Seeing things as they really are is the hallmark of the intelligent mind. I was hoping there was something I was missing but that is not the case. Thanks, Ralph, for confirming what I observed. When I heard the $800 million sustaining CAPEX figure during the virtual meeting, I knew something was wrong right away because I had been on the earlier presentations and remembered the slides showing a much bigger drop once the current expansion had been completed. Still, not wanting to just pop off based upon a recollection, I went back to the presentation and took another look at the slide which unfortunately was as I remembered it. It bothers me when people in charge don't level with the shareholders. Now I suppose that $800 million is the new normal for sustaining CAPEX until perhaps its shelf life is over and we suddenly get a higher number substituted without again adverting to what happened to cause the jump. I have to say, I am distressed enough over this that I intend to submit an inquiry regarding this. The goal posts are moving and I don't like it.
Bad news should be discussed, not buried.
My comment relates to what you had to say as well as another poster who wrote in response earlier than you did. Your comment shares the same characteristic as the earlier one; namely, that it was completely unresponsive to the point I made. I repeat: Had JANA prevailed in getting its people on the BOD, the share price of AGU would not have plummeted from $115 to $88.80 where it is now. Indeed, in my view, its share price would likely have gone higher. That JANA has a lot more than a "clue" as to what AGU needs to do to be a lot more successful, one only has to look at the feeble attempt AGU made to try to implement a number of their suggestions. Indeed, the 2% yield we currently have, for example, is a direct result of JANA's intercession in the process. I would have preferred that JANA had succeeded in getting its people on the BOD and have enjoyed a higher share price. Obviously, a number of folks on this board prefer that JANA lost and with that loss the share price dropped and has continued to drop. All I can say is: To each his own. AGU is an integral part of my AG stock field bet; because of its retail activities, it covers a part of the business I want. That the stock has been swirling in the bowl for months is something I don't like and wish were otherwise. One thing I do know. I am certainly not adding to my position as long as the current clowns are running the show. Oh yeah. One more thing. I have held my position since 2007, added to it in 2008-2010 and have never sold a share. So I not exactly an 'are we there yet' kind of investor.
The problem is that every day it is a different story. Weakening grain prices. Expansion plans. Perceived weakening of demand. India. Pricing. I don't doubt that there is a measure of truth in whatever happens to be the catalyst for why the stock goes down and stays down. Moreover, given that its peers seem to be suffering right along side POT, I am beginning to wonder whether too many investors regard investing in this area as just too boring. I mean, isn't it more exciting to wonder who is going to buy the latest $100 pants from Lululemon? One of the leading bromides for the past 2 decades has been "perception is reality." Unfortunately, the perception is that investing in the AG sector is not the place to be which is why our stock languishes. Of course perceptions can change. For starters, POT should get its yield above 4% which I think they will do before the year is out. That will be the tease. The hard truth is that the company has to start making real money again like it used to which may take some time. I noticed today that Uralkali believes potash prices are going to head back up. OK, I like that. And that Brazil will lose its only domestic source of potash by 2016, which means that they will be obliged to import an additional 600,000 MT over and above what they import now. Great. And as the CAPEX continues to decline dramatically, more stock buybacks. Yeah.
Eventually things should work out but they aren't right now. Good thing I don't need the money just yet. In the meantime, I will just continue to clip my coupon.
Dinner tonight consists of roast turkey and asparagus accompanied by a fine Pinot Noir. For desert, fresh raspberries and fresh pomegranate, topped off with 3 types of dates. Hope everybody else finds delight in their evening fare.
If JANA had gotten its people on the BOD, this stock would be rocking towards $120. Instead, it remains in the crapper, dropping pretty much every day regardless of what the major market averages are doing. The current management has no clue how to right the ship although the tools to straighten things out are staring them in the face. JANA laid out the blueprint but the folks in charge have no inclination to react dynamically. My guess is that we won't see any action necessary to help achieve improved shareholder value until there is another board election when their jobs will be on the line. Of course they can once again resort to despicable tactics to keep their chairs.
This is just made up bunky talk. There is no shortage of any kind of fertilizer anywhere on the globe. How do I know that? Because prices for each of them are falling and because nobody is reporting this. Instead, all the reports are talking about oversupply. I don't see the point in making up stuff like this. It is easily disproven. Also, take a look at the fertilizer stocks. They are all down. Now why might that be if there were a shortage of fertilizer? What a joke even for a Friday.
Notice the market reaction--nothing but yawns and yet another decline. Perhaps the market is waiting for a report which indicates that there is no potash inventory left in North America. I would expect that news to warrant at least a point or two to the upside. Restoration Hardware just announced that they had narrowed their quarterly loss but were now projecting 2nd quarter sales of as much as $380 million instead of analyst projections of $351 million. The market reaction? The stock gained 16% as of a little while ago, no doubt due in part to short covering. Maybe POT should redirect some of its CAPEX into high end home furnishings like Restoration Hardware. Couldn't hurt.
May domestic sales were up 61% from the prior month and 59% above the prior year. May inventory was down by over 138,000 tons and now stands 20% above the prior 5 year average. May exports, however, were down by 21% from the previous month and 4% below the same month last year. May production was up 1% from the prior month and 4% above the previous year.
In his most recent virtual meeting, CFO Brownlee mentioned, inter alia, that sustaining CAPEX once the current expansion is completed, which will get potash operational capacity up to 17.1 MMT, will be about $800 million a year. However, I took a look at a slide presentation he offered at the Citi Basic Materials Symposium on November 30, 2011. Slide 34 shows that CAPEX for 2015 is estimated at about $500 million. Am I missing something here? If not, then what accounts for the big jump in sustaining CAPEX after the current expansion projects have been completed? The jump in question obviously puts a serious dent in free cash flow.
Hardly a day goes by without some idiot publishing some nonsensical observations concerning the industry, as if the absence of incendiary and highly dubious remarks would prevent the author from getting his or her article published. Anyway, Morningstar as a lengthy piece surveying the entire landscape in terms of pricing, competition, expectations, the viability of potash projects, supply and demand considerations around the globe, etc. Although one may quibble with their long term price forecast, what the authors have to say is both illuminating and sound, virtues which we should celebrate. The article appears as part of their "Stock Strategist Industry Reports." It was published today.
I cannot recall ever having said I do not like the phosphate business. Remember, I have been holding my MOS position since 2007 when MOS' revenues were even more dominated by phosphate than they are now. What I have said is that when I made my field bet in the AG space, my largest position in percentage terms went to POT, and then to AGU and finally to MOS. To be sure, I also held CF for years but sold it before it took off. Figures.
What I quarrel with is the notion that somebody is going to come along and buy MOS at a sizeable premium, thereby validating the 'greater fool' theory that too many on this Board are depending on to justify their MOS holdings. Which is why I occasionally poke fun at the proposition, having exhausted myself when offering technical, factual reasons why it is not going to happen absent something totally outside of the realm of realistic expectations. I am glad to see that you are not one of them but then again, I have never seen you post anything to indicate you were caught up in that fever.
What people should be looking forward to is the likelihood [my expectation] that the 129 million shares of MOS held currently by the Cargill trusts will be repurchased by MOS over the next 2-3 years instead of having those shares add to the existing public float. Sure, such a repurchase, even if staggered between now and 2015, will cost a pretty penny. But MOS has and will have the financial wherewithal as well as the economic incentive to accomplish that. Better earnings and revenues coupled with fewer outstanding shares ought to be a recipe for this stock to go higher. A takeover, therefore, ought not to be necessary for current holders to do well--assuming they have the patience.
I hope you are right about the prospects for an improvement in the phosphate business. During the recent virtual Q&A, CFO Brownlee noted that it largely depends on India which we know is an imponderable place to assess. But we shall see.
Aside from the relative incoherence of your observation, what relevance does this have to POT? This is the POT board.
AGU has been a loser investment for months now but it isn't as if it is destined to remain in the toilet, going down pretty much every day regardless of how the market is doing. With the cash flow they are generating and given that they have cut back on their CAPEX expansion plans big time, they should raise the dividend another 50% so we get a 3%+ yield. That should perk things up. That is what POT is doing while MOS is about to launch a major stock buyback this year. Eventually revenues and earnings will tell the real story but there are things which can be done in the meantime to enhance shareholder value. AGU undertook its recent buyback and dividend increases because it was being threatened by JANA Partners. Now that that danger has passed, it looks as if the AGU management and BOD are just going back to their usual, sleepy MO. Perhaps somebody will come along and buy the whole thing for about $125 a share which is its approximate intrinsic value. Fat chance though of that happening.
OK, I stand corrected. Soros knows what he is doing or at least he has a track record of same. Sometimes though, people who have had a good run suddenly get cold. I know I used to think I knew what I was doing but it is evident from my having failed to sell my MOS shares after they had quadrupled in value that I count myself among the dumbheads. Some folks can't pick a stock if their life depended on it. That is not my problem. I invariably pick winners but usually don't enjoy the lion's share of the profits from said investments because I either hold onto them too long or else, as in the case of MOS, I never sell them at all. Fortunately I stopped kicking myself about my bonehead plays because I have no need to hit home runs anymore. Just a few base hits here and there will keep me afloat. I certainly don't want to be sitting in the nursing home with beaucoup dollars like that 84 year old woman who just won the jackpot. I mean, what is the point? You reach a point in your life when the extra dollars just have no bearing on the life you lead. Of course, not everybody is in that position but I am fortunate to be there. So then why do I invest serious money in the market? Two reasons. First, everybody in my family lives to be between 95-100 so I have to keep this thing going for quite some time to come in the hope of not becoming a public charge. And the other reason is the one which Sherlock Holmes once gave with regard to an entirely different endeavor: "I play the game for the game's own sake."
Perhaps the reason the stock was down 3% today was because people figured that if these guys were in, then it was time to get out. Just goes to show you that those guys aren't the wizards folks make them out to be. Soros had one good run against the pound and the Bank of England. I am not sure whether he hit any home runs after that one.
So now we have to wonder whether 60 will be the new resistance level.
And where are all those posters claiming that a buyout of MOS is imminent? I have tried to pour cold water on that notion before with little success. But perhaps reality is finally settling in. MOS will move up on real news [e.g., better earnings, a share repurchase, etc.] and not before.
I am in complete agreement with you. Over on the MOS Board [Confession: I hold MOS shares as part of my AG field bet], there are unfortunately too many knuckleheads who believe that either Vale or BHP is going to swoop in and buy the company. Too be sure, the only way that the Jansen project could make any economic sense for BHP would be, as you point out, if the income from the potash activities in Saskatchewan could be used to offset the CAPEX from the Jansen project. However, aside from what BHP would have to pay to acquire MOS--which is a lot at a time when they are scaling back their CAPEX--MOS is still predominantly a phosphate company and those are assets which BHP would have less than no interest in. Nor could they dispose of said business in a tax efficient manner given that the tax basis of those assets is virtually nothing.
I say all these capital spending curtailments are good for POT. And I have to say, I don't favor a takeover of MOS either, given that it would probably be inimical to POT's overall game plan. Fortunately, it looks as if I am going to get my wish.
I have been overseas on holiday for over a month and did not catch BHP CEO Andrew Mackenzie's comments a few weeks ago during a recent industry conference in which he said that BHP would be cutting its CAPEX by $4 billion during the next financial year and substantially lower CAPEX thereafter. He talked about increasing capital returns to shareholders as well as focusing on their 4 major areas where BHP currently enjoys a competitive edge. I am finding it hard to square those comments with the notion that he is nevertheless going to give the go-ahead to former CEO Kloppers' $10 billion plus Jansen potash project. With Vale having baled on its Rio Colorado potash project in Argentina, it is hard to see where all the oversupply of potash is going to be coming from over the next 5-10 years. Instead, it looks as if the usual suspects will be the ones supplying the goods.