Agribusiness · Fertilisers
Fertilisers Sector Primer
A 43-page primer plus Excel valuation model on fertiliser producers: nutrient prices, the gas-linked cost curve, mid-cycle EBITDA and a year-by-year DCF.
2026 Edition · data as of June 2026
- pages
- 43
- sections
- 15
- model sheets
- 13
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The full primer
£25 / ~$32
- 43 pages, 15 sections
- Worked examples and applied cases
- 2026 Edition, data as of June 2026
Excel model
Valuation template
£45 / ~$58
- 13 sheets (.xlsx)
- Runs the primer's worked valuations live
PDF + Excel model Best value
Both files together
£59 / ~$76
- The 43-page primer
- The 13-sheet Excel model
- £70 bought separately · £11 less
Complete Agribusiness Library
All three Agribusiness industries: three primers, three Excel models (Fertilisers, Ag Processing & Trading, and Aquaculture).
Inside the primer
The 15-section contents, a worked valuation page, and the Excel dashboard.
Contents
- 01 How Fertiliser Producers Make Money
- 02 Listed Company Types and Scale
- 03 Nutrient Chain Stages: Gas to Field
- 04 Segments and Sub-Markets: N, P and K
- 05 Revenue Drivers: Nutrient Prices and Throughput
- 06 Cost Structure: Gas, Cash Cost and the Curve
- 07 Valuation Frameworks: Mid-Cycle EBITDA
- 08 Worked Examples: Cyclical Valuation DCF
- 09 Applied Cases: Six Filed Franchises
- 10 Crop-Nutrient Cycle and Normalisation
- 11 Key Metrics and Screening
- 12 Risk Factors and Red Flags
- 13 Real-World Benchmarks
- 14 Comparative Case Study: CF vs Yara
- 15 Glossary and Quick Reference
Worked examples and applied cases · 43 pages · 15 sections · 4 producer engines
The Excel model
Educational material for professional use. This primer and its model are not investment advice or a recommendation to buy or sell any security, and they are not personalised. Worked valuations use illustrative calibrations, not fair-value estimates for any company.
A fertiliser producer sells a commodity it cannot price. Nitrogen producers turn natural gas into ammonia and urea, phosphate producers combine mined rock with sulphur and ammonia, and potash producers mine and refine an ore. Each earns the gap between a global nutrient price and its own cash cost, and that gap swings with crop and gas prices over a cycle that runs for years. Value the latest year and you value one point in the cycle. The work is to rebuild earnings at mid-cycle nutrient prices and decide how long the return to mid-cycle takes, so a year-by-year model does the valuing and a multiple only screens.
Fertiliser valuation benchmarks by nutrient
Each nutrient has its own cost driver, so each sits on its own cost curve. These are the mid-cycle margins and exit multiples the primer's worked producers use, at urea $480/t, potash $340/t delivered to Brazil, DAP $580/t and Henry Hub gas at $3.00/MMBtu.
| Nutrient and cost position | Mid-cycle margin | Exit multiple | What sets the position |
|---|---|---|---|
| Nitrogen on US gas ($3.00/MMBtu) | $195/t of urea | 6.5x mid-cycle EBITDA | Gas access: each $1/MMBtu moves cash cost by $20/t |
| Nitrogen on European gas ($7.50/MMBtu) | $105/t of urea | 5.5x | The marginal producer; 78% of its DCF value sits in the terminal |
| Phosphate (DAP) | $121/t | 6.0x | Rock, sulphur and ammonia used per tonne; reserve life |
| Potash (MOP, delivered) | $140/t | 6.5x | Ore quality, then royalties and freight on the same delivered basis |
| Any producer, as a cross-check | Rebuilt at the mid-cycle prices above | 5-8x through the cycle | Read only after earnings are normalised |
The discount rate is built up: an 8.94% WACC from a 4.50% Treasury yield, a 1.40 beta on a 4.23% equity risk premium, and debt at a 1.50% spread with a 25% weight. Cheap gas, owned rock or a low-cost orebody moves a producer down the cost curve. Leverage is judged on mid-cycle EBITDA: below 1.0x net debt is conservative, 1.0-2.5x normal and above 2.5x stretched. Multiples need the same discipline: one worked nitrogen producer's DCF value is 71.6x trough EBITDA, 4.9x mid-cycle and 2.3x peak.
Worked example: a fertiliser DCF from trough to mid-cycle
Take a hypothetical US nitrogen producer with 5.0 million tonnes a year of urea capacity. Its cash cost is $285 a tonne: 20 MMBtu of gas at $3.00, $35 of non-gas conversion cost and $190 of fixed plant costs, overheads and logistics. The primer starts urea at $300/t, a weak market, and walks it back to $480/t over four years while utilisation climbs from 80% to 90%.
| Step | Amount |
|---|---|
| Mid-cycle margin ($480 less $285 cash cost) | $195/t |
| Mid-cycle EBITDA (5.0Mt at 90% utilisation, $195/t) | $878M |
| PV of free cash flow, years 1-10, at 8.94% | $1,874M |
| PV of terminal value (6.5x mid-cycle EBITDA) | $2,422M |
| DCF enterprise value | $4,297M |
| Less net debt | -$1,000M |
| Equity value | $3,297M |
| Value per share (200M shares) | $16.48 |
A straight 6.5x on the same $878 million of EBITDA gives $23.52 per share. The primer splits that gap in two. $4.40 is the cost of starting below mid-cycle: three years of thin margins and a working-capital build before urea reaches $480 in year four. The other $2.63 is the multiple paying for growth the flat-price DCF never assumes, 1.3% a year for ever. Move the same plant onto European gas at $7.50/MMBtu and cash cost rises to $375/t, so the mid-cycle margin falls to $105/t and every tonne sold at the $300 starting price loses $75.
The primer shows the ten-year schedule, runs the same method on a phosphate producer and a potash miner, and adds sensitivity grids for urea against the exit multiple and against gas. The Excel model does the same with your own inputs.
Which fertiliser valuation method fits which company
| Company type | Primary method | Check with | Why |
|---|---|---|---|
| Nitrogen pure play | Ten-year price-reversion DCF on the urea margin | Mid-cycle EV/EBITDA screen | Earnings track the urea price less gas |
| Integrated N+P+K with retail | Segment EBITDA at mid-cycle prices | Upstream peers, with retail stripped out | The nutrient mix shifts through the cycle, and retail earns a distribution margin |
| Phosphate and potash | Price-reversion DCF on the DAP or MOP margin | Unit cost ranking against peers | Rock integration and mine costs set the margin |
| European nitrogen | Price-reversion DCF at European gas | Ammonia import flexibility | The marginal-cost producer |
| Specialty or fringe potash | Price-reversion DCF, or margin against cost of goods sold | Net cash and leverage | At the fringe the price barely covers cost |
What the full primer adds
The primer builds the tools in order: how producers make money, the listed company types, the chain from gas and rock to the field, then the nitrogen, phosphate and potash sub-markets, revenue drivers and the cost structure that sets the cost curve. Worked chapters value hypothetical producers from first input to equity value, with nutrient prices recovering from a low starting point to mid-cycle. Applied cases on six listed producers follow, then the crop-nutrient cycle, screening on mid-cycle leverage, the red flags and a comparison of a US and a European nitrogen producer.
Free guides cover the individual pieces: nitrogen, phosphate and potash, natural gas and nitrogen costs, fertiliser cost curves, EBITDA per tonne, FOB and CFR prices, mid-cycle earnings and the crop-nutrient cycle. Research profiles for Nutrien, CF Industries, Mosaic, Yara, ICL and Intrepid Potash apply the same method to filed results.
The companion Excel model spans thirteen sheets. At its centre are four fictional producers: a US nitrogen producer on Henry Hub gas, a European nitrogen producer, a phosphate producer and a potash miner. Each runs a ten-year DCF from the starting price back to mid-cycle, at an 8.94% WACC built from its inputs, with a line for minority interests and, for the two mines, a check on reserve life. A valuation summary splits the gap to the mid-cycle multiple into the years before prices return to mid-cycle and the difference between the multiple and the cash flows, and shows the growth each exit multiple implies. Around them sit cycle scenarios, a cost curve with a gas cost curve, a leverage screen on mid-cycle EBITDA, and two sensitivity grids: urea price against the exit multiple and against the gas price.
Sheets: Quick Start, Instructions, Assumptions, Nitrogen HH, Nitrogen EU, Phosphate, Potash, Valuation Summary, Cycle Scenarios, Cost Curve, Leverage Screen, Sensitivity, Dashboard.
Fertiliser valuation: free guides
Fertiliser valuation FAQ
- How do you value a fertiliser company?
- Rebuild earnings at mid-cycle nutrient prices, then run a ten-year DCF that walks the price from where it starts back to mid-cycle against a cash cost that barely moves, funding sustaining capex and working capital each year. The terminal value is mid-cycle EBITDA times an exit multiple, and the primer discounts at an 8.94% WACC. A through-cycle EV/EBITDA multiple is only the cross-check.
- What is a normal EV/EBITDA multiple for fertiliser stocks?
- On normalised mid-cycle EBITDA the primer uses a 5-8x through-cycle range, and its worked producers exit at 5.5-6.5x. Trailing multiples mislead: one worked nitrogen producer's single DCF value reads 71.6x trough EBITDA, 4.9x mid-cycle and 2.3x peak. A fertiliser stock that looks cheapest on trailing EBITDA is usually near the top of the cycle.
- What prices should a mid-cycle fertiliser model use?
- The primer uses urea at $480/t (Middle East FOB), potash (MOP) at $340/t (CFR Brazil), DAP at $580/t (US Gulf FOB) and Henry Hub gas at $3.00/MMBtu. They are teaching anchors, not forecasts, and a supply-shock spike is never capitalised. Price and cost must sit on one basis: a potash price delivered to Brazil needs a cost that includes royalties and freight.
- Why does the gas price matter so much to nitrogen producers?
- Gas is the feedstock for ammonia. At 20 MMBtu per tonne of urea, each $1/MMBtu shifts cash cost by $20/t. At $3.00 gas a producer earns $195/t at mid-cycle; on European gas at $7.50 the same plant earns $105/t, and at a weak $300/t urea price it loses $75 on every tonne. That is why high-cost European capacity is the marginal producer on the nitrogen curve.
See this methodology applied to a real company:
Nutrien (NTR) →