Agrium Inc. (AGU)

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Agrium Inc. (AGU)

2nd Annual BofA Merrill Lynch Global Agriculture Conference

February 27, 2013 2:15 pm ET

Executives

Michael M. Wilson - Chief Executive Officer, President and Director

Analysts

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Presentation

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Agriculture conference. The next presenting company, we're very pleased to welcome Agrium. Agrium is about a $15 billion equity market cap, diversified provider of seeds, crop protection chemicals and nutrients on the retail side of the house, as well as nitrogen phosphate and potash fertilizer in the Wholesale business. Representing the company today, we have Chief Executive Officer Mike Wilson, who joined the company in 2000. Mike, I expect you've had a busier the last several months than you might have otherwise had, given the proxy battle that's occurring right now with the company. So we do appreciate you making time for us to come down in Florida here, and talk to us and look forward to your update. And thank you.

Michael M. Wilson

Thanks, Kevin. And we have been busy. It makes life interesting. What I'll do today is I'll cover off just one slide on our strategy, briefly talk about the Ag fundamentals, you're likely getting tired of hearing about the Ag fundamentals but we can get into that in Q&A. And then highlight our 3 business units, our Wholesale, our Advanced Technologies, I only have one slide on it, and then our Retail business, and wrap up with where we're taking the company over the next 3 years.

We've all read our forward-looking statement, I'm sure.

If you look at Agrium, we are unique in this sector. We're the only global Ag input company that crosses the entire agricultural value chain. We are not a conglomerate. We're focused on Ag inputs. And if you look at the company, we make a little over 8 million tonnes of fertilizer. That group that makes that also buys and purchase for resale another 3 million to 4 million tonnes of fertilizer. And we're the largest retailer in the world. We serve about 350,000 growers around the world directly, and I'll talk a lot more about that. We're the third largest nitrogen company in the world, with most of our assets in North America, and then heavy weighted within North America and Alberta. We have a large position when it comes to chemical and seed, we're not just a fertilizer company, we're a good fertilizer company but we now pushed over $5 billion of seed and crop protection chemicals. It's amazing how much that business has grown considering 8 years ago, 7 years ago, it was likely a $400 million business. And we have a very unique position in a controlled release urea, which gives both an environmental and an agronomic -- economic impact to the farmer positively.

This is a key slide when you're looking at farmers, and that is how are they doing financially, are they making good cash margins? And the answer is they are. If you look at a $5.50 bushel corn which is sort of where December corn is, you can see they're making margins of about $500. To sort of put the mindset of the farmer, one good measure that we use when we're looking at farmers is how much prepay do they pay at the end of the year. And our prepay is up between 30% and 40% year-over-year. So the mood of the farmer is they're getting ready for the spring, they want to go and prepay us up significantly.

And you can see, there's also some discussion and we can get into it in Q&A if you want, oh my God, what happens if corn goes to $4.50? Well, if corn goes to $4.50, the farmer still makes very good money. And will still use our seeds, our crop-protection chemicals and our nutrients.

We have an integrated strategy. There's been a lot of questions around that. It's very powerful for us. Retail is certainly worth more within Agrium than outside of Agrium. If you look at potash alone, we took up about $0.75 billion of operating synergy on potash. If you look at the financial side, we have debt capacity of at least $0.75 billion more. And we have counter-cyclic cash flow. If you go back to '09, and I'm sure a lot of you in the room like you don't want to remember '09, but if we go back to '09, we freed up $1 billion of cash flow in a counter-cyclic fashion, and that allowed us to take advantage or attempt to take advantage of what we were called being opportunistic, and we were, and we will be opportunistic in the future if good deals come along.

You also look at the business. We're able, as a result of having an integrated strategy, to get some really great acquisitions. Royster-Clark was one, Tetra was one last year. And we're in the middle of closing and getting the competition review of Viterra. We tried for a long time to buy Viterra, and we were unsuccessful in the multiples, we would have had to pay were in that 10 or 11 range. We've now gotten Viterra at less than 6 pre-synergy. And our ability to do that was our ability to take both the nitrogen plant and the retail business. So it's very important.

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