DBRS Removes Agrium from Under Review - Developing and Confirms BBB Rating Following Termination of Offer for CF Industries

DBRS has today confirmed Agrium Inc’s (Agrium or the Company) Senior Debt rating at BBB with Stable trend following the Company’s announcement on March 11, 2010 that it will no longer pursue an acquisition of CF Industries Holdings, Inc. (CF Industries). Concurrently, DBRS has removed Agrium from Under Review with Developing Implications, where it placed on February 25, 2009 after the Company launched its bid for CF Industries.

DBRS notes that the Company has performed as expected under weak market conditions. The demand for fertilizers declined sharply in 2009 resulting from a reduction in planting acreage in North America and Argentina. Uncertainty on grain prices and tight credit availability have led farmers to curtail planting. Moreover, wet weather during the planting seasons in North America further reduced fertilizer usage. Operating performances at Agrium have weakened in 2009 and are well below the peak levels in 2008; all debt coverage ratios are near the low end of the range for the current rating. Nevertheless, the Company was still able to generate free cash through sound working capital management and reduce debt.

The Company’s financial profile, albeit weaker, remains acceptable for the current rating under bottom-of-the-cycle conditions. Moreover, a strengthened balance sheet and a strong liquidity position (cash and available liquidity were in excess of $2.2 billion at the end of 2009) provide further support to the confirmation of the current rating. Going forward, DBRS believes that the current down cycle in the industry has ended and that the demand and pricing for fertilizers should improve. DBRS expects the Company’s operating performance and credit metrics to improve as the industry starts to recover.

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

The applicable methodology is Rating Fertilizer Companies, which can be found on our website under Methodologies.

This is a Corporate rating.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.

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