UAP emerges from public offering with momentum

GREELEY – United Agri Products Holding Corp. has a long history as a publicly held entity and that history is shining brightly on its current public offering.

As a subsidiary of ConAgra Foods, UAP was part of one of the largest agriculture companies in the world. In 2003, ConAgra sold UAP to Apollo Management for about $600 million, and the new owners decided the future of the crop products distributor once again involved being public.

That goal was accomplished in November 2004 when UAP launched an initial public offering that issued 27.44 million shares at $16 a share, making it Northern Colorado’s newest public company.

United Agri Products manufactures and distributes crop production products, ranging from seeds to fertilizers to pest and weed killers. UAP Holding markets its products under the brands ACA, Salvo, Savage and Shotgun.

The company is the largest agricultural inputs distributor in the United States and Canada with $2.5 billion in sales in fiscal 2005. The company has 330 retail and wholesale distribution sites across the country and employs 3,440 company-wide, including 220 in Greeley.

“This has been a great year for UAP and our accomplishments are numerous,” company CEO Kenny Cordell said recently during UAP’s fiscal year-end conference call. “We have completely separated ourselves from our former parent, we’ve grown our business and we were fortunate to complete our initial public offering of common stock. Clearly, we are well positioned to move this company forward to expand our total addressable market as well as gain market share with our existing base.”

Officials with UAP were unable to comment to the Business Report due to an SEC-enforced quiet period. UAP was scheduled to release its latest earnings report on July 7, after this issue of the Business Report went to press.

In company documents, Cordell said UAP is benefiting from a wet fall in 2004 and an optimistic growing season this year. In 2006, UAP expects,”to grow our seed business, expand our market share in the fertilizer business and develop new products and new markets for our chemical offerings,” Cordell said.

In his 2005 annual earnings statement, Cordell said that seed sales were off to a strong start after the first two months of the new fiscal year. “Fertilizer sales were positive for us late in fiscal 2005 and early fiscal 2006 and we may have the benefit of that again late in fiscal 2006. As such we are optimistic about what we can do in fiscal 2006, both from a financial and a market perspective.”

Cordell added that the company will also continue to cut costs by reducing working capital and increase profitability and cash flow.

“With our taking the company public, our strong financial position is now evident and the commitment we have to our customers and suppliers into the future is now more clear,” he said. “I could not feel better about our business and company than I do right now.”

The company projects earnings for 2006 in the range of $1.17 to $1.24 per share, compared to $1.06 last year.

UAP’s size may offer a competitive advantage in an industry filled with consolidations and tightened margins.

“UAP is a sizable player in the market – they are the largest independent distributor on our top 100 list,´ said Paul Schrimps, group editor of Crop Life Magazine.

Schrimps said the industry experienced consolidation in the late 1990s and early 2000s to compensate for the continued consolidation of farming operations throughout the country.

“There are fewer farms and they are getting larger,” Schrimps said. “With fewer customers, companies have to offer more services in a larger geographical area.”

Wall Street analysts are also optimistic about the company and its growth potential in the marketplace.

Analysts who report to the msn.com Stock Scouter rating system gives UAP Holding a rating of 9 out of 10 because, “(UAPH) is expected to significantly outperform the market over the next six months with less than average risk.”

Jonathan Shapiro, small companies analyst for Goldman Sachs, said, “We believe that UAP’s leading market position in the large and stable agricultural inputs industry should drive steady growth and free cash- flow generation. We see 20 percent-plus upside potential from current levels as UAP begins to develop a track record with investors.”

on Facebook on LinkedIn