All Posts from February 18, 2008

Agrium reports $441 M net income in 2007; Redwater I to restart in late March

Featured, News

Agrium Inc. reported record net income for the year and quarter ending Dec. 31, 2007. Income for the year was $441 million ($3.25 per diluted share) on sales of $5.5 billion, versus 2006’s $33 million ($.25 per share) and $4.4 billion. Fourth-quarter net income was $172 million ($1.24 per share) on sales of $1.5 billion, versus the year-ago loss of $62 million ($-.47 per share) and sales of $944 million.

“Our performance this quarter was a result of our three business units all delivering record fourth quarter results, due to a combination of excellent business fundamentals and strong operating performance,” said Mike Wilson, Agrium president and CEO. “Furthermore, the outlook for 2008 is outstanding. Prices for virtually all major row crops are at record high levels, providing growers with a strong incentive to optimize use of crop inputs. Strong demand for crop inputs, combined with limited capacity additions for all three nutrients, is expected to result in the continuation of tight supply and demand conditions for global nutrient markets.”

For the year, Agrium’s Wholesale business reported an EBITDA of $786 million, more than double the year-ago level. Wholesale gross profit and EBITDA were all-time highs for any quarter, even though the second quarter is normally the strongest of the year.

Agrium’s Retail section posted annual EBITDA of $210 million, up from the year-ago $125 million. Agrium’s goal for the year had been $200 million.

The Advanced Technology section reported 2007 EBITDA of $29 million, up from 2006’s $7 million. The company said ESN sales volumes in 2007 were 120,000 mt. Wilson told analysts that the ESN market has the potential to grow to 1-3 million mt/y.

While touting the year 2007, Wilson told analysts that the best is yet to come. He cited tight supply/demand scenarios for all three major nutrients. While inventories at the retail level are higher than a year ago, the company anticipates a good spring, what with high grain prices across the board. As for fertilizer prices, the company expects no price corrections before spring planting, but maybe afterwards.

As for the average selling prices for potash, the company expects those for the first quarter to average in the low $300s/st for the Cornbelt warehouses, with them being above $400/st for the second quarter and above $500/st for newer sales.

When pressed by analysts, Agrium’s Retail President Richard Gearheard said he expects corn acreage to come in around 90 million acres in 2008. He said any downturn may come from the Southeast. He added Cornbelt acres may actually be up.

With a huge run-up in wheat prices, Agrium expects fallow land and pasture to be converted to more wheat production, noting Western Canada in particular. The company is bringing back more capacity in that region.

Agrium is restarting its Redwater 1 ammonia plant by the end of March. The plant, located in Redwater, Alberta, has been idled for some time and is only expected to come up to meet seasonal demand. Redwater I has the capacity to produce 280,000 mt/y. Redwater II operates at 680,000 mt/y.

In other news, on Feb. 11 the company re-filed its notification with the Federal Trade Commission in order to allow the FTC to continue to review the proposed acquisition of UAP Holding Corp. by Agrium under the Hart-Scott-Rodino Antitrust Improvements Act. The current re-filing will provide the FTC with additional time to review the information. The new waiting period under the HSR Act will expire Feb. 26, 2008.

$ million Retail Wholesale Adv Tech
07 06 07 06 07 06
Year Net Sales 2,466 1,975 2,845 2,269 249 101
EBITDA 210 125 786 352 29 7
4Q Net Sales 555 384 908 536 70 36
EBITDA 47 28 307 99 4 1
Wholesale 07 Net Sales Gross Profit Sales mt 000 Price Margin
Ammonia 508 125 1,282 396 98
Urea 765 326 2,162 354 151
UAN/Other 462 110 1,750 264 63
Tot. Nitrogen 1,735 561 5,194 334 108
Phosphate 466 118 1,021 456 116
Potash 305 167 1,684 181 99
Wholesale 06 Net Sales Gross Profit Sales mt 000 Price Margin
Ammonia 440 53 1,269 347 42
Urea 681 197 2,582 264 76
UAN/Other 255 41 1,209 211 34
Tot. Nitrogen 1,376 291 5,060 272 58
Phosphate 298 27 906 329 30
Potash 213 98 1,279 167 77
Retail 07 Net Sales 07 Gross Profit 06 Net Sales 06 Gross Profit
Crop Nut. 1,453 335 1,065 217
Crop Prot. 619 181 591 154
Seed/Other 394 160 319 124

CF focuses on Peru for expansion; Terra eyes the U.S.

Featured, News, Peru

With prospects for a CF Industries Holdings Inc. and Terra Industries Inc. joint venture plant in Trinidad waning, the two partners appear to be going their separate ways and assessing projects on their own. CF recently noted that the natural gas term sheet on the Trinidad project expired in December, and it has been frustrated by an inability to find an appropriate site in the country for a new plant.

CF Chairman and CEO Steve Wilson told analysts that CF is now focusing on Peru, where it won a gas supply contract late last year. Wilson said CF would like to see the Trinidad term sheet renewed, but that as far as his management group is concerned, it has turned its sights on the southwest and is aggressively working on the Peru project.

In the meantime, Terra, which was also to be in the Trinidad jv, lost out on its own bid to get a gas contract in Peru. Terra is now eyeing a number of $100-$150 million upgrade projects at existing facilities in the U.S. heartland. “We have identified several promising investment opportunities to upgrade more of our ammonia production into higher valued products, mainly UAN and liquid urea,” said Terra President and CEO Mike Bennett. He said Terra is in advanced stages of valuating one of these opportunities and expects to reach a decision soon. He said the first one could be completed in 2010.

Terra said it expects to invest some $10 million this year in the restart of the Donaldsonville, La., ammonia plant (GM Feb. 11, p. 1), with about half of that cost being for new catalysts. Once the restart begins, the company expects to be at full rates within a few weeks.

Terra also expects to squeeze more production out of its existing plants in 2008 as only one turnaround is expected, and that is for the Port Neal, Iowa, plant.

In related news, Bennett said the company ended 2007 with some $300 million in customer prepayments, which is the highest level it has ever experienced in its nitrogen business.

Yara net income tops $1.1 billion

News

Yara International ASA reported net income after minority interest of $1.1 billion (NOK 6,037 million) ($3.78 per share) for the year ending Dec. 31, 2007, compared to the $657.4 million (NOK 4,188 million) ($2.17 per share) posted in 2006.

EBITDA for 2007 was $1.55 billion (NOK 8,441 million) on sales of $10.5 billion (NOK 57,486 million). Operating income was $915 million (NOK 4,987 million). This compares to year-ago EBITDA of $1 billion (NOK 6,472 million), operating income of $526.2 million (NOK 3,352 million), and sales of $7.6 billion (NOK 48,261 million).

Total sales volume in 2007 was 24.6 million mt, versus 21.6 million mt in 2006.

Yara reported fourth-quarter net income of $375 million (NOK 2,044 million) ($1.29 per share) compared with the year-ago $139.9 million (NOK 891 million) ($.47 per share). Fourth-quarter operating income was $274.1 million (NOK 1,494 million), compared with $81.8 million (NOK 521 million) last year. EBITDA for the quarter was $464.4 million (NOK 2,531 million), compared with the year-ago $212.1 million (NOK 1,351 million). Fourth-quarter sales were $3.2 billion (NOK 17,389 million), versus the year-ago $1.95 billion (NOK 12,428 million).

Total sales volume in the fourth quarter was 7.1 million mt, versus the year-ago 5.65 million mt. Fourth-quarter fertilizer sales excluding Kemira GrowHow were up 10 percent from last year, primarily reflecting a strong market in Europe. Yara said all regions saw substantial fertilizer margin improvements, reflecting a demand-driven market and strong focus on price management.

“We continue to deliver strong financial performance with further margin improvements and volume growth. The global fertilizer market is tight with growing demand and limited new capacity, resulting in substantial fertilizer price increases to balance the market. The price increases have more than compensated for higher energy costs,” said Thorleif Enger, Yara president and CEO.

Yara said the decision to close the Terni plant in Italy at the end of 2008, triggered by the end of energy contracts, has resulted in a write-down of NOK 140 million.

Compass reports record 4Q, annual results

News Briefs, Southern Plains

Overland Park, Kan.-Compass Minerals reported a 23 percent increase in specialty fertilizer sales in the year ending Dec. 31, 2007, to $136.1 million, up from 2006’s $110.3 million. Fertilizer operating earnings moved up to $35.6 million from 2006’s $30.5 million. Compass sold 423,000 st of product at an average sales price of $321.82, versus 2006’s 377,000 st and $292.39. Fourth-quarter fertilizer earnings were $11.3 million on sales of $39.4 million, up from the year-ago $8 million and $29.2 million, respectively. Fourth-quarter volumes were 115,000 st with an average price of $341.29, versus the year-ago 96,000 st and $303.69. Company-wide, Compass reported 2007 net income of $80 million ($2.43 per diluted share) on sales of $857.3 million, compared to 2006’s $55 million ($1.69 per share) on sales of $660.7 million. Fourth-quarter net income was $50.4 million ($1.53 per share) on sales of $326.1 million, versus the year-ago $26.2 million ($.80 per share) and $211.1 million. “Our record results this quarter and for all of 2007 demonstrate Compass Minerals’ improving performance,” said Angelo Brisimitzakis, Compass president and CEO. “As the leading North American producer of sulfate of potash, our specialty fertilizer segment is realizing increasing benefits from the dynamic growth of the fertilizer industry. Our salt segment also posted substantial sales and earnings gains, aided by a significant year-over-year weather benefit in the fourth quarter.”

Rentech 1Q sales up, continues to post loss

California, News Briefs

Los Angeles-Rentech Inc. reported sales of $47.5 million for the first fiscal quarter ending Dec. 31, 2007, versus the year-ago $35.4 million. The increased revenue reflects the strong demand and prices from the company’s Rentech Energy Midwest Corp. (REMC) fertilizer plant in East Dubuque, Ill. “We expect pricing and demand for REMC products to remain strong for the remainder of the fiscal year,” said Hunt Ramsbottom, Rentech president and CEO. “REMC continues to provide significant cash flow to support Rentech’s synthetic fuels commercialization efforts.” Rentech reported a net loss for the quarter of $23.4 million ($.143 per share), versus a year-ago loss of $8.7 million ($.061 per share).

Raytec acquires new potash claims

News Briefs, Potash, Vancouver

Vancouver-Raytec Metals Corp., an upstart potash company, said Feb. 11 that it has signed an agreement to purchase a 100 percent interest in Exploration Permit Application Area (“EPAA”) KP452, located in Saskatchewan. EPAA KP452 covers an area of approximately 92,160 acres in south-central Saskatchewan. The newly acquired EPAA is in the south-eastern portion of the evaporite formation, located approximately 380 kilometers southeast of the company’s EPAA KP441. The new EPAA lies approximately 42 kilometers southwest of the Mosaic Co. – Compass Mineral Group’s K-1 and K-2 Potash-Salt Mines, and 53 kilometers west of Potash Corp. of Saskatchewan’s Rocanville Potash-Salt Mine. Raytec says it now has a total of 290,880 acres of prospective potash ground under permit application within the extensive Middle Devonian Prairie Evaporite formation of south-central Saskatchewan. It says Saskatchewan Ministry of Energy and Resources data indicates that EPAA KP452 is underlain by both the Belle Plain and the Esterhazy potash members. Exploratory drilling has been conducted on the newly acquired ground in the past. This historic information will be reported once the company has reviewed all pertinent data. It says that currently there is no NI43-101 report on this property, nor are there proven, indicated, or inferred resources. Raytec adds that the presence of the Belle Plain and the Esterhazy potash members does not guarantee the presence of economic quantities of potash. Terms of the acquisition with the arms-length vendor are as follows: 1) On acceptance by the TSX Venture Exchange ?Çô $150,000 cash, 275,000 common shares of the company, and 275,000 share purchase warrants, which may be converted to common shares of the company for a period of 12 months following TSX Venture Exchange approval at a price of $1.00 per share; 2) Six months after receiving acceptance by the TSX Venture Exchange – $150,000 cash, 250,000 common shares of the company, and 250,000 purchase warrants, which may be converted to common shares of the company for a period of 18 months following TSX Venture Exchange approval at a price of $1.00 per share; 3) After issuance of the final Exploration Permit from the Saskatchewan Ministry of Energy and Resources – 250,000 common shares of the company.

New Mexico levies $270,600 fine against Helena

News Briefs, Southern Plains

Santa Fe, N.M.-State environmental regulators are assessing a $270,600 penalty against Helena Chemical Co. for 11 air quality violations at the company’s Mesquite fertilizer plant. The New Mexico Environmental Dept. (NMED) said it considered two of the violations major because they involve failing to perform a compliance test that indicates emissions levels and not controlling dust – some believed to be toxic air pollutants – from escaping from the facility. The $270,600 is the largest of three environmental penalties against Helena since 2004, but could have been even larger. Four of the original 15 violations, which involved having open chutes that allowed fertilizer to escape and failing to keep toxic air pollutants and engineering records, were subsequently dropped because Helena was determined not to be liable. Dave Thomas, Helena’s division manager in charge of Mesquite operations, responded, “We are certainly pleased to learn that four of the alleged violations were dropped by NMED. Helena believes that this is a direct result of NMED and Helena’s continued working relationship and NMED’s increased understanding of Helena’s operations. Helena, NMED, local residents in the Mesquite area, and Southern New Mexico agriculture can only gain from increased communication and understanding among all concerned.” Thomas said Helena “will continue to working with NMED” regarding the remaining 11 “alleged” violations. Branch Manager Jeff Elmore added, “We intend to work with NMED and the community of Mesquite to ensure that we are able to continue to serve the agricultural industry in a manner that is compliant and beneficial to all New Mexico residents.” Ed Brister, Helena’s director of regulatory compliance and engineering, stated “The remaining violations are, we believe, primarily record keeping in nature, and Helena has already addressed those concerns. Further, at no point have Helena’s operations posed a threat to human health or the environment. We look forward to NMED’s cooperation in reaching workable solutions to all remaining issues.” However, NMED Deputy Secretary Jon Goldstein wasn’t so understanding in his statement that “Helena Chemical fails to understand the gravity of its past environmental violations and continues to disregard the welfare of residents by its lax behavior. Helena potentially put residents at risk by failing to monitor pollutants from the plant.” NMED issued the notice Feb. 8, which was related to a Nov. 14 enforcement action at the facility. The notice requires Helena, within 30 days, to pay the penalty and submit a certificate of compliance for the violations, the majority of which included failure to control emissions from the fertilizer at the company. NMED issued a NOV and assessed a penalty of $238,000 to the company in November 2004 for failing to obtain a permit to operate the facility. The department also issued a $36,000 penalty to Helena in October 2006 when the company failed to report a chemical fertilizer spill. NMED also began investigating all Helena facilities in March 2007 after a fire broke out at another Helena facility in Humboldt, Tenn., to ensure local operations were safe.

Legislation introduced to limit restoration

News Briefs, Pacific N.W.

Boise-The Idaho Mining Association has introduced legislation, backed by phosphate mining companies such as the J.R. Simplot Co. and Monsanto, that would prevent state regulators from requiring them to restore mineral-tainted water beneath their operations to its natural condition after their open pit mines are shut down. In early 2007, the Idaho Department of Environmental Quality, the mining industry, and environmentalists agreed that the Idaho Groundwater Quality Plan enacted in 1992 by the Legislature to protect aquifer quality while allowing mining activities was unclear and needed changes, but negotiations broke down. In November, IDEQ postponed talks until April 2008. Mining companies expressed concern that uncertainty about cleanup requirements could stifle new projects such as the expansion of phosphate mines in the Caribou-Targhee National Forest near the Idaho/Wyoming border, while environmentalists said vagueness makes it easier for the companies to pollute. Selenium from defunct phosphate mines contaminated water and killed livestock in Eastern Idaho in the late 1990s. The IMA disagreed with IDEQ’s plan to force companies to clean up groundwater within eight years after a mine closes, and environmentalists objected to DEQ’s provisions that allowed groundwater pollution below waste rock piles and reclaimed areas. On Feb. 4, the Idaho Senate Health & Welfare Committee printed an IMA-backed bill that would expand IDEQ’s definition of mining areas and clear the way for companies to pollute groundwater beneath waste rock disposal sites, reclaimed areas, and processing plants in perpetuity. IMA lobbyist Jack Lyman said nothing in the bill absolves companies of responsibility to protect neighboring property. Justin Hayes of the Idaho Conservation League said the IMA legislation is an attempt to circumvent unfinished negotiations. He said he wants IDEQ to develop rules that require mining companies to engineer projects to prevent groundwater pollution, rather than accepting it as inevitable. Hayes commended Canadian-based Agrium Inc. for using such high standards at its North Rasmussen Ridge Mine 25 miles from Soda Springs.

Folsom gets waste-to-fertilizer processor

News Briefs, Northeast

Boston-Converted Organics Inc. has announced the installation of its first fully automatic system utilizing high temperature liquid composting (HTLC) for turning food wastes into organic-based fertilizer at California’s Folsom State Prison. Converted Organics officials said the unit, which runs around the clock and can be monitored remotely, will help to achieve the state-mandated goal of 50 percent waste diversion and recycling. “The HTLC technology is an integral part of our future growth, and we intend to aggressively pursue opportunities in markets that can benefit from on-site organic waste recycling systems, such as prisons, universities, and medical centers,” said President and CEO Edward Gildea. Meanwhile, Alpharetta, Ga.-based Organic Growing Systems has supplied Miami with four tons of TOP 4-2-2 and expects the order to increase to truckload quantities for use as the city, the University of Miami, and EcoZone carry out their “clean and green” environmental plans. Superior Landscape is evaluating the organic fertilizer on a trial basis, but distributor Florida Mulch Inc. believes that “given the anticipated results, future use should be guaranteed.” Florida Mulch also reports that as a result of the Tropical Plant Industry Expo at Fort Lauderdale, orders have been received from separate Caribbean-based contractors for Grand Cayman Island and The Bahamas. Since the initial order three weeks ago, the Grand Cayman contractor has already placed its first reorder.

Wisconsin phos ban would include preemption

Great Lakes, News Briefs, Phosphate

Madison, Wisc.-Wisconsin is expected to be getting a statewide ban on the sale and use of phosphorus fertilizer for lawns, which includes preemptive language limiting further regulation by local governments, according to the spokesman for the landscape industry. “This bill will pass due to the strong grassroots efforts of the Wisconsin Lakes Assn. and other environmental groups contacting their lawmakers,” Brian Swingle, executive director of the Wisconsin Green Industry Federation, told Green Markets. Swingle predicted the General Assembly most likely will add to the Senate-passed bill an amendment imposing some form of preemption language on local units of government. He said the federation supports requiring scientific evidence supporting additional regulation at the local level, but opposes the Senate version, which bans display of fertilizer containing phosphorus as a “hide the fertilizer” approach. “Instead,” Swingle added, “we believe the solution is to post a sign at the point of sale educating customers of when phosphorus-containing fertilizers can be lawfully used, and the negative impacts that excess phosphorus can have on water quality.” One way or the other, Wisconsin agriculture interests aren’t much concerned about the phosphorus legislation. Farm Bureau officials reported that agriculture is exempted from SB179 because application of fertilizer for crop and pastureland is regulated through the state’s non-point source prevention program. Spokesman Paul Zimmerman said that growers and producers, with a few exceptions, are required to comply with management standards based on University of Wisconsin research. The lake supporters’ legislative and legal committee chair, Roger Walsh, remarked in the press, “We are pleased that this initiative won strong bipartisan support. The senate has adopted a good bill. We encourage the assembly to pass this bill quickly and get it to the governor’s desk.” Walsh pointed out that the vast majority of Wisconsin’s lawns are saturated with too much phosphorus and that runoff goes directly into surface waters. He said the bill has broad support from county and local governments, local lake groups, statewide conservation organizations, and others interested in protecting the lakes throughout the state. At the same time, a bill has been introduced in the Maryland state senate with 14 co-sponsors to prohibit use of phosphorus fertilizer on all established lawns. One of them, Montgomery County Sen. Brian Frosh, reported in the press that the intent is to make the restrictions voluntary by not establishing any lawn police or setting up fines. Phosphorus would be allowed for establishing new lawns. Frosh also suggested that producers should label their no-phosphorus products for use on older lawns.

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