Agrium Inc. (NYSE:AGU) is a Canadian company and its main headquarters are located in Calgary, Alberta. Agrium is a producer and seller of industrial products and agricultural nutrients, including insecticides, herbicides, fertilizer and seed. The company supplies agricultural services and retail products mainly in both North and South America, but has a presence worldwide. Agrium currently has approximately 14,500 employees under the company's CEO, Mike Wilson.
Agrium's Advanced Technologies business also produces and sells wholesale agricultural products and services, such as specialty fertilizers, to the North American market. Agrium Advanced Technologies mainly produces controlled release fertilizer technologies that are environmentally friendly, such as specialty products and micro-nutrients for professional turf, consumer use, as well as other agricultural and horticultural markets.
In 1931, Consolidated Mining and Smelting Company Limited (Cominco Fertilizers, Limited for short) was founded and then the name was changed to Agrium, Incorporated in 1995. The company's U.S. subsidiary, Agrium U.S. Incorporated, is where Agrium has its retail head office in Denver, Colorado. In addition, the company is part owner of another company, Canpotex, which controls all of the potash that is exported from Saskatchewan.
Agrium's brand names, which are Agroservicios Pampeanos S.A, Crop Production Services, Western Farm Services and Crop Production Services, maintain nearly 500 retail agricultural centers all over South America and the U.S. At the end of 2010, Agrium acquired the Australian Wheat Board for a sum of $1.236 billion (Australian) and then sold 40 percent of the holdings.
Agrium's wholesale division produces phosphate, nitrogen and sulphur based fertilizers, and also owns and operates potash and phosphate mines in Canada and the U.S. In addition, the Agrium wholesale division owns a fertilizer plant in Bahía Blanca, Argentina, and is currently completing expansion of its Egyptian production facility.
Many of the nutrients that aid crops worldwide in reaching their complete harvest potential are also utilized for a broad range of industrial purposes, such as in the lumber industry, where urea is utilized for the production of resins, potash for aluminum recycling, and phosphates as a fire retardant used in preventing the spread of forest fires.
As one of the oldest industries worldwide, agriculture is generally thought to be among the most stable and constant sectors with solid returns over time. Recently, the 2012 drought devastated U.S. crop yields, leading to maximum financial performance for the majority of agricultural companies. Since the weather forecasts are calling for a continuing dry spell, companies like Agrium could quite possibly see yet another excellent year ahead.
Among all of the fertilizer companies worldwide, Agrium is definitely one of the leaders in its field and currently has a cash flow of $837 million and holds more than $1.8 billion in cash and cash equivalents. The company is operating with a nominal debt-to-equity ratio of 57 percent and pays a $22 million in quarterly interest expense. The company's annual dividend yield is 2.2 percent with an annual payout of $299 million. Agrium's competitors have an average ROE of 8.9 percent over 12 months, whereas Agrium's ROE is 22.4 percent for the same trailing 12 month period. With earnings north of $1.4 billion the company is as healthy as they come.
AGU stock has a 21 percent current payout ratio, based upon this year's EPS estimates. In addition, the annualized dividend growth rate over the past five years is outstanding at 48.5 percent. In spite of the demanding atmosphere, Agrium has garnered record returns over the past couple of years. The anticipated escalation in demand for enhancers and protectors of crop yields, based upon increasing population worldwide, sees Agrium properly positioned to capitalize on these important factors over the next few years as the world's largest agricultural retailer, leading controlled release fertilizer distributor, as well as the third largest producer of nitrogen and low-cost potash in the world.
The bottom line is that, according to analysts, Agrium's third quarter average revenue estimate is $7.20 billion and next year's revenue estimate is $17.28 billion. As a major leader in worldwide production and sales of agricultural products that are projected to be in serious demand for years to come, Agrium is certainly poised to distribute great returns for the long run, making AGU a good investment in the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.