As Egypt tumbled into political chaos, Agrium Inc. CEO Mike Wilson was in touch every day with the African country, where his company expects to triple the size of its footprint over the next year.
"It's a shame to see what is going on in Egypt," he said at the height of the uncertainty, before the military took control. But the turmoil did not shut down Agrium's joint venture in nitrogen fertilizer, and expansion plans are still on track.
What's more, Calgary-based Agrium, as a muscular multinational on a global expansion drive, is now an old hand at confronting political change. "Anywhere in the world, you deal with politics - in Argentina, Africa, China," Mr. Wilson said. Political risk is an issue even in Canada, he pointed out, citing the shock waves from Ottawa's assault on income trusts in 2006.
Such worldly perspective comes naturally to a company that in five years has catapulted from a narrowly focused fertilizer producer to a growth engine that cuts across continents and the entire value chain of inputs that farmers use to grow food.
No company in the world is better situated to take advantage of the farm commodity boom. Agrium's takeover march had made it the largest agricultural retailer in the world - a force in the production of three major fertilizer components and an innovator in plant-growing technology.
It places Agrium at the centre of the food price surge that is helping seed unrest in developing countries such as Egypt. Fertilizer producers profit at a time when many people can't afford food, putting the sector under scrutiny.
"We don't want a food crisis and we think we're part of the solution," Mr. Wilson counters, "but we do want our farmers to make a lot of money."
Many of Agrium's farmers are making money now, as demand surges in emerging economies and local crop failures tighten supply of wheat and corn. But Mr. Wilson says the fertilizer industry is much more restrained than in the mad price runup of two or three years ago, which caused farmers to quit putting nutrients on their soil.
Now they are replenishing the land, and Agrium is enjoying robust numbers. Profits rocketed more than fivefold for the fourth quarter ended Dec. 31, compared with a year earlier, while sales soared 62 per cent. Despite a crushing commodity collapse in 2008-2009, Agrium's revenues and employment have risen almost sixfold in five years.
Through Thick and Thin
But the Agrium story is about more than channelling food prices; it reflects a strategy to create a countercyclical player that can prosper in the best and worst of times - and capitalize on the fertilizer sector's violent mood swings.
"In a commodities business, everyone suffers from current-itis," Mr. Wilson says. "When the market is good, they say the market is going to stay good forever and it doesn't. And when the market is bad, prices are depressed and they think it's going to be bad forever."
Mr. Wilson led the management team that blew Agrium out of this thinking, and on to a diversification course. A low-key engineer whose father worked in a chocolate factory in Campbellford, Ont., he has become a global business warrior, spending 70 per cent of his time on the road and eating as many as 250 dinners a year away from home.
One of Canada's least known major CEOs, he prefers to deflect attention to his people. While Agrium is a growing force in Melbourne or Buenos Aires, it is a bit of a secret in energy-obsessed Calgary. Agrium's striking headquarters sits on the city's southern fringe, to which Mr. Wilson commutes from his home 40 minutes away in the foothills - when he is not driving to the airport.
Having worked at Dow Chemical Co. and Methanex Corp., he joined Agrium 11 years ago and became CEO in late 2003 - just as the company was confronting its future as a producer of nitrogen, potash and phosphate fertilizer, with a weighting to nitrogen.
At the bottom of the commodity cycle, Agrium was frustrated that it was always short of cash and unable to exploit growth opportunities. The solution was to get big in farm retailing, which is less cyclical. At the bottom of the cycle, it can theoretically use cash from retailing to expand in fertilizer; at the top, it can spend fertilizer-generated money on retail assets.
That strategy now guides the company, with the result that, over the full cycle, Agrium's business is split about 50-50 between retailing and production/distribution. It also develops advanced technologies such as higher-yield controlled-release fertilizer. It sells more than $4-billion a year of non-fertilizer items, including seed and crop-protection chemicals, vs. seven years ago, when its $2-billion-plus in revenue was dominated by nutrients.
Mr. Wilson says its contributions to farm productivity are not the actions of an exploiter. "We've spent billions of dollars on fertilizer and seed to help feed the world. We spend a lot of money on education and technology. We don't want the world to be hungry."
Another key thrust is cost control, which permits the company to invest in new production at any point in the cycle. But when it does mergers and acquisitions, Agrium aims to be countercyclical, and Mr. Wilson boasts he has possibly the strongest M&A team in North America.
With that comes the discipline to walk away from the table. He cites Agrium's year-long hostile pursuit of CF Industries, a U.S. fertilizer company at the centre of a four-way battle that one newspaper blog labelled the "Forever War." The fevered bidding went from $3.6-billion (U.S.) to $5.4-billion until, last spring, Agrium exited the scene.
It was but one setback in an acquisition offensive of 15 takeovers in five years. The strategy is to know everything possible about a target company - which managers to retain, which assets to shed - before clinching the deal, and executing quickly.
That played out recently when the company negotiated a $1.1-billion (Australian) friendly takeover of the Australian Wheat Board, owner of Landmark, the country's biggest agri-retailer and a building block coveted by Agrium.
Eleven days after closing, Agrium sold AWB's grain handling unit to Cargill Inc. "We had the game plan in place and we got a very attractive price," Mr. Wilson says. Now Landmark is touted as a possible bidder for a New Zealand farm services company, PGG Wrightson.
The AWB deal happened about the time Ottawa rejected Australian mining giant BHP Billiton Ltd.'s bid for Potash Corp. of Saskatchewan. Mr. Wilson sensed little backlash in Australia, other than a newspaper cartoon showing him in Mountie uniform riding a moose with AWB saddlebags.
On its own, Ottawa's move does not mean Canada has gone protectionist, he says, but if it happened several times, he might get worried. "I'm a believer in [the]free flow of capital across borders. The government made the decision, it's a unique decision, and it surprised many."
As for BHP's takeover strategy, he would only comment: "We got ours through; they didn't get theirs through."
Another fertilizer player, Mosaic Co., is being spun out of Cargill, creating speculation it is in play. Mosaic says it is not for sale, but Mr. Wilson says it is only natural that if any part of Mosaic became available, Agrium would take a look at it.
Agrium and Mosaic, along with Potash Corp., are partners in Canpotex, Canada's international potash sales agency. Recently Bill Doyle, Potash Corp. CEO, vowed there would not be a runup in potash prices of pre-crash proportions.
But Mr. Wilson is reluctant to make guarantees. "The supply-demand dynamics of the market will dictate where the price goes. And if the Russians took the price of potash up $100 a tonne, I would think our shareholders would be quite angry with us if we said, 'Nah, we'll go up $10 or $15.' "
But he agrees with Mr. Doyle that "you can't take your pricing to the point where you squeeze your customers." Some producers are short-sighted, he says, and prices got ridiculous three years ago.
This time, "it has been a more disciplined rise, and most of it based on supply-demand fundamentals." While crop prices are, in many cases, back to 2008 levels, fertilizer still costs about half as much.
In fact, Mr. Wilson is now confident of Agrium's fortunes in good times and bad. He wishes the previous downturn had lasted longer, because "if the market had stayed crappy for six more months, we would have got CF."
There is a part of Mr. Wilson that actually looks forward to another crappy period. "That's what makes it fun. There is opportunity at the bottom of the cycle if you don't blow your brains out at the top."
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