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Opinion: CF boss gets half way to proving his case

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CF Industries second quarter results have gone some way to showing that there is more to Stephen Wilson's front than a facade.

The CF Industries chief executive showed quite some chutzpah - even for a boss protected by Delaware's board-friendly corporate laws - in pooh-poohing the holders of 62% of CF shares who voted for him to engage in talks with Canadian suitor, Agrium.

Mr Wilson stuck to his guns, restated that the company is best under his management, and continued his own pursuit of rival Terra Industries.

Second quarter results have shown that he has half a case.

Strong performer

The good news for Mr Wilson is that CF performed well in a testing period.

In nitrogen, it outperformed Terra, a sector specialist, reporting far smaller declines in both overall sales and volumes shifted.

In phosphate, it trounced Mosaic, the sector giant. Sure, CF's performance was not great, with sales down 25% and gross margin down 69% at $33.0m.

But Mosaic did far worse, suffering a revenue drop in phosphates more than twice as steep. Its gross margin, seven times higher than CF's a year before, came in at $32.9m.

Bargain basement

The bad news is that investors are still reluctant to give CF anything like the full benefit of its success.

CF trades at about 4.5 times this year's earnings before interest, tax, depreciation and amortisation, a discount of about 10% to Terra. The likes of Mosaic, Agrium, Canada's PotashCorp and Norway's Yara trade on seven times.

Mr Wilson can hardly complain about being treated with disdain by investors. He has earned their respect but not their trust.

But he is missing a trick, given the huge boost that a rating like, say, Yara's would give to CF shares.

Being conciliatory is not always a sign of weakness. Mr Wilson may be better off treating the armoury offered by Delaware law as a last, rather than first, resort.


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