Agrium Inc. (AGU)

AGU 
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Agrium Inc. (AGU)

February 26, 2013 10:30 am ET

Executives

Stephen G. Dyer - Chief Financial Officer and Executive Vice President

Presentation

Unknown Analyst

Perfect. Okay, great. So we're going to go right down the schedule here and continue. Next up, we have Agrium. We're happy to have their CFO, Stephen Dyer, presenting this morning. And Stephen's going to go through a -- some prepared remarks then we're going to go into Q&A. Stephen?

Stephen G. Dyer

Thanks, thanks, yes. What I thought I would do is just walk through a little bit on the fundamentals of the business since we're heading into the spring season pretty quickly here, spend a little time talking about our strategy and then move into each of our business units to give you a little update where we're going with our strategy and how we're moving forward there. And then we'll finish up with what that all means for us.

So first slide, you can read that at your leisure in terms of our forward-looking statements. But as you're -- most of you are probably aware that we are the only integrated agricultural inputs company out there across the -- across that value chain. We have a -- 9 million tonnes of production capacity within our Wholesale business. We lost our slides.

There we go. We are the largest ag retailer with around 1,250 locations in several countries around the world, and we are the leader in advanced technologies -- through our Advanced Technologies with coated products as well.

So taking a look at -- spending a little time just on our -- on the fundamentals out there, we continue to see very strong fundamentals for the grower out there. So we continue to see very strong cash margins. And moving into this spring season, the farmer is in a very good shape.

One of the measures that I use or take a look at within our Retail business is the amount of prepay that we're receiving from our customers. And last year, we had a record $1.3 billion that we brought in. This year, we're sitting at $1.6 billion of prepay again from the farmer into the -- into our Retail business. And we've actually seen prepay down in the southern parts of the U.S., which is pretty much unheard of historically. So we've got -- I usually use that as a little measure of the sentiment of the farmer out there.

So again, we see very strong fundamentals there. The grower is going to continue to be motivated to use the best seed hybrids, to use the best chemistry and as well as the optimal amount of fertilizer moving forward. And again, we're well positioned to participate in all those areas.

Just moving into a little bit about our strategy, talk about our integrated strategy. And we really see several aspects that provide advantage for us across that value chain. On the potash side, on our production side, we have about $750 million of value that we quantify in terms of being able to run at higher production rates because of the integration we have between our Wholesale and our Retail. We also have -- or are very well positioned from market intelligence and gaining market intelligence across the value chain, which brings a lot of value. We have a tremendous financial capacity, that being across the value chain, having that countercyclical cash flow brings us advantage there. We figure we have about close to $1 billion of debt capacity of being together versus being separate as an organization being across that value chain as well. So we have several advantages out there that we see. And the other one that's been very huge for us is the acquisition opportunities, everything from Royster-Clark to the UAP acquisition to the most recent Viterra acquisition. Being across that value chain has allowed us to take those opportunities, take those assets, some of them being wholesale and some of them being retail, and bring them into our organization and really optimize those assets.

And what has that done for us? If you look at the growth that we've had since 2005, we've -- almost 4 times in terms of EBITDA, in terms of growth. If you take a look at our growth of our Retail business, it's bigger than the whole organization back in 2005 from an EBITDA standpoint.

Moving into our business units, talking a little bit about our Wholesale. We obviously have a very strong production presence as well distribution presence right through North America and down to South America and Argentina with our joint venture, and then in Europe with significant distribution infrastructure now and in support of our MOPCO production facility.

And if you look at our Wholesale business, we have several strengths within that business. If you look at the performance this past year, we had our second best ever performance from an EBITDA standpoint and -- with $5.5 billion in revenue. And if you take a look at the advantage that we have, we have a significant gas advantage being in North America and particularly in Alberta with a significant portion of our nitrogen; we have local market advantage with our nitrogen or phosphates being close to those local markets, not having that distribution cost significant of importing product into the U.S.; and we -- on our phosphate, we have very good sulfur and integrated ammonia advantage as well as well as integrated rock in our Conda facility, and I'll talk a bit a little later we'll be moving to imported rock for our Redwater facility. And then you look at our potash, we have our 1 million-tonne expansion and a low-cost, high-quality production facility in Saskatchewan with our potash production.

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