All Posts from February 4, 2008

UAP 3Q fertilizer sales up over 80 percent; higher SGA expenses increase quarterly net loss

Featured, News

UAP Holding Corp. reported an 80.3 percent increase in fertilizer sales during the third quarter ending Nov. 25, 2007, to $209.5 million versus the year-ago $116.2 million. The company attributed $12 million in additional revenues to acquired businesses, with increased volumes and selling prices making up the remainder. Nine-month fertilizer sales were $888.2 million versus the year-ago $607 million.

Higher selling, general, and administrative expenses (SGA) caused UAP’s net income to dive 45 percent to a loss of $19.0 ($.36 per share) on sales of $497.8 million, versus the year-ago loss of $13.1 million ($.26 per share). SGA expenses for the quarter mimicked the downturn, up 45 percent, to $79.3 million from the year-ago $54.7 million. UAP said the higher expenses were due to additional expenses from acquired businesses, as well as higher incentive-based compensation commensurate with the company’s performance. The company acquired some eleven businesses for a total initial purchase price of $82.1 million in the prior fiscal year 2007, net of cash received, and assumed liabilities of approximately $47 million. UAP also acquired some four businesses during fiscal 2008 and paid $8.9 million in purchase price.

For the first nine months UAP was well within the plus column, with net income of $103.7 million ($1.95 per share) on sales of $2.96 billion, up from the year-ago $40.9 million ($.78 per share) on sales of $2.51 billion. Nine-month SGA was up 22 percent.

In December 2007, UAP and Agrium Inc. announced Agrium’s plans to conduct a tender offer for UAP’s shares (GM Dec. 10, p. 1). Due to questions from U.S. regulatory authorities, Agrium has had to withdraw and refile documents in order to allow more time for review (GM Jan. 21, p. 1). While the deal does not appear to be in jeopardy, UAP says should it not be completed due to a failure to achieve regulatory approval and certain other conditions, Agrium would be liable to UAP for a reverse break fee of $54 million. Likewise, should the deal not proceed for other, unspecified reasons, Agrium would be liable to UAP for up to $54 million.

Canadian regulatory authorities have recently given the Agrium/UAP deal a green light (GM Jan. 28, p 12), with the companies noting that neither has significant retail presence in the country. For the nine months ending Nov. 25, 2007, UAP reports Canadian sales of $64.2 million, compared to U.S. sales of $2.9 billion.

UAP Net Sales 3Q-07 3Q-06 9Mo-07 9Mo-06
Chemicals 233.7 218.3 1,575.1 1,499.0
Fertilizers 209.5 116.2 888.2 607.0
Seed 32.2 19.3 416.8 362.5
Other 22.4 21.9 85.1 73.0
Total 497.8 375.7 2,965.3 2,541.5

* Sales in millions

Agriliance still for sale; Memphis leaders let go

Featured, News, South Central

While CHS Inc. and Land O’Lakes Inc. have ended exclusive negotiations to sell the remaining southern retail assets to a management group (GM Jan. 28, p. 1), the two continue to retain BMO Capital Markets to help them sell the assets. This, according to a recent Securities Exchange Commission filing by LOL. Some had suggested that the parents might actually keep the assets for themselves. BMO was brought onboard last summer to assist in Agriliance’s repositioning.

With BMO still in the hunt for a buyer for Agriliance assets, sources suggested that if one large buyer does not come forward, the outlets could be sold off to regional players on a piecemeal basis. Agriliance said last week that about 40 northern locations have been repositioned, primarily with member cooperatives, and that it continues to evaluate options for repositioning the remaining retail operations.

Agriliance said its remaining retail operations consist of just under 100 retail centers and ProSource One locations in the south (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, and Tennessee), along with the separate Agronomy Co. of Canada, Belton, Ont., which supplies inputs to Agromart outlets in Eastern Canada. ProSource One, a Memphis-based distribution company supplies fertilizers, chemicals, seed, and services to professional users throughout the U.S. Its markets include professional turf, ornamental and nursery, aquatics, and vegetation management.

In the meantime, Agriliance let go its leadership team in its Memphis office, including Jim Blome. Tim Witcher, region director, Winfield Solutions of LOL, has been assigned management responsibility for the southern area and will be spending a lot of time in the Memphis office, according to an Agriliance spokesperson. There are no plans to close the Memphis office. The company said this would be up to a buyer.

Raytec joins growing list of potash startups

News, Saskatchewan

Raytec Metals Corp., Vancouver, said Jan. 29 that it has signed an agreement to purchase a 100 percent interest in Exploration Permit Application KP441, located in Saskatchewan.

Permit KP441 covers an area of approximately 88,320 acres in central Saskatchewan, in an area of both highly prospective properties and producing potash mines, including Potash Corp. of Saskatchewan Inc.’s Cory Mine, located 20 kilometers south. The claims are immediately adjacent to claims currently held by a joint venture between Anglo Minerals Ltd. (Anglo Potash) and BHP Billiton Diamonds Inc. Raytec notes that the Anglo jv has increased its area of primary interest as the seismic data indicates that the potash resource may be possibly larger and more contiguous than originally thought. As a result, Anglo has initiated a $16 million follow-up seismic program and drill program.

Raytec says Saskatchewan Ministry of Energy and Resources data indicates that its permit lands are underlain by both the Patience Lake and the Belle Plain potash members. Raytec said information obtained from the Saskatchewan Research Council on two drill holes within the drill area, conducted by Canadian Exploration Ltd. in 1969, indicated intersections with both of these potash members.

Raytec cautions, however, that there is no NI43-101 report on the property, nor are there proven, indicated, or inferred resources. It says the presence of the Patience Lake and Belle Plain potash members in the 1969 drill holes does not guarantee the presence of economic quantities of potash.

Raytec says it acquired its permit from an unnamed arms-length vendor. Terms with the vendor include: on acceptance of the acquisition by the TSX Venture Exchange – $50,000 and 1 million shares of the company, commencing on the later of: 30 days following issuance of the final exploration permit from the Saskatchewan Ministry of Energy and Resources, or six months from the date of the agreement: $2 million payable in stages over a period of 12 months and the number of shares equivalent to $1 million worth of the company’s stock; and a 2 percent royalty in favor of the vendor, which may be purchased for $2 million.

In addition, Raytec says it has granted incentive stock options to its directors, officers, consultants, and employees, under its stock option plan, for the purchase of up to 300,000 common shares for a period of 2 years at a price of $.40 per share.

Raytec describes itself as an integrated mineral exploration company that is developing Canadian mineral deposits. It cites iron ore properties in Ontario as well as the potash permit in Saskatchewan. Brian Thurston, Raytec president, says the company is well positioned to meet the growing demand for these products in India, China, and Asia.

In just the past few months, the industry has been peppered with reports from new, emerging companies, ready to explore potash reserves and make their fortunes. Most recently, and just in Saskatchewan alone, these have included Anglo Potash Ltd. (GM Jan. 28, p. 14), Athabasca Potash Inc. (GM Jan. 21, p. 13), Potash One (GM Jan. 14, p. 12).

Bill Doyle, PotashCorp President and CEO, recently made light of his new competition in a teleconference with analysts. He noted that one had said it was happy to be in the potash industry. He said he had news for them – they are not in the potash industry. He outlined the long road and huge cash outlays ahead for any of them in actually developing a greenfield project, as well as the transportation logistics and terminals needed thereafter.

Not all the proposed projects are in Saskatchewan. An Indian company recently announced exploration plans for Ethiopia (GM Dec. 3, p. 11) while MagMinerals Inc., a Canadian company, has its sites on the Congo (GM Dec, 3, p. 14).

Higher phosphate prices have also encouraged phosphate exploration, with PhosCan searching for product in Canada (GM Jan. 14, p. 13). Legend International Holdings Inc. and Minemakers are both eyeing projects in Australia (GM Jan. 21, p. 13 and Jan. 7, p 14). While Canadian-based Sprott Resources Corp. has expressed an interest in Peru (GM Nov. 26, p. 14), where it says it invested in reserves long before the recent run-up in phosphate rock prices.

Miss Phos announces sulfuric acid repairs, will temporarily limit DAP production

News, Phosphate, South Central

Mississippi Phosphates Corp. announced Jan. 25 that one of its sulfuric acid plants will be out of production for approximately 30 days to replace the internal components of a boiler in the plant. The affected plant is one of two 1,500 ton-per-day sulfuric acid plants at the company’s phosphate fertilizer facility in Pascagoula, Miss.

In July 2007, the internals of the boiler (boiler tubes and tube sheets) in question suffered a major failure. Miss Phos says the contractor retained by the company to assemble and install the replacement internal components of the boiler has failed to deliver an operationally reliable boiler. The latest failure of the boiler has led the company to conclude that further efforts by the contractor to correct its prior defective work are unlikely to be successful. As a result, the company has engaged another contractor to assemble and install new internal components in the boiler. It is estimated that the work can be completed within 30 days, with replacement parts already on site. Until the idled sulfuric acid plant is returned to service, DAP production will be limited to approximately 900 tons per day.

In October 2007, the company filed suit against the contractor seeking to recover damages caused by the contractor’s failure to complete its work in a proper and timely manner. The company intends to vigorously pursue its claims in these pending legal proceedings.

California agriculture cautious about nitrous oxide

California, News

Agriculture groups have joined – some of them reluctantly – with state air quality regulators to find ways to lower nitrous oxide emissions (N20) from nitrogen fertilizer as part of the mandated statewide reduction in greenhouse gases to 1990 levels. Over the next decade, California agriculture faces the task of eliminating millions of tons of N20, one of the five naturally occurring gases that contribute to global warming.

Emitted both by farming and industrial activity, and also when solid waste or fossil fuels are burned, N20 is considered by scientists as 100 times worse than carbon dioxide. In agriculture, N20 is released into the air mostly during the breakdown of nitrogen in the soil and is believed to be caused by widespread use of chemical fertilizers, although use of natural nutrients such as manure is also a factor.

Neither agriculture nor the California Air Resources Board (CARB), one of the agencies involved in the state’s climate change efforts, are certain about the best way to reduce agriculture-related N20. “At this point we haven’t identified anything specific to be done,” reported Cynthia Cory, environmental specialist with the California Farm Bureau Federation, one of two dozen or more groups participating from agriculture. “But one thing is certain; we don’t want to be sacrificing crop production for a little bit of nitrous oxide reduction.”

Dale Shimp, the CARB official who has been dealing with the agriculture community, agrees that “we don’t know exactly how to prevent it.” Shimp, who handles special agriculture and forestry projects, believes the answers may be in the composition of the fertilizer or the way it is applied or how deep it goes into the ground. Yet he insists that a solution will be a win-win for the state and agriculture, which could benefit from more efficient nitrogen usage.

Shimp said some groups agreeing to participate are concerned that the outcome could be additional regulations for the industry. “They like the concept,” he remarked, “but they’re still watching (how the study develops) with caution even though more regulation is not our intention.”

The Western Plant Health Association is one of the participants, along with others that include the Western United Dairymen, the Nisei Farmers League, and the California Cotton Assn.

WPHA President and CEO Renee Pinel still has a lot of questions about the study. First, she offered, CARB needs to make sure its figures are accurate on how much N20 agriculture contributes. She doubted that much can be done with reformulating the fertilizer, but suggested considering areas such as revising application methods or making changes in equipment. Pinel isn’t convinced the result will be merely voluntary guidelines for the industry, as CARB has suggested, rather than additional regulations. “Voluntary guidelines have a habit of turning into mandatory regulations,” she noted.

Others have suggested that emissions can be reduced by better targeting of fertilizer applications, both in space and time, and minimizing waste with better balance between fertilizer and crop yield. California became the first to act statewide on climate change in 2004 with passage of a regulation to reduce passenger car greenhouse gases by about 30 percent by 2016. Action by both the governor and the legislature in 2005 established that greenhouse gases be reduced to 1990 levels ?Çô or approximately 25 percent by 2020, and then 80 percent below that by 2050.

According to figures obtained by the California Farm Bureau, nitrous oxide levels from agriculture or otherwise are expected to reach 32 million metric tons, or 8 to 9 million higher than the 24 million tons in 1990. Even though there aren’t any obvious targets at present, the Farm Bureau’s Cynthia Cory concluded that “we have to be involved to figure out what are the best ways to achieve these goals and to stay in business.”

Tiger-Sul plant in Stockton to open in July

News

H.J. Baker & Bro. Inc., based in Westport, Conn., and its wholly-owned subsidiary, Tiger-Sul Products, announced on Jan. 24 the ground-breaking for an expansion of H.J. Baker’s Stockton, Calif., facility. The expansion will allow H.J. Baker to increase its manufacturing capability for pastillated sulfur-based products for agriculture and other applications, including Tiger 90CRTM sulfur and Tiger Micronutrients TM fertilizers.

“We are very pleased to begin this significant expansion of our existing Stockton, Calif. site to include the Tiger-Sul pastillation facility,” said Christopher Smith, H.J. Baker president and CEO. “This will allow us to offer top quality products directly to our customers in the region, while continuing to provide them with the exceptional service they depend on.”

The Stockton plant will be Tiger-Sul’s third facility in North America. The company said its pastillation process “produces an especially uniform product that is an excellent fit for California soils,” and also noted the product’s environmentally-friendly features, such as a season-long release of nutrients to improve availability to the plant and minimize nutrient loss to the environment.

“Tiger 90CRTM sulfur and Tiger Micronutrients TM fertilizers are industry leaders,” Smith said. “As part of our effort to continually provide our customers the best product possible we are creating a facility that will maintain the quality, value and dependability they expect. I am also pleased that every effort is being made to be environmentally conscientious during the manufacturing process.”

The new facility is being constructed at H.J. Baker’s existing site in Stockton in order to utilize available land and enhance operational efficiencies. The production facility will initially have one pastillation belt with room for expansion, and will be operational by July 2008. Sahargun Plumbing Inc. of Stockton has been chosen as the project contractor.

Tiger-Sul Products manufactures products for the agricultural, organic, and turf markets, and is the global leader in bentonite sulfur and bentonite micronutrients technology. The company also operates a fleet of trucks for molten sulfur transportation in Alabama, Florida, Mississippi, and Louisiana. The Tiger group of companies includes Tiger-Sul Products (Canada) Co. in Calgary, Alberta; Tiger-Sul Products LLC; and Tiger Transportation in Atmore, Ala.

Farmers adopting BMP, according to TFI/CTIC study

News

Farmers are adopting best management practices in record numbers, according to a survey just released by the Conservation Technology Information Center (CTIC) and The Fertilizer Institute (TFI). The survey, which reached slightly less than 2,000 farmers nationwide, helped to gain a better understanding of environmental management measures on U.S. farms and barriers to adoption. The respondents represent 2.5 million acres of farmed cropland.

“The results of this survey have provided us with knowledge of producer practices that will help us best identify how we can continue to increase adoption rates of best management practices and conservation practices,” said TFI President Ford West. “It is satisfying to know that 60 percent of those surveyed have fully-adopted nutrient management plans, and indicators are positive that farmers are using the right nutrient product at the right time, right place and right rate.”

Survey respondents had an average of 29 years of farming experience and were typically 52 year-old males. Seventy-five percent of those answering the survey farm a corn-soybean or a corn-soybean-wheat rotation. Seventy-nine percent had at least some college education.

“These survey results show that many farmers are actively engaged in conservation – in fact, conservation tillage was the most adopted practice among row crop producers,” said CTIC Executive Director Karen Scanlon. “We also have a clear picture about why some producers are not choosing conservation practices. That’s important, because now we can better address their concerns and work to overcome those barriers.” The comprehensive survey netted great results.

Among the top messages taken from the survey is that having a conservation plan is a key predictor of additional conservation behavior. More than half of row crop producers who responded to the survey have fully adopted conservation tillage, nutrient management, grassed waterways, and integrated pest, disease, and weed management.

In addition, farmers indicated that financial assistance is mostly preferred over educational and technical assistance, as related to best management practice adoption. In six of the 12 categories, including conservation buffers, GPS yield monitor, irrigation water management, precision agriculture, terraces, and water and sediment control basins, financial assistance was most preferred.

The top four respected information sources cited are Cooperative Extension, certified crop advisers, agribusiness, and Natural Resources Conservation Service. Family members and local farming leaders rated amongst the lowest as preferred information sources.

A positive correlation exists between large-scale farms and adoption of conservation tillage and no-till. The survey also showed that large landowners are more conservation-oriented than small landowners.

About half of farmer-respondents soil test according to state recommendations. Economic concerns and time were primary obstacles to not testing. Twenty-four percent of corn growers, 23 percent of soybean growers, and 23 percent of wheat growers cited test costs as a reason they don’t soil test.

Scotts reports increased revenues

Eastern Cornbelt, News Briefs

Marysville, Ohio-The Scotts Miracle-Gro Co. reported a 14 percent increase in revenues for the first quarter ending Dec. 29, 2007, to $308.7 million from the year-ago $271.2 million. While the company continued to post a seasonal loss, earnings did improve by 4 percent, to a loss of $56.8 million ($.89 per diluted share), versus the year-ago loss of $59.4 million ($1.09 per share). “We had a strong start to the year with good sales growth throughout the business and control over expenses,” said Jim Hagedorn, Scotts chairman and CEO. “We are well positioned as we prepare for the beginning of the lawn and garden season. We continue to see strong support from our retail partners, and we remain confident that consumers will remain committed to the category and to our brands.” Scotts reported strong consumer demand, even though the quarter normally only represents 10 percent of annual sales. “Consumer purchases of lawn fertilizer improved 7 percent in the quarter, which reinforces our confidence that consumers remain engaged in the category in spite of the economic concerns. We also saw a nearly 60 percent year-over-year improvement in grass seed purchases and a 10 percent improvement in growing media.” Scotts LawnService had revenues of $38.3 million, up from $25.8 million. “With the launch of new products this year, and a larger investment in both marketing and sales support, we remain confident that sales this year can grow 6-8 percent and that operating profits will improve by as much as 6 percent,” said Dave Evans, CFO. “Due to the incremental interest expense impact of our recapitalization in mid-2007 and our decision to make investments in several long-term projects this year we remain committed to our guidance that adjusted net income for fiscal 2008 will be flat to slightly down from 2007 levels.”

Phosphate Holdings announces special dividend

News Briefs, Phosphate, South Central

Madison, Miss.-Phosphate Holdings Inc. reports that on Jan. 29 its board of directors declared a special dividend of $1.50 per share of common stock of the company. The dividend will be paid on March 7, 2008, to stockholders of record on Feb. 25, 2008. The company said the timing and amount of future dividends will be determined in light of the company’s results of operations, financial condition, liquidity needs, restrictions under any agreements or under applicable law, and other factors deemed relevant by the board. The company is a Delaware corporation and the sole stockholder of Mississippi Phosphates Corp. Miss Phos is a Delaware corporation, with its executive headquarters in Madison, Miss. It owns and operates manufacturing facilities in Pascagoula, Miss., that produce DAP.

Organic fertilizer producer expands again

News Briefs, Northeast

Boston-Converted Organics Inc. has announced further expansion into organic fertilizers with acquisition of a leading liquid fertilizer product line and its state-of-the-art production facility, along with proprietary technology for producing liquid and solid fertilizer from biodegradable wastes. Company officials said they have acquired United Organic Products LLC of Gonzales, Calif., and the assets including the intellectual property of Waste Recovery Industries LLC of Paso Robles, Calif., making Converted Organics the exclusive owner of the high temperature liquid composting (HTLC) system. “These acquisitions catapult us into a leadership position within the organic fertilizer industry and facilitates our immediate entry into the liquid fertilizer market,” said President Edward Gildea. He described HTLC as microbial digestion technology that will become an integral part of the organic fertilizer business, and said in addition the acquisition provides a strong West Coast agribusiness customer base with established distribution channels. United Organic Products employees will be joining Converted Organics, and its chief executive, Peter Townsley, will become executive vice president and chief technological officer overseeing California operations, as well as product and process improvement and development.

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