AGRIUM INC. (Toronto symbol AGU; www.agrium.com) makes fertilizers from natural gas. It sells its products to farmers and industrial users through its more than 1,200 stores in North America, South America and Australia. The company’s retail outlets help shield it from volatile fertilizer prices.
Agrium continues to add more stores. It recently agreed to pay $1.65 billion (all amounts except share price and market cap in U.S. dollars) for 230 fertilizer outlets in western Canada operated by Viterra Inc.
It will also purchase Viterra’s 17 stores in Australia, plus its 34% stake in a fertilizer plant in Alberta. Agrium will buy these businesses from Glencore International plc, which is now in the process of taking over Viterra.
In 2011, Agrium’s purchase of 400 farm-supply stores in Australia and New Zealand helped lift its sales to $15.5 billion.
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Potash stocks: Agrium invests in new growth projects
Agrium’s earnings shot up to a record $9.52 a share (or $1.5 billion) in 2011. Cash flow per share improved from $6.74 in 2011 to $11.93 in 2011.
Agrium held cash of $1.75 billion at March 31, 2012, but will probably borrow most of the money it needs to buy the Viterra stores. Still, its long-term debt of $2.1 billion is a low 16% of its market cap, so it can easily afford to take out more loans.
The company is also investing in new growth projects. For example, it is spending $1.5 billion to increase production at its potash mine in Vanscoy, Saskatchewan, by 50%. The company expects to complete this project in 2014.
In the latest edition of The Successful Investor, we look at how well Agrium will be able to integrate the Viterra acquisitions. We also consider the long-term outlook for fertilizer stocks. We conclude with our clear buy-sell-hold advice on the stock.
COMMENTS PLEASE:
Agricultural stocks have become a big “theme” in investing due to the need of a growing global population for food. Do you invest in stocks because they seem to be riding a theme or trend? Let us know what you think in the comments section below. Click here.
Comments
Dan
Yes i do buy stocks that may ride up on changing demographics or new game changing technology…However, I often do not know which ones to buy. For instance I thought TransAlta would get a good jump on cheaper natural gas to feed its power generation business. Yet, failed to take into account that they had coal, expensive wind,and hydro, that would off-set their cheaper natural gas plants.
Absolutely. The Trend is your friend as long as you are aware of the fact that you haven’t jumped on too late. Make sure you watch the 50 and 200 day to ensure you’re out before the trend changes along with the macd.
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Yes i do buy stocks that may ride up on changing demographics or new game changing technology…However, I often do not know which ones to buy. For instance I thought TransAlta would get a good jump on cheaper natural gas to feed its power generation business. Yet, failed to take into account that they had coal, expensive wind,and hydro, that would off-set their cheaper natural gas plants.
Absolutely. The Trend is your friend as long as you are aware of the fact that you haven’t jumped on too late. Make sure you watch the 50 and 200 day to ensure you’re out before the trend changes along with the macd.