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Aug 28, 2017

Ex-PotashCorp CEO says industry lacks leadership, calls Agrium merger 'sad'

Former PotashCorp CEO on the state of the fertilizer industry

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Bill Doyle is decrying the state of his former field, arguing the potash industry lacks strong leadership amid persistently weak prices. In an interview on BNN Monday, the former Potash Corporation of Saskatchewan chief executive said the industry has sacrificed prices at the altar of volumes, chasing larger market share instead of seeking to firm up market conditions for the underlying commodity.

“There’s just no one that’s stepped up to the plate that’s taking a leadership role,” he said. “Price is so much more important than volume and producing, according to the market. It’s one thing to pay lip service to it, it’s another thing to actually have the intestinal fortitude to do it.”

Prices of the fertilizer ingredient collapsed after Belarus’s Uralkali broke up the production cartel in 2013, effectively leaving producers to their own devices instead of seeking to balance supply and demand. Under Doyle, PotashCorp was considered the swing producer in the space, and was quick to curtail production when potash demand plummeted in 2009.

“We didn’t do it to be charitable, we did it because we understood that price is so important,” Doyle said. “Once you lose price, it take years, and years and years to get it back.”

Absent intervention on the production side, potash prices have been more than cut in half over the course of the last five years, driving shares of PotashCorp to $21 from its $78 peak in 2008. That weakened the company’s financial position, leaving it more exposed to the takeout offer from Agrium, which is expected to close later this year.

Doyle lamented that the company he vigorously defended from BHP Billiton would so meekly fall into the hands of the Calgary-based firm in a deal that will create the largest crop nutrient company on the planet.

“I think it’s a great deal for Agrium, I think they negotiated really well on behalf of their shareholders. I’d say it was a grand slam homerun for them. For Potash, not so much,” he said. “When you look at the facts, it really is a reverse takeover. Agrium is clearly going to be running the operation.”

Doyle said the deal, in which PotashCorp shareholders receive 0.4 of a share in the newly-formed company for each share they currently own, marks a gloomy conclusion for long-suffering stakeholders.

“I just think it’s a little bit sad for Potash shareholders. There was a tremendous amount of destruction of shareholder value there; and Agrium, I think, took advantage of the situation.”

Given his view the last thing the industry needs is additional capacity, Doyle took a dim view of the prospects for BHP Billiton’s proposed Jansen project in Saskatchewan, the development of which has dragged on for years and was recently delayed once more.

“There’s no return on investment remotely possible there,” Doyle said. “It’s a project that I just don’t think has any chance of ever going forward.”