Fertilizer giant Nutrien sets out to grow business

LONDON (ICIS)–Advertisements promoting “new year, new you” are a common sight in high street stores throughout early January, as retailers attempt to attract festivity-weary shoppers with a positive message promising growth and happiness.

Nutrien’s potash facility at Lanigan

Indeed, for Nutrien – the agricultural industry giant created by the merger of Canadian majors Potash Corporation of Saskatchewan (PCS) and Agrium – 2018 will be a year of new beginnings.

The merger was first announced in September 2016, after being unanimously approved by the boards of both companies, and promised an enterprise value of around $36bn.

Thereafter followed a long, difficult road of regulatory review and approval, with both companies lobbying the governments of Brazil, Russia, the US, China, and India to approve the “merger of equals”.

Although Agrium was left largely untouched throughout the process, PCS was required to divest its minority stakes in competing muriate of potash (MOP) producers SQM, Arab Potash (APC), and Israel Chemicals (ICL).

The US government was the last to sign-off on the deal in late December 2017.

Speaking in an announcement on 2 January confirming the successful merger, Chuck Magro – former President and CEO of Agrium, and now head of Nutrien – says: “Our company will have an unmatched capability to respond to customer and market opportunities, focusing on innovation and growth across our retail and crop nutrient businesses.

“Importantly, we intend to draw upon the depth of our combined talent and best practices to build a new company that is stronger and better equipped to create value for all our stakeholders.”

Despite Magro’s jargon, his confidence is well-placed: Nutrien is now the world’s single-largest provider of crop nutrients, boasting 22m tonnes/year of MOP capacity in Canada alone – the largest volume globally.

Meanwhile, thanks to Agrium’s assets, Nutrien has also become the globe’s third-largest nitrogen fertilizer producer, with sales of nearly 11m tonnes of product annually.

The new entity also boasts two phosphate fertilizer facilities in North America and one in Canada, totalling 4.2m tonnes/year of production – plus some 7.7m tonnes of ammonia fertilizer capacity.

Married to this production powerhouse is the world’s largest agricultural retail business, with some 1,500 locations across North America, Australia, and South America, plus global distribution operations – including a partnership with Canpotex, Canada’s MOP export marketing arm.

The shares of the merged entity are now trading on the New York and Toronto stock exchanges.

In a video released on Nutrien’s website, Magro adds: “2018 will be our first full year, and of course we have ambitious plans.

“We made a public commitment when we announced the deal to deliver $500m of annual operating synergies, and that has to do with driving efficiencies in procurement and logistics in the supply chain of the two companies.”

Nutrien expects to achieve savings of approximately $250m by the end of 2018, with the full annualized run-rate achieved by the end of 2019.

Magro adds: “There will be a strong focus to grow the retail business in North America, but we also have plans to grow the network in Brazil.”

Meanwhile, regarding Nutrien’s production business, Magro says the company is “always looking for assets that fit, and are low-cost, [and] top-tier”.

Soundbites aside, the merger will have a considerable effect on the global fertilizer market for both producers and buyers.

Domestic farmers and distributors especially may find fertilizer prices firming thanks to the reduced competition, but the financial and production stability offered by the merger will also give Nutrien more power to secure supply tenders, thanks to its amalgamated supply chain.

Notably, Nutrien’s combined potash production capacity could mean a more reliable supply of product for use in both spot business around the world, and in negotiations for a share of the key MOP import contracts in India and China – a key bellwether for the industry, which both look set to be agreed at an increase this year.

With its bullish outlook, financial stability, and considerable capacity clout, the promise of “new year, new you” is certainly true for Nutrien.

Focus article by Andy Hemphill

Additional reporting by Tom Brown