Recently, at a BMO conference, Agrium’s (AGU) CFO Steven Douglas said that the company is considering sale of its phosphate business in the next three-to-five years. He termed Phosphate business difficult and expensive and also talked about the potential for further industry consolidation. Of late, Agrium is taking a lot of strategic steps to enhance shareholder value. In February, Agrium raised its target dividend pay out ratio to 40%-50% of free cash flow and also disclosed its plans to buy back up to 5% of its common shares over the next 12 months. Divesture of Phosphate business will further increase cash availability for dividends and buy backs. I believe Agrium is a good buy at current levels given its low valuations and plans to enhance shareholder value.
Agrium is a retailer of agricultural products and services in the United States, Canada, Australia, Argentina, Brazil, Chile and Uruguay, as well as a multi-national producer and wholesale marketer of nutrients for agricultural and industrial markets. Agrium’s strategy is to invest and operate across the agricultural inputs value chain (fertilizer, crop protection and seed), through production, distribution and retail sales. This integrated strategy allows the company to generate both strategic and operational synergies. For the fiscal year ended December 31, 2014, Agrium reported its business through two business units and a non-operating segment for Corporate and inter-business unit eliminations. The two business units are Retail and Wholesale. Continue Reading »