Potash Corp to cut workforce by 18 pct as prices slump

Reuters

By Rod Nickel and Ashutosh Pandey

Dec 3 (Reuters) - Potash Corp of Saskatchewan Inc , the world's biggest fertilizer company, will slash itsworkforce by 18 percent as it struggles with slumping demand andweak prices for the crop nutrient.

The cuts will amount to more than 1,000 jobs in Canada, theUnited States and Trinidad, including about 570 positions in itspotash operations, the company said on Tuesday.

"The need to become more globally competitive is what'sbehind all of these workforce reductions," Chief Executive BillDoyle told Reuters in an interview.

"Our belief in the fundamentals of the business has notchanged at all. This is simply an adjustment to the current andforeseeable market conditions."

Potash Corp has often acted as the swing producer in theglobal market, trimming production and putting workers onfurlough when demand is weak. The severity of the permanent jobcuts, especially in its core potash operations, indicates it isgirding for a long-term slump in the potash market.

Potash Corp shares edged up 0.3 percent to $31.82 inpremarket trading in New York.

Doyle said Potash Corp will not cut its dividend, which wasraised in May, and has no immediate plans to scale down a sharebuyback program. The company also intends to complete the10-year, $8-billion expansion of its Canadian potash mines,slated to wrap up in the next year.

Potash Corp reported its weakest quarter in three years inOctober and cut its full-year earnings forecast more thanexpected.

Potash prices have been sliding since mid-summer, when thebiggest global producer, Russia's Uralkali OAO, quitits export partnership with Belaruskali of Belarus and said itwould seek to maximize sales volume.

Doyle said he had "no idea" when or if Uralkali andBelaruskali will return to a strategy targeting higher pricesand reverse what he has called "the single dumbest thing" he hasever seen.

The turmoil in the usually tightly controlled potashindustry, dominated by Uralkali and North America's Canpotex Ltdexport group, has caused buyers to head for the sidelines toawait further price reductions.

"While the (job cuts) announcement blames soft demand indeveloping markets, we believe the real culprit is the BPC(Uralkali-Belaruskali) break-up and the resulting price declinesin both (phosphate and potash)," BGC analyst Mark Gulley said ina note to clients.

Potash demand was weak even before last summer's spatbetween Uralkali and Belaruskali; buying from key importersIndia and China has been particularly sluggish.

Typically, potash demand grows 3 percent annually, but ithas been flat since 2007 due to the recession, Doyle said.

He said Indian demand, influenced by government subsidies onfertilizer, is unlikely to improve much until after Indianelections this spring.

He said spot Chinese purchases should resume this month. Acontract between Canpotex - the export arm of Potash Corp,Mosaic Co and Agrium Inc - and China's SinofertHoldings Ltd will likely be reached by the end ofJanuary, he said.

Potash Corp said on Tuesday it would suspend production atone of its two mills in Lanigan by year-end and cut productionat its Cory operations. Both operations are in Saskatchewan. Italso plans to stop production at its Penobsquis facility in NewBrunswick at the end of the 2014 first quarter.

Doyle said the company will still have the ability to supplybuyers with more than 10 million tonnes of potash in 2014,combining production with its large stockpiles.

He could not predict how much potash the company willproduce in 2014. But he said 2013 production is likely to amountto around 7.75 million tonnes, a little over half of thecompany's capacity, reflecting output curbs.

"We'll sell exactly what we were going to sell anyway,"without the job cuts, Doyle said. "This doesn't affect in anyway our ability to service our customers.

"We just had too much capacity versus what we were seeingneeded in the foreseeable future."

North American potash stockpiles at the mine level reached2.8 million tonnes in October, 39 percent above the average ofthe previous five years, according to data on Potash Corp'swebsite.

Doyle said Potash Corp remains interested in raising itsequity stakes in Israel Chemicals Ltd, Chilean potashand iodine producer SQM, Arab Potash Co andSinofert. Despite the difficult conditions, it is not looking tosell those investments, he said.

The job cuts also extend to the company's phosphate andnitrogen operations.

It will close its Suwannee River chemical plant, one of twoat its White Springs phosphate facility in Florida, in thesecond half of 2014.

Potash Corp said it expects potash cost savings of $15 to$20 per tonne in 2014 from the job cuts and operation closures,with a targeted reduction of $20 to $30 per tonne by 2016.

The company's potash sales fell to 1.5 million tonnes in thethird quarter from 2.1 million tonnes a year earlier, while itsaverage realized price dropped 28 percent to $307 per tonne.

The company will take a one-time charge of about $70 millionrelated to the job cuts.

View Comments (1)