Type: Public Company
Address: 600 Fourth Street, P.O. Box 6000, Sioux City, Iowa, 51102, U.S.A.
Telephone: (712) 277-1340
Fax: (712) 233-3648
Web: http://www.terraindustries.com
Employees: 1,238
Revenues: $1.8 billion (2006)
Stock Exchanges: New York
Ticker Symbol: TRA
Incorporated: 1964 as Terra Chemicals International, Inc.
NAIC: 325311 Nitrogenous Fertilizer Manufacturing; 325312 Phosphatic Fertilizer Manufacturing; 325320 Fertilizer and Other Agricultural Chemical Manufacturing
SIC: 2873 Nitrogenous Fertilizers; 2874 Phosphatic Fertilizers; 2879 Agricultural Chemicals Nec
Terra Industries, Inc., is one of the largest international producers of nitrogen fertilizer and crop protection products for commercial and industrial agricultural use. Terra's agricultural products fall into seven major categories: anhydrous ammonia, urea ammonium nitrate solutions, ammonium nitrate, granular urea, urea liquor, diesel exhaust treatment, and nitric acid. The company owns and operates five nitrogen product manufacturing locations in the United States and Canada and controls 50 percent interest in nitrogen production facilities in both the Republic of Trinidad and Tobago and the United Kingdom. In 2007, the company reported assets exceeding $1.8 billion and maintained one of the largest nitrogen production businesses in the nation.
Early History: 1964-84
Terra Industry's roots extend to 1964, when Terra Chemicals International, Inc., broke ground for a large nitrogen fertilizer manufacturing complex at Port Neal, Iowa. Initially, Terra distributed its products through a number of small companies in Iowa and Wisconsin and in 1965 the company purchased the Grand Forks Seed Company, which became the company's principal distribution center.
The young company moved quickly to expand its product line and sales territory. By 1967, the Port Neal site was producing sizable amounts of nitrogen-based fertilizer and within a decade the company entered into a joint venture with W.R. Grace and Gulf Oil Chemical Co. to obtain an interest in another fertilizer plant in Woodward, Oklahoma. The Woodward plant developed into one of the company's largest production centers and Terra eventually became the sole owner of the plant after purchasing the rights from W.R. Grace in 1988.
Terra went public in 1974 with its first stock offering. Three years later, bolstered by investment resources, the company was ready for another expansion and decided to purchase the Memphis, Tennessee-based Riverside Chemical Company. The addition of Riverside's 45 farm service centers made Terra one of the nation's largest independent producers and distributors of fertilizer, agricultural chemicals, and seed.
In 1981 Terra became a wholly owned subsidiary of Plateau Holdings, an umbrella company for mining and natural resources, to begin a decade of vastly accelerated growth and diversification. Plateau, which was jointly owned by Minerals and Resources Corporation Limited (Minorco Inc., U.S.A.) and Hudson Bay Mining and Smelting Co., Ltd. (HBMS), created a new company, Inspiration Resources Corporation (IRC), as a holding company for Terra and several other natural resources ventures.
Within two years, a reorganization realigned the corporate chips, making HBMS and Tren International Ltd. (TIL) wholly owned subsidiaries of Inspiration. In 1984 Inspiration traded shares of TIL and Trend Exploration Ltd. (TEL)--formerly one of its wholly owned subsidiaries--with Danville Resources, Inc., which in turn exchanged its shares of TIL and TEL for shares in Madison Resources, Inc. Thus, Terra's parent, Inspiration, ended up holding a 73 percent interest in Madison, including its wholly owned subsidiaries, TIL and TEL. Despite this session of "musical shares" and the diversification of Inspiration into everything from copper mining to ammonia production, the Terra subsidiary continued to focus primarily on agricultural markets.
Growth and Financial Strain: 1984-92
A series of strategic acquisitions, paired with renewed emphasis on aggressive distribution channels, propelled new growth for Terra in the mid-1980s. The company began operating a dry and liquid flowable crop protection formulation facility in Blytheville, Arkansas, in 1984. In 1985 Terra acquired the agricultural products division of Sohio Chemical Company, augmenting its direct sales contact with farm customers through the division's 118 retail farm service centers across Michigan, Ohio, Indiana, Illinois, Missouri, and Kansas. That year, the company also changed its name to Terra International, Inc., in anticipation of broader markets.
As markets for base metals took a beating in the early 1980s, Terra's parent felt the heat. Inspiration suffered consecutive losses of $83 million in 1983 and $101 million in 1984, for example, largely due to sagging copper prices (which adversely affected the company's Consolidated Copper Corp. and Hudson Bay Mining & Smelting Co. Ltd. subsidiaries). A 1985 company report noted that Inspiration was attempting to lessen its dependence on copper by increasing its interests in oil, gas, agricultural, and chemical businesses. This trend spelled good news for Terra, which would benefit from the parent's search for "inspiration" in agribusiness. In a 1986 speech to shareholders, Reuben F. Richards, Inspiration's chairman, said that the corporation's prospects for profitability hinged greatly on the ability of Inspiration Copper to secure substantial labor cost reductions and a strong performance by Terra International's agricultural business.
By the early 1990s, with the base metals market still weighing down on Inspiration's recovery, the company focused its efforts on agribusiness, beginning to divest or discontinue other operations in areas such as mining and base metal refining. In 1990 the company wrote off its equity investment in western Gold Exploration and Mining Co. Limited Partnership (Westgold). That year, Inspiration also discontinued its coal operations. Such divestment continued in August 1991, when Inspiration sold its base metals business, principally its wholly owned subsidiary Hudson Bay Mining and Smelting Co. Ltd., and related metals marketing and trading operations to Minorco (U.S.A.). Within a year, the parent company also sold certain leased rail assets and by 1992 had discontinued the leasing and construction materials businesses as well as equity interests in a copper alloy producer, an undeveloped beryllium mine property, and its gold mining affiliate.
These changes were accompanied by organizational shifts as well. In August 1991, Inspiration named W. Mark Rosenbury as vice-president and chief financial officer of the newly reconstituted company, with its new emphasis on fertilizer and other agribusiness units operated by Terra International, Inc. Terra's ascent was not complete until Inspiration moved its corporate offices from New York to Sioux City, Terra's headquarters, and finally, until IRC's shareholders approved a name change for the parent company to Terra Industries, Inc., in May 1992. The new name recognized Terra's focus on agribusiness with the sale/discontinuation of its natural resources and other businesses. "We have transformed ourselves from a metal and mining company to one of the nation's leading producers and marketers of fertilizers, crop chemicals and seed. Terra, the Latin world for 'land,' has been known and respected for over 25 years in the agricultural community," President and CEO Burton M. Joyce said at the annual meeting in May 1992. Essentially, the parent company had developed along the lines of its most successful subsidiary.
In 1992 Terra decided to diversify into methanol production, announcing plans on December 1 to begin production of the chemical at its Woodward, Oklahoma, nitrogen fertilizer manufacturing facility. Scheduled for completion in the first quarter of 1994, the $15.5 million project was designed for a capacity of 400 tons of methanol per day, a relatively small production quantity by industry standards. Still, the company focused not on volume but on efficiency, devising a production process by which methanol and ammonia could be processed simultaneously, using synergy to save energy. "Terra will be one of the smallest methanol producers, but likely one of the most efficient," Joyce said in a news release. By diversifying into methanol, while increasing its storage capacity, Terra hoped to reduce the impact of fertilizer market seasonality on its profits, Joyce said.
Shifts to a Focus on Production: 1993-99
Terra also moved toward market stability through sheer volume, effecting a virtual explosion of growth in its nitrogen fertilizer business in 1993. With that year's acquisition of ICI Canada's Lambton Works facility near Sarnia, Ontario, Terra increased its nitrogen fertilizer capacity by 50 percent, making it the fourth largest nitrogen solutions producer and the fifth largest anhydrous ammonia producer in North America. The ICI acquisition also included interests in 32 farm service centers, or "Agromarts," in Ontario, New Brunswick, and Nova Scotia.
Terra continued to expand its geographical reach with the 1993 acquisition of the business and most of the assets of Asgrow Florida Company (AFC), a subsidiary of the Upjohn Company and a distributor of fertilizer, crop protection products, and seed to the vegetable and ornamental markets in Florida. Initially operating under the Terra Asgrow Florida name, the combined organization resulted in a broader range of products and services for Florida vegetable, citrus, ornamental, and other growers. For Terra, it marked another new frontier; in 1993 the company announced plans to broaden its agrochemical operations into the Southwest and far West as well.
Such explosive growth in fertilizers was, unfortunately, interrupted by a tragic fertilizer explosion at Terra's Port Neal plant in Iowa in December 1994. The accident took the lives of four employees, injured 19 people, unleashed a cloud of potentially dangerous ammonia gas that caused the evacuation of a nearby town, and rendered the 325,000-ton-a-year plant inoperable for nearly one year.
Terra's Port Neal explosion created shock waves on various fronts, including trading floors. While personnel tried to assess the damage and the cause of the explosion--and whether the plant would reopen--Terra stock plunged, as Terra's main competitors, Cominco Fertilizers Ltd. of Calgary and Chicago-based Vogoro Corp., saw their shares jump in brisk trading.
Tremors from the explosion also shook up investigators and regulatory boards. In January 1995, the Iowa Occupational Safety and Health Administration (IOSHA) filed an affidavit alleging that Terra had hindered inspections of the blast, whereupon Terra filed a court motion disputing the state's charges. By May, the dispute had escalated, with Terra denying IOSHA's allegations that the company hindered inspections and contesting the $460,000 fine that the state agency proposed. Into 1995, the dispute fueled other related disputes in the media, including the extent of federal regulation and oversight in an era when Congress displayed an antiregulatory mood. In 1990 Congress had created a five-member, independent Chemical Safety and Hazard Investigation Board as part of the Clean Air Act amendments. By 1995, the new panel--which would have investigated cases similar to Terra's--had not been sworn in; the Office of Management and Budget made moves to block the panel and transfer its intended responsibilities to the existing U.S. Environmental Protection Agency and the U.S. Occupational Safety and Health Administration. Thus, the Terra explosion highlighted not only ambiguities regarding that company's safety policies, but those of the federal government as well.
Despite the legal and financial setbacks of the Port Neal explosion, Terra enjoyed a year of solid growth in 1994, reporting a net income of $56.6 million, or 78 cents a share, for the year, compared with net income of $22.8 million for 1993. Despite a $7 million charge in the fourth quarter to cover uninsured costs from the explosion, the company said business interruption insurance and property damage insurance would enable it to rebuild the facility.
Moreover, Terra continued to grow through strategic acquisitions, shooting to the top echelon of North American nitrogen product and methanol production with its 1994 acquisition of Agricultural Minerals and Chemicals Inc. (AMCI). The combination of both companies' production facilities resulted in an annual production capacity of 2.7 million tons of ammonia, of which 1.6 million tons were upgraded into 3.0 million tons of nitrogen solutions, and over 700,000 tons of urea. The combined methanol production capacity of the company reached 320 million gallons a year. To help finance the AMCI acquisition, Terra successfully issued 9.7 million common shares, raising $113 million and immediately adding to earnings per share. "Geographically, these businesses fit well, and operationally we'll realize synergies that will benefit both sides of the business combination," Joyce announced in an October 1994 company news release.
Positioning itself for still wider markets, in June 1994 Terra announced that it had signed a letter of intent to acquire a one-third interest in Royster-Clark, Inc., a farm service distribution network located on the East Coast. The terms of the agreement provided Terra with the option of increasing its ownership position to majority holder within five years. In a June 1994 news release, Joyce said that the new alliance afforded Terra Products growth potential in new markets, such as the East Coast--particularly the Carolinas--where Royster-Clark had a strong presence.
These new markets laid a fertile groundwork for Terra's continued growth into the 21st century. Moreover, the methanol market, which the company had entered in 1992, showed particular promise as requirements of the Clean Air Act caused gasoline producers to build inventories of methanol for use in formulating methyl-tertiary-butyl-ether (MTBE), a clean-burning fuel additive, in anticipation of increased demand.
In 1997, Terra expanded into the United Kingdom by purchasing two nitrogen fertilizer plants, one in Billingham and one in Severnside. The company also expanded its operations with new ammonia processing facilities at its Beaumont, Texas, location and a reconstructed, higher-capacity nitrogen production facility at Port Neal.
Over the next three years, the company endured a financial slump that convinced management to reorganize its growth strategy. In 1999, the decision was made to sell the company's distribution facilities, including approximately 400 farm service centers, to Cenex/Land O'Lakes Agronomy Company. With the sale, reported at over $390 million, the company left the farm supply business and reorganized its operations to concentrate on chemical production and sale. In company press releases, Terra said that portions of the sale would be used to pay down debt and to enhance the company's chemical manufacturing activities.
Terra Industries in the 21st Century
In 2001, Terra's board of directors named Michael L. Bennett as president and chief executive officer. Bennett began his career with Terra in 1973 as an operations technician at the company's Port Neal plant and worked his way through the company's management structure to the position of senior vice-president, which he assumed in 1997. Under Bennett's leadership, the company further streamlined its management structure, reorganizing job responsibilities and reducing the company's board of directors from 11 to seven members.
The shifting price of nitrogen and the company's other chemical products made it difficult for Terra to achieve growth. The company reported losses in 2000, 2001, 2002, and 2003, with the highest loss coming in 2002 at a reported $258 million. In response to declining dividends, the company decided in March 2004 to close their Blytheville, Arkansas, location. Bennett explained the closure in the company's press releases, saying: "We decided to permanently close our Blytheville production plants because of continuing high natural gas costs, the upcoming lull in off-season nitrogen markets and the likelihood that competition from imported ammonia and urea barged up the Mississippi River will make future major maintenance and capital investments at the Blytheville facility unsound." Although a number of Blytheville employees lost their jobs due to the closure, company management announced that they would help to find job opportunities for as many employees as possible. That same year, Terra was forced to "mothball" its Beaumont, Texas, facility, which had been operated under the terms of a five-year lease to Methenex Corporation since 2003. Approximately 40 employees were released from the Beaumont facility. As the company's financial difficulties continued, further closures were announced, including the 2005 closure of the company's Woodward, Oklahoma, location, which had previously been one of the company's largest production facilities.
In August 2004, Terra finalized a deal to purchase Mississippi Chemical Corporation, a company that had been under Chapter 11 bankruptcy, for a reported price of $268 million. With the acquisition, Terra strengthened its production and distribution capabilities and gained facilities in Houston, Texas, and Donaldsville, Louisiana. "This transaction creates a strong platform for improved efficiency and future growth," Bennett stated in an official press release, adding that the acquisition was an important step in increasing the company's sources for natural gas.
In 2007, Terra completed an agreement with Kemira GrowHow Oyj to enter into a joint venture processing and production facility in the United Kingdom. Negotiations for the deal began in 2006 and the venture was approved by stockholders in September 2007. The joint venture would combine the two companies' operations in the United Kingdom and Ireland and significantly enhance financial prospects for both companies. Kemira, one of Europe's largest producers of feed phosphates and fertilizers, had sales in 2006 of EUR 1.2 billion. Together with GrowHow, Terra would control over 40 percent of the fertilizer market in the United Kingdom. Terra's other international ventures included 50 percent ownership in a plant at Point Lisas in the Republic of Trinidad and Tobago.
While Terra's financial difficulties continued, the company's revenues increased slowly in the period from 2004 to 2007, with 2005 marking a 75 percent increase in revenues over the previous year. Although the company again posted minor losses in 2006, growth from international ventures was expected to reinvigorate the company through the remainder of the decade.
Principal Subsidiaries
Terra Nitrogen Company L. P.; GrowHow UK Ltd.; Point Lisas Nitrogen, Ltd.
Principal Competitors
PotashCorp; CF Industries, Inc.; Agrium, Inc.
Further Reading
Beeman, Perry, "Bumpy Ride for Terra Probe," Des Moines Register, January 22, 1995, p. G1.
"Blast Hits Terra Plant in U.K.," Chemical Week, May 31, 2006.
Hendee, David, "Iowa Says Terra Isn't Cooperating; Firm Denies Slowing Probe of Plant," Omaha World Herald, January 7, 1995, p. 1.
------, "Terra to Expand Through Global Sales," Omaha World Herald, May 3, 1995.
Jordan, Carol L., "Profit Prospects Hinge in Agri, Copper Businesses: Inspiration," American Metal Market, May 16, 1986, p. 5.
"Kemira GrowHow Oyj and Terra Industries, Inc., Confirm Formation of Joint Venture," Nordic Business Report, September 14, 2007.
Munford, Christopher, "Inspiration to Cut Costs, Staff; Consolidation Under Way After Sizable 2nd-Quarter Loss," American Metal Market, August 16, 1991, p. 2.
"Terra, CF Industries Join Forces in Trinidad Project," Chemical Week, April 27, 2005.
"Terra, GrowHow Merge in U.K," Chemical Week, October 25, 2006.
"Terra Industries Acquires Mississippi Chemical," New York Times, August 8, 2007, p. C4.
"Terra Industries, Inc., to Acquire Mississippi Chemical Corp. for 0.24 Times Revenue," Weekly Corporate Growth Report, August 16, 2004, p. 3.
"Terra Industries to Sell Agricultural Line to Distribution Firm," Wall Street Journal, May 4, 1999, p. 6.
— Kerstan Cohen; Updated by Micah L. Issitt
International Directory of Company Histories. Copyright © 2006 by The Gale Group, Inc. All rights reserved.
