In the second quarter, Agrium Inc. (NYSE: AGU - News) reported diluted earnings per share of $4.00, more than double from $1.70 in the same quarter of the previous year. The recently completed United Agri-Products (UAP) acquisition is estimated to have contributed $0.70 diluted earnings per share for the reported period of May 5 to June 30.
Rising global prices for nitrogen, potash and phosphate leveraged by strong demand augur well for AGU. The company also has significant free cash flow. Therefore, we rate the shares a Buy with a target of $100.00.
After the acquisition of UAP, the company's market share increased to 16% in the retail business. The company expects good growth in the seed sales and crop protection chemicals business in 2008 because the UAP acquisition has expanded the depth and breadth of its product line. The company expects annual synergies of approximately $18 million, $80 million and $115 million from 2008 to 2010.
Recently, Agrium concluded the acquisition of 70% interest in Common Market Fertilizers S.A. (CMF), one of Western Europe's largest fertilizer distribution companies. This acquisition is expected to increase the company s purchase-for-resale business by almost 2.5 million tons on an annual basis.
Further, the company plans to expand its retail operations in South America through organic growth and greenfield expansion. It has already identified six sites for expansion in 2008 and 2009. Due to tight supply and strong demand in the ammonia business, the company restarted its smaller Redwater #1 ammonia plant late in the first quarter of 2008..zacks.com
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