DBRS Releases Report on Agrium

DBRS has today released a report that supports the recent confirmation of the Issuer Rating and Senior Debt rating of Agrium Inc. (Agrium or the Company), both at BBB with Stable trends.

The rating confirmations reflect Agrium’s position as one of the world’s leading agricultural retailers, as well as an important primary producer of nitrogen, potash and phosphate-based fertilizers.

The Company has deepened its business profile with a number of acquisitions, particularly in its Retail unit, as well as through internal expansions in its Wholesale unit. Agrium’s financial metrics weakened in 2013, although they remain solid for its ratings, as earnings and operating cash flow declined materially due to softer markets for primary fertilizers and despite record profitability in Retail.

With lower earnings and operating cash flow expected by DBRS in 2014, materially higher dividend levels and ongoing high capital expenditures, the Company’s net free cash flow deficit could exceed 2013 levels, in the range of negative $500 million to $1,000 million, resulting in weaker credit metrics in the near term.

Agrium will need to be judicious in its spending choices if it wishes to maintain the strength of its credit metrics, particularly those related to its balance sheet.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Companies in the Mining Industry (June 2011) and Rating Companies in the Industrial Products Industry (June 2013), which can be found on our website under Methodologies.

Today’s report and the March 26, 2014, press release are available at www.dbrs.com or contact us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.