roughly 2,000 employees globally.
Solvay is a multi-specialty chemical company headquartered in Brussels, with approximately 27,000 employees in 58 countries. Solvay recorded net sales of €10.9 billion in 2016.
United Services Association, Urbandale, Iowa, reported that Daniel Mudgett will be joining the company on Nov. 20 as director of operations in the Fertilizer Procurement Department. Mudgett will fill the position currently held by Ralph Owens, who is retiring at the end of December after 22 years with United Services. Mudgett most recently served as product manager/procurement specialist at Winfield United in Ames, Iowa. He can be reached at 515.246.3062, or by email at Daniel@unitedservices.net.
Russian fertilizer producer EuroChem Group AG on Nov. 15 announced the official launch of its new subsidiary in Bulgaria, EuroChem Agro Bulgaria. The business is headquartered in Pleven in northern Bulgaria, and stems from EuroChem’s March 2017 acquisition of Agricola Bulgaria (GM March 3, p. 15), a Bulgarian fertilizer distribution company that was previously owned by Agrium Europe NV.
EuroChem said the launch of EuroChem Agro Bulgaria will enable EuroChem to expand its distribution footprint in Bulgaria and more widely into southern and eastern Europe, where it sees strong demand for fertilizers. At the time of its purchase of Agricola Bulgaria, EuroChem said the Bulgarian distribution company had annual fertilizer sales of 70,000-80,000 mt, accounting for around nine percent of the Bulgarian fertilizer distribution market.
“We are investing heavily in people and resources to bring our premium brands to Bulgaria, which is currently dominated by straight fertilizers and blended products,” said Dmitry Strezhnev, EuroChem CEO. “It is clear that more efficient fertilizers are needed to meet demands for reduced water use, lower emissions, and reduced nitrate leakage while also achieving higher yields.”
EuroChem said it is planning to develop production facilities in Bulgaria to facilitate the distribution of new premium products, and has invested in research and development trials for several of these products – including Nitrophoska, ENTEC, and UTEC – which showed “highly positive results” in Bulgaria.
“We see strong demands for these new products,” said Andrey Savchuk, head of Sales and Marketing, Europe and Turkey. “On large field commercial trials we have proven results, with farmers achieving higher yields and better returns with our more efficient products. We know that the quality of the cereals is assured, regardless of soil conditions or cold weather, when using our more efficient fertilizers.”
Headquartered in Zug, Switzerland, EuroChem currently operates production facilities in Belgium, China, Kazakhstan, Lithuania, and Russia, supporting distribution assets in Europe, the CIS, Asia, and North and South America. The company has more than 25,000 employees globally.
Fertilizantes Heringer SA, Viana, Brazil, reported a third-quarter loss on a slight uptick in volumes. Losses decreased to R9.9 million on net revenues of R1.48 billion from the year-ago R22.5 million and R1.51 billion, respectively.
Third-quarter volumes moved up 2.9 percent, to 1.36 million mt from the year-ago 1.32 million mt. While conventional fertilizer deliveries were up 6.7 percent, to 730,000 mt from the year-ago 684,000 mt, specialty was off 1.3 percent, to 628,000 mt from 636,000 mt. Specialties share of total sales dropped to 46 percent from the year-ago 48 percent.
Heringer announced that it has introduced a foliar line to its specialty portfolio, and has the goal of soon being ranked among the main market players within the foliar segment. While the company said the foliar line volumes will be much smaller than other specialty lines, the products will have higher margins.
Nine-month losses were R102.4 million on revenues of R3.3 billion, up from the year-ago R9.2 million and R3.82 billion, respectively.
Nine-month volumes were 2.97 million mt, down 5.1 percent from the year-ago 3.13 million mt. Conventional fertilizer deliveries were up 0.1 percent, to 1.593 million mt from 1.592 million mt. However, Specialty was off 10.4 percent, to 1.38 million mt from 1.54 million mt. Specialties share of sales dropped to 46 percent from the year-ago 49 percent.
The Agricultural Retailers Association (ARA) and more than 180 other agricultural organizations and regional cooperatives sent a letter on Nov. 13 to House Speaker Paul Ryan (R-Wisc.) and House Minority Leader Nancy Pelosi (D-Calif.) opposing the repeal of the Domestic Production Activities Deduction, which is eliminated in the House’s tax reform legislation.
H.R. 1, the Tax Cuts and Jobs Act, was passed by the House on Nov. 16. The 440-page legislation reduces the corporate tax rate from 35 percent to 20 percent, reduces the number of tax brackets from seven to four, and doubles the standard deduction, while eliminating many other deductions and credits.
Among those being eliminated is the Domestic Product Activities Deduction, also known as Section 199, which was passed as part of the American Jobs Creation Act of 2004. Section 199 allows cooperatives to deduct the proceeds earned from products that are manufactured, produced, grown, or extracted, and in turn pass those deductions back to their farmer members.
The Nov. 13 letter to Ryan and Pelosi states that Section 199 is critical for the country’s cooperative system and should be preserved to “incentivize domestic production and job creation.” The letter claims that farmer cooperatives pass 95 percent of the deduction benefit, or nearly $2 billion nationally, directly back to farmers, who can then deduct their share of the Section 199 benefit from their taxes.
“In its current form, H.R. 1 repeals Section 199 with the assumption that cooperatives and their members would benefit from the proposed reduced corporate and individual tax rates,” the letter states. “However, the math does not add up for the farm sector. Farmer-owned cooperatives are not taxed like traditional corporations, so they cannot benefit from lower corporate rates like most other industries. Even more troubling is that for many farmers, changes to the individual tax code would not be enough to offset the loss of the Section 199 agriculture deductions.”
The letter claims that ending the Section 199 deduction for agriculture would result in many individual farmers paying more in taxes. “Across virtually every commodity, we are facing the fourth consecutive year of stagnant prices,” the letter states. “We encourage you to preserve Section 199 for agriculture as part of any tax reform efforts. As a matter of basic fairness, we need you to consider tax reform that will lower rates on businesses broadly but does not raise taxes on farmers.”
The Senate Finance Committee is now expected to vote its version of the tax reform bill out of committee on Nov. 17, with a full Senate vote expected after Thanksgiving.
