DBRS Releases Report on Agrium

DBRS Limited (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 the Company’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.

Although Agrium 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 that are nearing completion, financial metrics weakened again in 2014, as earnings before items considered by DBRS as non-recurring and operating cash flow continued to erode from record levels in 2011, debt levels rose to fund expansion projects and dividends increased.

Agrium’s credit metrics are expected to stabilize in 2015 with an outlook for flat to modestly higher operating cash flow, but with lower capital expenditures resulting in a moderation of debt growth.

That said, the Company also has an incomplete discretionary normal course issuer bid outstanding, which may require up to $775 million in funds if fully executed in 2015. As such, the risks related to discretionary increases in shareholder payments or acquisitions remain. Accordingly, Agrium will need to be judicious in its spending choices to avert any negative rating action due to persistence of its currently cyclically weak credit metrics.

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 19, 2015, 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.