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Tuesday, August 4, 2015
5:30 PM| Comment!
- Canpotex, the potash export sales arm for Potash Corp. (NYSE:POT), Mosaic (NYSE:MOS) and Agrium (NYSE:AGU), says it has hired Ken Seitz, chief commercial officer of uranium producer Cameco (NYSE:CCJ), as its new CEO.
- The current president and CEO, Steve Dechka, is retiring at the end of the year after 32 years of service with the company.
- Mosaic (MOS +2.8%) continues to maintain solid gains after reporting better than expected Q2 earnings thanks to higher sales of phosphates, which now account for more than half of the company's operating earnings.
- MOS says Q2 net sales of phosphates totaled $1.4B, up from $1.3B the year before, while sales volumes in the segment were 2.8M metric tons, up from 2.6M in the prior-year period; potash net sales were $730M, down from $762M a year earlier, on lower sales volume of 2.3M metric tons vs. 2.5M a year ago.
- Phosphate prices during Q2 fell ~3% Y/Y, while potash prices climbed nearly 5% Y/Y.
- For the full year, MOS sees phosphate sales volumes of 9.5M-10M metric tons, vs. an earlier outlook for 9M-10M metric tons, and potash sales volumes of 8.2M-8.6M metric tons, vs. 8.5M-9M earlier.
- CEO Jim Prokopanko, who steps down from the job tomorrow, says Q2, which includes the spring planting season in North America, showed that farmers are not skimping on fertilizer, and says he expects farmers to behave similarly during the fall fertilizer application period.
- COO Jim O'Rourke, who is taking over for Prokopanko, says the possible takeover of German potash miner K+S by Potash Corp. would make further industry consolidation less likely.
- Archer Daniels Midland (ADM +2.1%) racks up solid gains even as Q2 earnings fell more than expected, after it forecasts an H2 rebound in North American grain export volumes and margins.
- ADM says it expects ethanol margins, which also affected Q2 profits in its corn processing division, to improve, as sales remained strong, and a good corn crop in the U.S. is likely to push down input costs and further help margins.
- Q2 operating profits at ADM's corn processing unit fell 30% Y/Y to $188M, but the oilseeds business rose 1.3% to $301M, supported by strong soybean meal demand and higher South American purchases and export volumes; operating profits at the ag services business fell more than 30% to $127M as a plentiful South American harvest and a strong dollar reduced the competitiveness of North American grains.
- ADM also says it would no longer proceed with its acquisition of Chinese sweetener business Meiweiyuan Biotechnology, originally announced in May.
- Alcoa (AA +2.8%) is upgraded to Buy from Neutral with a $14 price target at UBS, which is positive on the company's transformation and expects mid- and downstream growth.
- UBS likes the significant shift in AA's business to expand its lightweight, multi-material business relative to its traditional upstream commodity base since Klaus Kleinfeld became CEO.
- The firm believes AA's price multiple could expand over time as less volatile midstream and downstream businesses grow and become a greater portion of the company, especially if aluminum prices continue to remain weak; this growth also would decrease AA's already declining sensitivity to the aluminum price.
- Glencore (OTCPK:GLCNF, OTCPK:GLNCY) says it will shut its 68%-owned South African Optimum coal mine in a dispute with state-owned utility Eskom, placing the mine in the local equivalent of bankruptcy proceedings after Eskom said it was not willing to renegotiate a two-decade old supply agreement.
- Optimum is contracted to supply Eskom with 5.5M tons/year of coal, and Glencore says it has been selling the coal to Eskom at significantly below the cost of production for several years.
- Eskom, which is battling a power crisis, supplies more than 95% of South Africa’s electricity and is dependent on coal-fired power stations.
- Monsanto's (NYSE:MON) unwanted takeover bid with Syngenta (NYSE:SYT) would face strong resistance in Brazil if it goes forward, a hurdle that could delay or force major concessions to the $45B deal, Reuters reports.
- Brazil, the second-largest market for both companies, is likely to surpass the U.S. as the world's top soybean producer in the coming years, while its tropical climate makes it an enormous pesticide consumer.
- Brazil's regulator, Cade, could spend up to a year, the maximum time allowed, analyzing any potential deal, says one Sao Paulo-based antitrust lawyer.
- Brazilian farmers are opposed to the deal, says the head of Brazil's main farmers' lobby, and the group would closely monitor Cade's evaluation of any merger proposal and could take additional legal measures.
- Rehovot, Israel-based Evogene (NYSE:EVGN), a computational genomics company focused on improving crop productivity and economics for the food and feed industries, completes the first computational discovery round for microbial genes that have potential to control crop-destroying insects from the families Coleoptera (beetles/weevils) and Lepidoptera (butterflies/moths), including the corn rootworm and corn earworm.
- The discovery round utilized the company's proprietary microbial database and a dedicated analysis platform called BiomeMiner. The candidate genes will be validated against target insects at its R&D site in St. Louis, MO. The work should be finished next year.
- The current market for insect control traits based on microbial genes is ~$4.5B annually. The insecticidal genes are inserted into a target crop where they provide protection against certain harmful insects. Most of the current microbial gene-based products are derived from the bacterium Bacillus thuringiensis, which insects have grown resistant to over the years.
Monday, August 3, 2015
- U.S. crude oil sank to five-month lows today while Brent crude finished below $50/bbl, as crude continues to be weighed by a worldwide glut and uncertainty over economic growth, as well as last week’s downbeat assessment (I, II) of market prospects by Exxon and Chevron.
- U.S. WTI crude dropped $1.82, or 3.9%, to $45.29/bbl, the lowest level for a most-active contract since March, while Brent crude on London’s ICE Futures exchange sank $2.35, or 4.5%, to $49.84/bbl.
- "Economic weakness has set the tone," says Matt Smith, director of commodity research at Clipperdata, adding that "the gasoline crack spread is also unraveling."
- Iran’s oil minister also added to the bearish tone, saying over the weekend that the country could lift production by 500K bbl/day within a week of the lifting of sanctions and by 1M bbl/a day within a month after that.
- Speculators have grown cold on oil, as money managers retreated to their weakest bullish stance on U.S. crude in nearly five years last week, according to data released by the CFTC late on Friday.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
- A series of power shortages has forced Zambia’s largest copper producer, First Quantum Minerals (OTCPK:FQVLF), to halt production at one of its largest mines, in a major operational scale-down that will result in the loss of nearly 1,500 jobs.
- The miner says it is starting a rigorous cost-cutting program to save its $2.1B Sentinel copper mine following the decision of the state power company to slash power supplies to its operation due to a nationwide shortfall.
- Zambia recently enjoyed one of the most reliable electricity grids in the region, depending on its vast hydro power plants and imports from South Africa to maintain a steady supply to its mines, but both sources have faced pressure in recent months as a severe drought has lowered water levels at dams.
- South Africa's second biggest gold miner's union rejected a pay offer over the weekend made by operators including AngloGold Ashanti (AU -1.9%) but stopped short of calling a strike.
- AU and Sibanye Gold (SBGL -5.1%) proposed on July 30 to raise monthly pay for entry-level workers by 1,000 rand/year ($79) for the three years starting July 1, while Harmony Gold (HMY -3.4%) offered a 500-rand increase.
- The AMCU union is demanding 12.5K rand/month for basic pay, more than double the current basic pay of ~5,800 rand, while the National Union of Mineworkers lowered its demand last month to 9.5K rand/month, still at least 60% more than the current wage.
- AU, SBGL and HMY are at or near 52-week lows in today's trade as gold futures prices continue to fall further below $1,100/oz.
- German chemicals group BASF (OTCQX:BASFY) has lined up a loan package from large multinational banks for a potential takeover offer for Syngenta (NYSE:SYT), which has rejected a $45B takeover offer from Monsanto (NYSE:MON), Reuters reports.
- BASF would wait for MON to make a bid before making its own move for SYT, and it would be comfortable with no merger at all and the industry status quo prevailing, the report says.
- "BASF will not be a first mover but remain a reactive player," according to one source.
Friday, July 31, 2015
- Alliance Resource Partners (ARLP -1.7%) says it's completed acquiring the rest of the White Oak Resources equity interests that it didn't already own, and has updated production and financial guidance accordingly.
- The move means an Alliance unit takes operating control of White Oak Mine No. 1 in Illinois, producing 6M tons/year of high-sulfur coal.
- The company now guides to coal production of 42.8M-43.5M tons for the year, and sales volumes of 42.7M-43.8M tons.
- It also sees 2015 revenues (excluding transportation) of $2.37B-$2.41B -- above consensus of $2.36B -- and full-year EBITDA of $765M-$795M (in line) and net income of $405M-$435M.
- Alliance paid $50M at closing and may owe contingent consideration in the future. The company will hold a conference call to talk about the guidance on Monday at 11 a.m. ET.
- Heading into the last day of July, commodities are extending their worst monthly slump since 2011, as the dollar advances and the Fed moves closer to raising interest rates.
- The raw materials are also taking a beating from a further slowdown in China. For July, Chinese shares posted their biggest monthly loss since August 2009.
- Crude futures -2% to 47.53/bbl; Gold -0.8% to $1079.90 an ounce.
- ETFs: GLD, USO, OIL, IAU, UCO, PHYS, UWTI, SCO, SGOL, BNO, DBO, UGL, DWTI, DGP, GTU, GLL, DTO, UGLD, DZZ, USL, GLDI, OUNZ, DGL, DNO, DGZ, DGLD, AGOL, OLO, SZO, GEUR, UBG, GYEN, OLEM, QGLDX
Thursday, July 30, 2015
- Barrick Gold (NYSE:ABX) agrees to sell a 50% interest in its Zaldivar copper mine in Chile to Antofagasta (OTC:ANFGF) for ~$1B.
- ABX has been trying to sell the mine as it looks to pay down at least $3B of debt by the end of this year.
- The Zaldivar mine produced 222M lbs. of copper in 2014, while proven and probable copper reserves as of December 2014 were 5.56B lbs.
- The June Prices Index for agricultural production, down 1.9% from the May index & 7.1% below the June 2014 index.
- The crop production index decreased 2.2% M/M to 88, while the livestock index decreased 0.8% to 121.
- Food grains -5.1% M/M and -17% Y/Y.
- Feed grains -1.6% M/M and -20% Y/Y.
- Oilseeds unchanged M/M and -31% Y/Y.
- Fruits and nuts +0.8% M/M and -2.2% Y/Y.
- Other crop unchanged M/M and -15% Y/Y.
- Related ETFs: DBA, RJA, DAG, JJA, AGA, AGF, FUD, USAG, UAG, DIRT, TAGS, ADZ
- Bunge (BG -4.8%) shares are sharply lower after the agricultural commodities trader posts Q2 earnings far below expectations, citing weak oilseed processing margins in Canada and Europe and an unexpectedly steep drop in demand for its food products in Brazil.
- Q2 earnings in the agribusiness segment, which buys, sells, stores and transports crops and processed products, plunged 57% Y/Y, while profit in the food and ingredients segment sank 68% as edible oils margins and volumes contracted amid rising unemployment, inflation and currency devaluation in Brazil.
- Bumper crop harvests in the U.S. and the Black Sea region, which would boost BG's asset utilization, and strong soy processing margins in China could lift H2 returns, CEO Soren Schroder said in this morning's earnings call; full-year EBITDA in agribusiness is expected to top $1B from $464M as of June 30.
- Vale (VALE -3.2%) moves into the black for the first time in a year, overcoming a slump in iron ore prices to report a Q2 net profit of $1.68B, a 17.3% Y/Y increase and more than 4x the average forecast of $408M.
- A major factor behind the improved result was a reduction in cash costs, with Vale lowering its cost of iron ore production to $15.8/metric ton from $18.3/metric ton in Q1; total Q2 expenses were $4.93B vs. $6B in the year-ago quarter.
- Vale says its realized price on ore sales rose to $50.6/metric ton from $46 in Q1.
- Vale's Q2 debt service costs totaled $215M, down from $983M a year ago.
- However, Q2 net revenue dropped 29.7% Y/Y to $6.96B, and EBITDA fell 46.1% to $2.2B.
- In this morning's earnings conference call, Vale said last week's collapse of a coal stacker at its port in Mozambique will not affect its coal production forecast for next year.
- Separately, Vale says it agrees to sell a 36.4% stake in its MBR unit to an investment fund for 4B reais ($1.19B); the company also concludes a previously announced sale of four Valemax ships to China Merchants Energy Shipping Co. for $448M.
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