Nutrien to Buy Brazilian Agricultural Retailer for Undisclosed Price

Canadian fertilizer giant Nutrien (TSX:NTR,NYSE:NTR) kicked off the new year by announcing plans to acquire Brazilian agricultural retailer Agrosema Comercial Agricola.

The terms of the deal have not been disclosed, although Nutrien has described the acquisition multiple as being “in line with similar sized tuck-in acquisitions in North America in recent years.”

According to Nutrien, Agrosema has annual sales of about US$60 million. It serves thousands of customers across 12 farm centers and has around 200 employees.

Chuck Magro, president and CEO of Nutrien, said that the purchase will help Nutrien build its presence in Brazil, where it currently has two main operations under the Nutrien Ag Solutions name.

Those include a central fertilizer blending facility in Itapetininga, along with six other facilities in São Paulo and Minas Gerais. Nutrien’s Agrichem produces specialty liquid fertilizers for the entire country.

Magro said Nutrien plans to expand its product offerings in Brazil moving forward, a statement that was echoed by André Dias, vice president and managing director of Nutrien in Brazil.

“Bringing Nutrien’s extensive products and solutions to the Brazilian farmer is a key goal for the company. We believe we can provide new product offerings and solutions to help Brazilian agricultural producers become more profitable and to grow their business,” said Dias.

While the deal will allow Nutrien to begin 2020 on a bright note, the past year has been rough for the company and others in the fertilizer market.

Nutrien was impacted by difficult wet weather conditions in the fourth quarter of 2018, as well as the first and second quarters of 2019. Reporting its results for Q2, the company said that the US had experienced its worst planting season ever.

“US weather in the first half was so severe it nearly eliminated global demand growth for crop inputs,” said Magro at the time.

In September, Nutrien responded to the potash market slowdown by saying it would close its Saskatchewan-based Allan, Lanigan and Vanscoy mines for eight weeks during Q4.

The company emphasized that it saw the slowdown as short term and said that it was positive about potash demand in 2020 and about medium- and long-term fundamentals.

However, while employees at Allan and Lanigan went back to work at the end of December, reports indicate that Vanscoy will not be back online until the end of January at the earliest. About 250 employees will be affected by the decision, which Nutrien spokesperson Will Tigley said was made because the potash market environment is “still not great.”

Nutrien also had to close its Rocanville potash mine, another Saskatchewan asset, for two weeks in December due to a Canadian National Railway (TSX:CNR,NYSE:CNI) strike.

Nevertheless, the company’s latest quarterly earnings report, released in early November, paints an optimistic picture of the agricultural space moving forward.

“Nutrien’s third-quarter results and fourth-quarter expectations are impacted by short term market softness,” said Magro. “However, we believe that agriculture fundamentals are starting to strengthen and we expect 2020 to be a strong year for crop input demand, for which we are well positioned to benefit.”

Nutrien was up slightly at close of day on Monday (January 6) at C$61.30 on the TSX and US$47.29 on the NYSE.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.