All Posts from November 8, 2019

Scotts Executing on “All Cylinders”

News, News Briefs, Specialty

The Scotts Miracle-Gro Co., Marysville, Ohio, reported a surge in income and sales growth during both the fourth-quarter and fiscal year ending Sept. 30, 2019. FY 2019 net income was $460.2 million ($8.18 per diluted share) on sales of $3.16 billion, up from the year-ago $63.7 million ($1.12 per share) and $2.66 billion, respectively. Adjusted EBITDA was up 16 percent, to $558.2 million from $482 million.

“Fiscal 2019 showed the strength of our business when we execute on all cylinders,” said Scotts Chairman and CEO Jim Hagedorn. “New products accounted for 15 percent of our sales in our U.S. Consumer business, we saw growth in every major retail channel, and we drove increased consumer participation in nearly every category in our industry. In Hawthorne, we further established our clear leadership with indoor growers, improving our market share and growing our full-year sales 24 percent on an apples-to-apples basis.”

FY 2019 U.S. Consumer profit was up 6 percent, to $527.8 million on sales of $2.28 billion from the year-ago $496.6 million and $2.11 billion, respectively. Hawthorne profit was up 977 percent, to $53.5 million on sales of $671.2 million from the prior year loss of $6.1 million on sales of $344.9 million.

Scotts posted a fourth-quarter seasonal net loss of $58.1 million ($1.04 per share) on sales of $497.7 million, versus the year-ago loss of $146.9 million ($2.65 per share) and $433.9 million, respectively. Adjusted EBITDA was a loss of $15.3 million, compared to a year-ago positive $400,000.

While U.S. Consumer posted a fourth-quarter loss of $20.7 million on sales of $261.6 million, down from the year-ago positive $5.3 million and $252.6 million, respectively, Hawthorne reported profit of $21.9 million on sales of $210 million, up from $500,000 and $152.2 million, respectively.

“The momentum in Hawthorne has been building all year and we saw our highest levels of organic growth in the fourth quarter, giving us a high degree of confidence as we look ahead into fiscal 2020,” added Hagedorn. “During the quarter, we reported strong growth – often above 50 percent – in established West Coast markets, especially California, as well as emerging markets like Michigan, Florida, and Massachusetts. We also saw consistent growth in lighting, nutrients, and other major product categories.”

Scotts expects fiscal 2020 sales growth of 4-6 percent, with Hawthorne sales up 12-15 percent and U.S. Consumer 1-3 percent.

“While the expected growth rates in the U.S. Consumer business and Hawthorne are slightly lower in 2020, the basic fundamentals remain the same,” said Scotts Executive Vice President and CFO Randy Coleman. “We anticipate total company growth largely from volume, as well as modest price increases that are necessary to offset expected pressure from certain commodities and tariffs.”

Aramco IPO Back On

News, News Briefs, Saudi Arabia

Saudi Arabia is pulling out all the stops to ensure the success of Aramco’s initial public offering after Crown Prince Mohammed bin Salman finally decided to offer shares in the world’s largest oil producer, according to Bloomberg.

More than three years after the IPO was first mooted, Aramco published a so-called intention to float on Sunday, Nov. 3, the most dramatic change to the Saudi oil industry since the company was nationalized in the 1970s. The IPO is a cornerstone of Prince Mohammed’s Vision 2030 plan to make the Saudi economy ready for the post-oil era. Saudi Arabia is aiming for a valuation of between $1.6-$1.8 trillion, according to people familiar with the matter.

“This is the right time for us,” Chairman Yasir Al-Rumayyan said at a news conference at Aramco’s headquarters in the eastern city of Dhahran. Aramco’s net income last year of $111 billion made it the most profitable of any corporation – more than Apple Inc., Google’s parent Alphabet Inc., and Exxon Mobil Corp. combined – but the company has pledged to pay a minimum of $75 billion in dividends, leaving it vulnerable to a downturn in oil prices.

Fire Quickly Extinguished at FoxFarm Facility

News, News Briefs, Southeast

Fire crews in Pendleton, S.C., on Nov. 6 responded to an early-morning blaze at FoxFarm Soil and Fertilizer Co., a producer of soil mixes, liquid and dry fertilizers, micro-brewed liquid plant foods, and natural fungicides and insecticides.

“We arrived to find heavy fire on the exterior in the hopper system and fire had spread into two structures,” the Pendleton Fire Department said in a Facebook post. “With a quick response from Pendleton, Zion, Sandy Springs, and Ladder Company 109, the fire was quickly contained.” According to local news reports, fire crews arrived at the site at 5:30 a.m. and had the fire extinguished by 6:00 a.m.

The cause of the fire and the extent of damage at the facility was not reported. Pendleton Fire Department Assistant Chief Tommy Brock was transported to a local hospital after falling and breaking his leg at the site, according to the department’s Facebook page. He was listed in stable condition with non-life-threatening injuries.

FoxFarm’s 60,000 square-foot manufacturing and packaging facility in Pendleton was opened in 2015 at a reported cost of $6.9 million. The company’s products include liquid, dry, slow-release, and soluble fertilizers, potting soil and soil conditioners, and a range of soil supplements and inoculants. FoxFarm’s many brands include Happy Frog®, Ko Ko Bop™, Bush Doctor®, and Strawberry Fields®.

CHS FY Income Up 7 Percent; Ag Off

News, News Briefs

CHS Inc., St. Paul, reported net income of $829.9 million on revenues of $31.9 billion for the fiscal year ending Aug. 31, 2019, compared to the year-ago $775.9 million and $32.7 billion, respectively. CHS saw upticks in earnings from its Energy and Nitrogen Production (CF Nitrogen stake) segments, though Ag, which includes wholesale and retail fertilizer operations, was down 42 percent.

“We are pleased with our results on behalf of our owners in fiscal year 2019. We focused on our priorities, built on our strategies, continued to improve our control environment, and leveraged the strength of our supply chain to deliver value to the farmers and co-ops that own us,” said Jay Debertin, CHS President and CEO.

“Improving customer experience and innovations led to better results including increased diesel production at our refinery in McPherson, Kansas. Our acquisition of the remaining 75 percent interest in West Central Distribution (WCD) (GM March 15, p. 1) that we previously didn’t own expanded our distribution channels and grew market access in agronomy,” he continued.

“When flooding made major river ways impassable, we leveraged our supply chain to reposition fertilizer to ensure our cooperatives and customers had the crop nutrients they needed for spring planting,” he said. “We identified new markets for our owners’ grain to help them navigate the difficult trade situation. And we began construction on a fertilizer storage facility in North Dakota and a grain shuttle loader in Minnesota. In each of these, the driving force was to be our customers’ first choice.

“We know the headwinds agriculture faced in fiscal year 2019 have carried over to fiscal year 2020, and CHS feels those same challenges,” Debertin added. “No one, however, feels them more and understands the impact more than the farmers and cooperatives that own us. We remain focused on delivering value to our owners and creating connections to empower agriculture. And we’re committed to continuing to raise our owners’ voices to policymakers and elected officials and identifying opportunities to continue to build our business, leveraging our supply chain and helping our owners navigate fluctuating markets.”

FY Ag pretax income was $43 million, down from the prior year $74.3 million. CHS cited poor weather conditions, including flooding, as well as ongoing global trade issue between the U.S. and foreign trading partners, which resulted in generally decreased margins and volumes across most of the segment. The Ag decrease was partially offset by increased crop nutrient prices, as well as the acquisition of the remaining 75 percent of WCD which was added to the CHS agronomy business in March. CHS said the purchase, from March 1, resulted in a $456.2 million increase in revenues. CHS paid $106.7 million for the WCD stake.

Overall FY Ag revenues were off at $24.7 billion from the prior year $25 billion.

CHS reported FY pretax income of $72.9 million from its Nitrogen Production, compared to the prior year $38.8 million. This was from the CHS equity investment in CF Nitrogen, with CHS citing increased urea and UAN prices. In addition, CHS said the CF Nitrogen investment distributed $186.5 million in cash to CHS during the fiscal year.

Energy pretax income was up at $618.2 million from the prior year $452.1 million, with CHS citing improved market conditions in refine fuels, primarily driven by favorable pricing on heavy Canadian crude oil, which is processed at CHS refineries in Laurel, Montana and McPherson, Kan. Energy revenues were off at $7.12 billion from the prior year $7.59 billion.

Farmers Union Oil Merges with Agtegra

News, News Briefs, Northern Plains

Another regional co-op merger has been completed in the Northern Plains. Farmers Union Oil Co., which has three South Dakota locations at Reliance, Presho, and Draper, merged its operations with Agtegra Cooperative, Aberdeen. S.D., on Nov. 1. Farmers Union members voted to approve the consolidation in late September.

“We are very excited to serve the communities previously served by Farmers Union Oil,” said Chris Pearson, Agtegra CEO. “This merger is a continuation of Agtegra’s investments and commitment to serve our customers in this area.”

Agtegra began operations in February 2018 (GM Jan. 5, 2018), and was formed from the merger of South Dakota Wheat Growers and North Central Farmers Elevator (NCFE), Ipswich, S.D. The company said the merger with Farmers Union Oil will expand its abilities to serve customers with propane, bulk fuel, gas, oil, and truck and auto services. Farmers Union Oil has no agronomy operations.

As a result of the merger, Agtegra said the equipment and team at the Reliance truck and auto location will move to Presho on Nov. 15, while Agtegra’s Murdo location will become a 24-hour cardtrol fuel location. The Reliance cardtrol will remain in operation.

Agtegra has 900 employees at more than 60 locations in North and South Dakota, and serves approximately 6,300 active member-owners. In addition to grain and agronomy services, Agtegra offers its members aerial application services, fuel, animal feed, and precision ag hardware and software products and services.

Earlier this year, Agtegra took full ownership of North Star Energy (NSE), a propane business based in Aberdeen that serves customers in North and South Dakota. Agtegra had been one of three owners of NSE, but the company on July 1 purchased the other ownership interests following a decision by the boards of directors of NSE and Agtegra.

Uralchem Issues Statement Regarding Allegations

News, News Briefs, Russia

JSC Uralchem, Moscow, has issued an official statement blasting a number of media outlets for publishing false allegations about the company, which, it said, tarnishes its business reputation and its management.

“In these publications, published in some regional, federal, and foreign media, Uralchem is falsely accused of non-payment of taxes to the Russian budget and tax fraud, obtaining loans from state banks to siphon funds aboard, and misappropriation of natural resources,” the company said. “Baseless assumptions were made regarding the imminent bankruptcy of the company and its possible liquidation. In addition, a number of reports feature meritless accusations of corruption and attempts to influence tax and law enforcement agencies against the management of JSC Uralchem.”

Uralchem stated that the facts and figures featured in these publications and materials “are false” and “are the authors’ conjectures.”

It further stated that the company is a bona fide taxpayer, that all companies of the Uralchem group undergo regular field and desk tax audits, and neither law enforcement agencies nor the Russian Federal Tax Service accuse the company of non-payment and violations.

One of the publications in question is believed to be a report released last month by the Moscow-based Centre for Analysis of Strategies and Technologies.

More Challenges for Vedanta’s Greenfield DAP Project

Di-Ammonium Phosphate, India, News, News Briefs

Mumbai-headquartered Vedanta Resources Ltd.’s much-delayed project to set up a greenfield DAP plant close to subsidiary company’s Hindustan Zinc’s zinc smelter at Chittorgarhin in Rajasthan is reported to be facing another hurdle, according to a Hindu Business Line report. The company has met major environmental opposition for the project, reportedly due to claims that the project is being planned to be built on green-belt land. Vedanta is now said to be looking at alternate locations in the state.

Hindustan Zinc first announced the project in 2015, with plans to build a 1.02 million mt/y DAP plant using sulfuric acid derived from its zinc production, and phosphate rock from its mine near Udaipur in Rajasthan.

Acquisition Adds Heft to Andersons Results: 3Q Fertilizer Volumes Up 18 Percent

News, News Briefs, Specialty

The Andersons Inc., Maumee, Ohio, reported a third-quarter loss attributable to the company of $4.2 million ($0.13 per diluted share) on revenues of $1.98 billion, compared to the year-ago loss of $2.1 million ($0.07 per share) and $685.6 million, respectively. Adjusted EBITDA was $42.5 million, up from $27.5 million. Revenues were up significantly due to this year’s acquisition of The Lansing Group.

Wall Street reacted well to the results, which President and CEO Pat Bowe said were “substantially better” than they would have been without the Lansing purchase. Shares closed Nov. 6 at $21.37, up 9.25 percent from the prior-day close.

“The Trade Group’s adjusted results were much improved year over year on stronger merchandising, though grain originations lagged due to limited farmer selling,” said Bowe. “We continue to see the benefits of our larger and more diversified Trade Group, whose results were substantially better than they would have been without the Lansing acquisition.

“I’m also particularly pleased that our Ethanol Group remained profitable despite difficult market conditions, outpacing many in its sector,” added Bowe. “In August, we began production at Element, our state-of-the-art biorefinery in Kansas, from which we ultimately expect industry-leading results. We also announced in October the merger of what had been four separate ethanol plant entities, three of which were jointly owned with Marathon Petroleum Corp., into a single entity jointly owned with Marathon just after quarter-end.”

The company’s Plant Nutrient Group (PNG) reported a third-quarter pretax loss of $7.4 million on revenues of $109.4 million, versus the year-ago loss of $8 million and $104.2 million, respectively. The company said the reduced loss was due to increased field activity during the quarter. EBITDA was $900,000, up from $100,000. Overall, the company said income improved 7 percent on better volumes and operating expenses. Margins were lower due to product mix. Carrying costs on higher inventory continued to be a headwind.

The company said PNG recovered some volume from earlier in the year that was delayed by the protracted spring rains.

Overall, third-quarter fertilizer volumes were up 18 percent, at 395,000 st from the year-ago 335,000 st. However, while primary nutrient volumes were up at 287,000 st from 214,000 st, specialty were down at 95,000 st from 108,000 st. Other remained stable at 13,000 st.

Nine-month net income attributable to the company was $11.7 million ($0.35 per share) on revenues of $6.28 billion, down from the year-ago $17.7 million ($0.62 per share) and $2.23 billion, respectively. Adjusted EBITDA was $171.4 million, up from $114.8 million.

PNG reported a nine-month pretax income of $4.5 million on revenues of $508.5 million, down from the year-ago $8.2 million and $542.9 million, respectively. EBITDA was $30.8 million, compared to $32.9 million.

While the company said primary nutrient prices remain soft, it expects a likely increase in 2020 corn acreage will help the PNG improve.

Nine-month fertilizer volumes were 1.56 million st, down from the year-ago 1.66 million st. Primary nutrient volumes were off slightly, at 1.05 million st from the year-ago 1.07 million st. Specialty were down at 467,000 st from 541,000 st, while Other remained stable at 42,000 st.

UAN

California, Eastern Cornbelt, Market Watch, Pacific N.W., U.S. Gulf, UAN, Western Canada, Western Cornbelt

U.S. Gulf:

UAN barges continued to be called $150-$155/st ($4.69-$4.84/unit) FOB. While some have predicted lower numbers in the near term, nothing new was reported during the week.

East Coast vessel pricing remained at $155-$160/mt CFR.

Eastern Cornbelt:

The UAN-32 market remained at $185-$205/st ($5.78-$6.41/unit) FOB regional terminals in the Eastern Cornbelt, depending on location, with the low confirmed at Cincinnati and Mount Vernon, Ind., and the high reported for brokered offers out of spot Illinois River terminals. UAN-28 pricing was unchanged as well at $160-$162/st ($5.71-$5.79/unit) FOB Cincinnati in early November.

Western Cornbelt:

UAN-32 was quoted at $185-$210/st ($5.78-$6.56/unit) FOB in the Western Cornbelt, with the low reported at St. Louis and the upper end out of spot Iowa terminals for November-February shipment.

California:

The UAN-32 market in California had reportedly slipped to $225-$235/st ($7.03-$7.34/unit) FOB Stockton and $230/st ($7.19/unit) FOB West Sacramento and Port Hueneme, down $5-$10/st from last report. Postings from some suppliers remained as high as $245-$255/st FOB in the state, but sources reported no new business at that level.

No current rail-DEL prices were reported for UAN in California.

Pacific Northwest:

UAN-32 pricing remained at $240-$245/st ($7.50-$7.66/unit) FOB terminals in the Pacific Northwest, with rail-DEL tons quoted in the $245-$255/st ($7.66-$7.97/unit) range.

Western Canada:

UAN-28 pricing remained at C$305/mt (C$10.89/unit) DEL in Western Canada, with no buying or movement reported.

Ammonia

Ammonia, Black Sea, California, China, Eastern Cornbelt, India, Market Watch, Middle East, Northwestern Europe, Pacific N.W., South Korea, Tampa, U.S. Gulf, Western Canada, Western Cornbelt

U.S. Gulf/Tampa:

The Tampa ammonia market continued to be called $260/mt CFR, with NOLA unchanged at the $245/st FOB level. With international prices described as soft at the current time, sources were hesitant to put any predictions on the December Tampa number. Another player said much may depend on the fall domestic ammonia season.

Eastern Cornbelt:

The ammonia market was steady at $390-$400/st FOB in the Eastern Cornbelt, with the low in Illinois and the upper end reported in the Indiana and Ohio markets on a spot basis. “There is no way, even with great fall weather at this point, that we will use all of our fill tons,” said one regional contact at midweek.

Western Cornbelt:

Fall applications of ammonia and dry fertilizer were underway in some parts of the Western Cornbelt in early November, but as one source put it, the pace is “not running at full speed.”

The ammonia market remained at $380-$390/st FOB in the region, depending on location, with the lower end in Nebraska and the higher numbers out of Iowa terminals.

California:

Anhydrous ammonia postings remained at $360/st DEL in California in early November, with aqua ammonia referenced at $100/st FOB.

Pacific Northwest:

Anhydrous ammonia remained at the $390/st level FOB terminals in Washington, unchanged from last report, with truck-DEL tons quoted at the $420/st mark in Idaho. Railed offers were reported in the $380-$405/st range in the Pacific Northwest in early November, depending on location and point of origin.

Aqua ammonia was unchanged at $104/st FOB Kennewick, Wash.

Western Canada:

Ammonia pricing had reportedly slipped to C$670-$680/mt DEL in Western Canada, down C$10-$20/mt from last report amid concerns about a poor fall application season. “Ammonia so far is about half of normal fall volumes across the Prairies,” said one regional contact, adding that “there will be significant carryover” to next spring.

Middle East:

Arab Gulf spot ammonia prices remain steady in the $250s/mt FOB. Contract deals are still reported in the $230s/mt FOB. Sources said that price could move up soon, however, based on the FACT award to Trammo at $295/mt CFR into India.

India:

Trammo will supply FACT with two ammonia cargoes of 7,500 mt each at $295/mt CFR. The deal was cast from the last FACT tender, which only received two offers.

Contract buyers in India continue to argue that the prices they are paying are well below $280/mt CFR, which the industry seems to accept as the current level. The lack of specific data, said one trader, leads the rest of the industry to accept the $280/mt CFR level.

Even though the FACT tender was significantly higher, sources said it will most likely have little or no effect on the landed price of contract ammonia in India. The FACT price is usually higher than the contracted price, and often even higher than other spot deals. The small quantities represented by each FACT delivery pushes their price higher.

South Korea:

Just who is supplying whom for 2020 remained up in the air. Sources reported that Namhae initially said it would be using the same suppliers it did in 2019. However, sources now report that Koch – the 2019 supplier – is withdrawing from the Asian ammonia market.

Major contract sales out of the Middle East continue to South Korea. Sources reported that Lotte Fine Chemicals (LFC) has fixed orders of 380,000 mt, with 130,000 mt coming from Mitsui, 100,000 mt from Trammo, and 50,000 mt direct from SABIC. The company also has a running contract for 270,000 mt with Ma’aden for spot sales as needed. To move these tons, LFC has a vessel on time charter through April 2020.

China:

Prices appear to have reached their peak, said international traders. The higher prices have been pressuring phosphate producers to push back against desires for lower prices, but they have been unsuccessful. As more ammonia plants come back online, sources said prices should begin to soften and ease the pressure on the phosphate industry.

Black Sea:

Sources called the ammonia market out of Yuzhnyy flat, with prices remaining in the low-$230s/mt FOB.

Northwest Europe:

Industry watchers said the Antwerp ammonia price has moved up. The usual $50-$60/mt difference with Yuzhnyy has been bumped up, largely because of tighter freight rates.Sources now put the Antwerp market at $285-$290/mt C&F.Baltic prices for November have reportedly not shifted from their October levels.

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