Our Stock of the Year for 2006

Article Excerpt

AGRIUM INC. $27 (Toronto symbol AGU; SI Rating: Average) is one of the world’s largest producers of agricultural fertilizers, with 13 plants in Canada, the United States and Argentina. It also makes chemicals that manufacturers use to make a variety of industrial products, such as fiberglass insulation and fire retardants. North America supplies 80% of its sales, and 90% of its profit. Nitrogen-based fertilizers account for about two thirds of Agrium’s production. The company uses natural gas to make ammonia, the basic ingredient in more complex fertilizers. Location keeps gas prices down Natural gas accounts for 85% of the cost of producing ammonia, which makes Agrium vulnerable to rising gas prices. However, most of its ammonia plants are in Alberta, and long-term deals with local gas suppliers help cut this risk. It also uses hedging contracts to keep gas costs down. Consequently, in 2004 Agrium paid about 25% less than the average market price for gas. However, rising gas costs at its plant in…

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