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How Tax Bill Could Impact Agribusiness Stocks

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Part 3
How Tax Bill Could Impact Agribusiness Stocks PART 3 OF 3

A Look at Tax Rates of Agribusiness Companies outside the US

Companies with comparable tax base

Some agribusiness companies outside the US already have tax rates that are comparable to what the new tax rates in the US could be.

A Look at Tax Rates of Agribusiness Companies outside the US

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Companies outside the US

The effective tax rates of PotashCorp (POT), Agrium (AGU), and Syngenta (SYT), which have their tax bases outside the US, were below the current 35% in the US.

In 2016, Syngenta’s tax rate was 13.2%, which was even lower than the proposed tax rate of 20% under the new bill, which was passed on December 2. Syngenta is headquartered in Basel, Switzerland. Israel Chemicals (ICL), which is headquartered in Tel Aviv, Israel, saw its effective tax rate hover around 25%.

Similarly, PotashCorp, which is headquartered in Saskatoon, Canada, had an effective tax rate of 12% in 2016. Earlier this year, in its 1Q17 earnings call, the management stated that it expects the 2018 tax rate to be in the range of 16% to 20%.

If US corporate tax rates come down to 20%, these companies’ tax rates would be comparable to new rates in the US.

Our view

A lower tax rate would benefit commodities businesses such as agricultural commodities producers (MOO) that pay a large portion of their earnings to the US government. A lower tax rate would translate into savings, which could be passed on to customers by lowering the selling prices of fertilizer products to retain the market share.

To learn more about the outlook for fertilizer prices, read PotashCorp’s Analyst Conference on November 29: Key Takeaways.

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