Replies to post #2230 on The Rising Influence of Rising Affluence

[Tuff-Stuff]

Vale to Sell Up to 49% of Fertilizer Unit in Second Half

March 04, 2011, 4:40 PM EST

Vale, based in Rio de Janeiro, is in talks with financial institutions including Deutsche Bank AG as part of plans to hire advisers on a sale of between 25 and 49 percent, Mario Barbosa, head of Vale’s fertilizer unit, said yesterday in an interview.

The company will seek to almost triple potash and phosphate rock output to 16.1 million metric tons by 2015 as a rising population’s food needs lead to an increase in demand. Vale plans to invest about $2.5 billion in the fertilizer business during 2011, about 10 percent of the year’s total spending, as it develops projects in countries such as Argentina and Brazil.

“We are taking all the internal measures for the company to be ready to do the IPO,” he said. “There is a big demand from people interested to be part of the company.”

Vale is “unlikely” to buy more assets before the IPO and isn’t talking to Brazilian smelter Paranapanema SA about its Cibrafertil fertilizer unit, Barbosa said. Anglo American Plc’s Copebras SA, a Brazilian phosphate producer, has “tremendous” synergy with Vale operations in the same region of Center West Brazil, Barbosa said in the interview from Sao Paulo.

Vale Chief Financial Officer Guilherme Cavalcanti said in an interview in London Oct. 20 that the IPO wouldn’t be ready before the second quarter of 2011. Delays are due to the “bureaucratic” processes, Barbosa said yesterday.

Share Declines

Vale fell 55 centavos, or 1.1 percent, to 49.05 centavos as of 6:08 p.m. in Sao Paulo after earlier falling as much as 1.8 percent. Before today, the stock gained about 2.3 percent this year, compared with a 1.7 percent decline for the benchmark Bovespa Index.

Usinas Siderurgicas de Minas Gerais SA, Brazil’s second- largest steelmaker, recently postponed plans for an IPO of its mining and railroad business. QGEP Participacoes SA, the energy exploration and production unit of Queiroz Galvao SA, and Brazilian oil and gas company HRT Participacoes em Petroleo SA, both raised less than expected in initial public offerings as investor appetite for emerging market assets waned.

“With every day that goes by, the outlook for liquidity and demand are deteriorating,” Rogerio Freitas, a fund manager at Teorica Investimentos in Rio de Janeiro, said today in a telephone interview. “We’re entering a less optimistic period of global economic growth.”

Consolidating

Fertilizer producers are consolidating as demand for nutrients that boost crops is rising on increased population growth and higher incomes in emerging markets. OAO Uralkali, Russia’s largest potash producer by market value, agreed to buy OAO Silvinit for $8.2 billion in December, after BHP Billiton, the world’s largest mining company, failed in its attempt to buy Potash Corp. of Saskatchewan Inc. for $40 billion.

Vale expects to start working on its Rio Colorado potash project in Argentina this year after getting licenses required by the local authorities, Barbosa, 64, said. The project, which Vale bought from Rio Tinto Group in 2009 for $850 million, will start producing in the second half of 2013 to “mainly” meet Brazilian fertilizer demand, he said.

Vale has an output target of 3.4 million metric tons of potash and 12.7 million metric tons of phosphate rock by 2015. The company produced 662,000 metric tons of potash and 5.3 million tons of phosphate rock last year, according to Vale’s 2010 production report.

Potash Corp., the world’s largest fertilizer producer, more than doubled its potash production last year to 8.1 million metric tons.

--With reporting by Peter Millard in Rio de Janeiro. Editor: Jessica Brice

http://www.businessweek.com/news/2011-03-04/vale-to-sell-up-to-49-of-fertilizer-unit-in-second-half.html

[DewDiligence]

PCL held its annual Investor Day webcast yesterday—the slides (80 pages) are at http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9ODYyNzR8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 .

There was nothing radically new compared to last year’s event, which featured the impetus for higher timber prices stemming from the mountain pine beetle (#msg-47898395); however, this year’s event had additional color on recent timberland values by region and the growing importance of wood exports to China. I will post more about this later.

PCL remains a simple story: fair market value for the company’s timberlands (net of liquid balance-sheet items) is at least 25-30% higher than the enterprise value implied by the current share price (#msg-43004163). While you wait for the market price to improve, you get: i) a fat dividend yield taxed at the capital-gains rate; and ii) an increasing cash flow derived from a renewable resource that's essential to The Global Demographic Tailwind.

What's not to like?

[DewDiligence]

Nice day for The Global Demographic Tailwind! Of the 20 stock on my LTBH list (#msg-60616494), five—AGN, APD, HNZ, MMM, UNP—made 12-month highs today and three others—CVX, PCL, XOM—closed within a whisker of a new high.

[DewDiligence]

AGN derives 15% of sales from emerging markets and is enjoying robust growth there, particularly from self-pay products such as Botox cosmetic. Thus, AGN is a play on The Global Demographic Tailwind without the patent-cliff baggage of Big Pharma.

AGN’s P/E ratio is much higher than Big Pharma companies, but the company’s product portfolio and near-flawless execution justify a relatively high P/E, IMO.

[DewDiligence]

I’m adding PKI to the long-term-buy-and-hold list in #msg-60616460.

[DewDiligence]

The World After QE2 (cover story in Barron’s): #msg-63905348.

[DewDiligence]

This WSJ piece recommends five of the stocks on my top-20 LTBH list (#msg-60616494)—DE, MON, XOM, CVX, and HES:

http://online.wsj.com/article/SB10001424053111903635604576474143564882146.html

Good article :- )

[DewDiligence]

My Top-20 Picks for LTBH

Since the previous version of this list about six months ago, I dropped
BBL and UNP, and added PG and PKI; the other 18 names on the list
remain the name. One thing all of these companies have in common:
they are beneficiaries of The Global Demographic Tailwind.
Below are two sample posts for each name. (Some sample posts are old
but still a good read.) Also see #msg-66347821 for brief, recent comments
on some of these names.

 
 Pharma/healthcare  
 ABT      #msg-66126904   #msg-61658082 
 AGN      #msg-64097718   #msg-62751639 
 MNTA     #msg-65934811   #msg-61591240 
 NVS      #msg-56670900   #msg-56791291 
 PFE      #msg-65791666   #msg-59590951 
 PKI      #msg-65917215   #msg-63398644 
  
 Natural resources  
 CLB      #msg-61638324   #msg-62613267 
 CLF      #msg-60141751   #msg-58708254 
 CVX      #msg-66380505   #msg-61086027 
 HES      #msg-38256080   #msg-65617274 
 PCL      #msg-59643478   #msg-60240622 
 VALE     #msg-64938685   #msg-63534058 
 XOM      #msg-63763494   #msg-43578073 
  
 Industrial/agriculture/technology  
 APD      #msg-46518659   #msg-64095618 
 CUB      #msg-66355098   #msg-58908872 
 DE       #msg-66316633   #msg-61382266 
 MMM      #msg-60356285   #msg-54817296 
 MON      #msg-61383009   #msg-60259277 
  
 Consumer products  
 HNZ      #msg-63662457   #msg-50806342 
 PG       #msg-65909016   #msg-42162914 

Feedback welcome.