AGU

Potash-Agrium Deal Will be Subject to Growing Regulatory Scrutiny

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Image Source: Bruce Guenter By Kris Rosemann Suppressed crop prices and a supply glut have negatively impacted the financial performance of crop nutrient companies around the world and have helped spur a string of attempted mergers in the agriculture space. Seed giant Bayer’s (BAYRY) pursuit of rival Monsanto (MON) and ChemChina’s purchase of Syngenta (SYT) for $43 billion are two recent examples of consolidation attempts among major agricultural firms, the latter of which is expected to create the world’s largest supplier of pesticides and agrochemicals. Canadian firms Potash Corp (POT) and Agrium (AGU) had previously announced they were in preliminary merger talks and have now announced an agreement to combine forces in a merger of equals that will create a … Read more

The Long-term Remains Ominous for Potash Producers

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By Brian Nelson, CFA We think investors are finally getting a feel for the vulnerability of commodity-oriented equities, almost across the board. Potash (POT), the largest member of Canpotex, rang the alarm bell a number of weeks ago, slashing its dividend, “The Bounce in Energy and Potash’s ‘Surprising’ Dividend Cut (Jan 2016).” Times have been tough across the industry, but the big shocker was its “little brother,” pure-play Intrepid Potash (IPI), which put up terrible fourth-quarter results February 29 and warned that “pricing pressure…has the potential to cause a breach in (its) loan covenants.” Incredible. Intrepid Potash has now fallen to under $1 per share from ~$40 in early 2011. As we wrote in July 2013, “Uralkali Backs Out of … Read more

Potash Miners Digging Themselves a Hole

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The global potash industry is a highly profitable one, known for its high margins and high barriers to entry; the former has attracted the investments of high-profile mining companies Rio Tinto (RIO) and BHP Billiton (BHP). This, along with the disbanding of the Belarusian Potash Company has brought about concerns of the stability of the global potash market. The market was formerly dominated–and pricing was more or less controlled–by two informal cartels, the Belarusian Potash Company and Canpotex. Following the disbanding of the former, the competition for pricing power and market share has intensified, and many fear that this will lead to an oversupply in the market. Russian potash producer Uralkali withdrew from the Belarusian Potash Company in the summer … Read more

Dividend Increases for the Week Ending November 7

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Below we provide a list of firms that raised their dividends during the week ending November 7. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Aaron’s (AAN): now $0.023 per share quarterly dividend, was $0.021. Acadia Realty Trust (AKR): was $0.24 per share quarterly dividend, was $0.23. Agrium (AGU): now $0.78 per share quarterly dividend, was $0.75. Atmos Energy (ATO): now $0.39 per share quarterly dividend, was $0.37. AmTrust Financial Services (AFSI): now $0.25 per share quarterly dividend, was $0.20. Cantel Medical (CMN): now $0.05 per share semi-annual dividend, was $0.045. … Read more

Potash Market: The Best Is Behind It

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It’s always sad when good things come to an end. In this case, it appears to be the global potash cartel…permanently. According to reports from the Wall Street Journal this week, the CEO of “Russian potash giant Uralkali JSC has no plans to restore a sales partnership with Belarus.” It appears that the prospects for reconciliation of the Belarusian Potash Company (BPC) have passed, and the global pricing cartel in the fertilizer ingredient is now a thing of the past. There are no plans for further talks at this time. Canpotex, which is comprised of Potash Corp (POT), the Mosaic Co (MOS), and Agrium (AGU), and the BPC collectively controlled about 70% of global potash exports. With the breakup of … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

PotashCorp’s 2014 Earnings Will Decline Due to Pricing Pressure

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On January 30, PotashCorp (POT) reported fourth-quarter and full-year 2013 results. The fertilizer giant faced challenging market conditions during much of the year, and PotashCorp CEO Bill Doyle was quick to note that “this past quarter was a difficult one. Pricing headwinds – most notably in potash – weighed on (its) performance, although there were signs as the quarter came to a close that the uncertainty in global markets was beginning to abate. (Its) focus remain(s) on those things (it) can influence, and (it) took important steps to enhance (its) competitive position across all three nutrients and prepare the company to deliver better performance.” Unfortunately, the most important “thing” is something that PotashCorp cannot control: pricing. Competitive pressures and a … Read more

Monsanto Reports Fourth Quarter Results and Moves into Data

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Agricultural biotechnology giant Monsanto (click ticker for report: ) posted slightly disappointing fourth quarter results Wednesday morning. For the full year, revenue increased 8.7% year-over-year to $14.8 billion, while quarterly revenue rose 4.9% year-over-year to $2.2 billion–a touch short of consensus estimates. Earnings per share for the full year advanced 21% year-over-year to $4.60, with the firm’s quarterly loss increasing by five cents to $0.47 per share–worse than consensus expectations. Free cash flow during fiscal year 2013 was $2 billion, equal to 13.2% of total revenue. The fourth quarter isn’t much of a revenue driver or profit driver for Monsanto, so we find it more prudent to take a closer look at full-year results. Image Source: Monsanto The firm’s ‘Corn … Read more

The Potash Situation Gets More Interesting

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Late last month, Russian producer Uralkali backed out of a highly profitable and rational potash cartel arrangement, creating a free-for-all in the global potash market. As a result, shares of North American potash producers such as Potash (click ticker for report: ), Mosaic (click ticker for report: ), Agrium (click ticker for report: ), and Intrepid Potash (click ticker for report: ) have come under significant pressure as a result of the prospects for significant lower economic returns. Then mining giant BHP (click ticker for report: ) confirmed it will invest in its Jansen potash project, which will add even more potash supply to the market. A look at industry bellwether Potash’s shares below reveals the recent difficult performance experienced by the … Read more

Uralkali Backs Out of Belarusian Potash Company; Industry to Change

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Early this morning, Russian fertilizer Uralkali announced it will leave the Belarusian Potash Company in order to grab market share. CEO Vladislav Baumgertner asserted that BPC partner Belaruskali had been making potash exports outside of the pre-arranged agreement, rendering the BPC useless. Until now, the potash industry had been a relatively stable cartel allowing industry participants to generate robust amounts of free cash flow as spot prices rested well above the cost of production. On a conference call following the announcement, Baumgertner mentioned that the price of potash could fall by over $100/tonne as Uralkali will boost production nearly 25% and look to steal market share. Uralkali is the largest single potash producer in the world and likely has the … Read more