All Posts from August 6, 2012

CF to buy Viterra stake in Medicine Hat plant; Agrium agrees to sale, reduces amount for retail purchase

CF Industries Holdings Inc. said Aug. 2 that it has entered into a definitive agreement with Glencore International plc to acquire its 34 percent stake in Canadian Fertilizers Ltd. (CFL), currently owned by Viterra Inc., for total cash consideration of C$915 million, subject to certain adjustments. CFL owns the largest nitrogen fertilizer complex in Canada, located in Medicine Hat, Alberta. This will give CF, already the majority owner, 100 percent of CFL.

“This acquisition is a low-risk expansion of our nitrogen supply capability, as we have operated the complex for over 35 years. It will add approximately 425,000 gross tons of ammonia and 275,000 tons of urea per year to our nitrogen production capacity in a region with low natural gas costs,” said CF Chairman and CEO Stephen Wilson. The Medicine Hat complex has two ammonia plants with 1,250,000 st/y of production capacity and a urea plant with 810,000 st/y of production capacity.

Agrium Inc., which was to take the minority CFL stake as part of its acquisition from Glencore of the bulk of Viterra’s retail assets, said that it reached an agreement for Glencore to make the sale to CF. Agrium said this significantly reduces the amount it will pay for the retail business, and also removes uncertainties on a couple of fronts. One of those was regulatory, as Canadian authorities are still to sign off on Agrium’s purchase of the Viterra assets. Some had objected to Agrium’s stance as both a major producer and retailer, even though the company argues that it operates these two divisions separately.

Agrium says the resulting net purchase price for the portion related to the retail business is estimated to be about $175 million plus approximately $400 million in retail working capital, or a combined $575 million. This compares to an original $1.65 billion for the retail assets plus the CFL stake.

Agrium noted that Viterra retail EBITDA in 2011 was $100 million. Agrium is buying approximately 90 percent of Viterra’s retail business.

In other news, Agrium says the sale of the CFL stake has provided an opportunity to return excess capital to shareholders. As a result, the company’s board has authorized the making of a Dutch auction substantial issuer bid to repurchase $900 million of its outstanding common shares. The bid is expected to commence in early September and be completed by mid-October. The maximum and minimum price that shareholders may select under the bid will be determined in the context of the market price of Agrium common shares at the time of the commencement of the bid.

Agrium posts record 2Q and YTD; 2Q net income up 20 percent

Agrium Inc. reported a 20 percent increase in net earnings for the second quarter ending June 30, 2012, to $860 million ($5.44 per diluted share), compared to the year-ago $718 million ($4.54 per share). It was a record second quarter for the company, which said all three of its business sectors capitalized on strong fundamentals. Retail and Wholesale achieved the highest EBITDA in history, both for the second quarter and first half. Overall, sales were up 10 percent, to $6.83 billion from the year-ago $6.2 billion.

Second-quarter Wholesale net earnings were $634 million on sales of $1.71 billion, compared to the year-ago $569 million on sales of $1.71 billion. Nitrogen sales were up, at $743 million from $717 million. Sales volumes were off at 1.3 million mt, but prices were up at $573/mt compared to the year-ago 1.43 million mt and $500/mt.

Phosphates were up at $224 million from $206 million. Sales volumes were up at 313,000 mt from 259,000 mt, while prices were down at $713/mt from $795/mt.

Potash sales were off, at $246 million from $259 million. Sales volumes were 512,000 mt, down from 543,000 mt. Prices were up slightly, to $480/mt from $477/mt.

Second-quarter Retail net earnings were $556 million on sales of $5.2 billion, up from $486 million on sales of $4.65 billion. Within this sector, crop nutrient sales moved up to $2.36 billion from $2.11 billion, with crop protection up to $1.73 billion from $1.46 billion and seed at $712 million from $687 million.

Second-quarter Advanced Technology earnings were $14 million on sales of $178 million, up from the year-ago $13 million on sales of $158 million.

Both income and sales were up 14 percent in the first half. Net income was $1 billion ($6.41 per share) on sales of $10.5 billion, compared to the year-ago $889 million ($5.62 per share) on sales of $9.15 billion.

Six-month Retail earnings led the way at $613 million on sales of $7.67 billion, up from $471 million on sales of $6.47 billion. Crop nutrients were up to $3.4 billion from $2.8 billion, crop protection to $2.56 billion from $2.1 billion, and seed to $1.03 billion from $917 million.

Wholesale earnings were $960 million on sales of $2.93 billion, compared to the year-ago $946 million on sales of $2.95 billion. Nitrogen sales were up at $1.13 billion from $1.05 billion. Nitrogen volumes were 2.1 million mt with an average selling price of $536/mt, versus the year-ago 2.18 million mt and $482/mt.

Phosphate sales were $413 million, down from $444 million. Volumes were down slightly, to 556,000 mt from 565,000 mt. Prices were down at $742/mt from $786/mt.

Potash sales were $385 million, down from $454 million. Volumes were 791,000 mt, down from 1.02 million mt. Prices were up at $486/mt from $445/mt.

Advanced Tech earnings were $9 million on sales of $313 million, up from the year-ago $8 million on sales of $239 million.

CHS continues to add international assets, buys Brazilian input and grain company

CHS Inc. continues to add to its international assets with another purchase, announced Aug. 1 – Atman, a company based in Goiania, Brazil. The acquisition was executed through the company’s CHS do Brasil entity in that country. Atman is an input distribution and grain origination company operating in Goias, the third largest producing state of Brazil.

“CHS is steadily and strategically expanding its South American grain and crop nutrients business. As part of CHS, Atman will accelerate our growth,” said Stefano Rettore, senior vice president, CHS South America, Sao Paulo, Brazil. “This acquisition will help us further fulfill the CHS aspiration for global commodities expansion by providing expertise in barter operations that are key to the business model in the Brazilian cerrado.”

The Atman acquisition rounds out a series of strategic South American business investments CHS has announced in the last six months. In May, CHS announced it had purchased 25 percent ownership of TCN, a Brazilian logistics company, and also signed a long-term agreement with TCN, securing export terminal access at the Port of Itaqui, Sao Luis, Brazil. In July, CHS acquired 50 percent ownership of Andali, a provider of fertilizer storage and blending services based in Paranagua, Brazil (GM July 9, p. 1).

“CHS is committed to the long-term growth and development of its commodities business in Brazil and across the region. These investments and the expertise that our partners and new employees bring will help us further add value to our owners,” Rettore said.