Potash Corp cuts outlook more than expected as sales slump


By Rod Nickel

Oct 24 (Reuters) - Potash Corp of Saskatchewan on Thursday reported a sharp drop in third-quarter earnings and cut its full-year outlook more than Wall Street expected as buyers backed away from the key fertilizer ingredient potash.

Last summer's breakup of rival Belarusian Potash Co (BPC) has roiled the market, leaving North America's Canpotex Ltd, owned by Potash Corp, Mosaic Co and Agrium Inc, as the last potash trading partnership with such global clout.

"The most recent quarter can best be characterized as a predictable response to an unpredicted event," said Potash Corp Chief Executive Officer Bill Doyle. "As we have seen in the past, fertilizer customers faced with uncertainty act with extreme caution."

Shares of Potash Corp, the world's largest fertilizer supplier and biggest producer of the crop nutrient by capacity, dropped 1.4 percent to $31.25 in New York before normal trading hours.

The stock has lost 16 percent since late July, when the biggest global producer, Russia's Uralkali OAO, quit its export partnership with Belaruskali and said it would seek to maximize sales volumes.

Potash cut its 2013 earnings estimate to a range of $2.00 to $2.20 per share, which would be the least profitable results since 2010. It previously had forecast $2.45 to $2.70.

The new outlook is well off the average Wall Street estimate of $2.33 per share, according to Thomson Reuters I/B/E/S.

The lower outlook is "not too surprising, given the market conditions," said analyst John Chu of AltaCorp Capital. "Some of the other players were already bringing down their numbers, so until we get some sort of resolution (to the Russia-Belarus dispute), potash demand is going to remain weak in the near term."

Potash Corp said it expected to ship 8.0 million to 8.4 million tonnes of potash in 2013, down from a July forecast of 8.5 million to 9.2 million tonnes. The company idled production at its Canadian potash mines longer than usual in the summer to whittle down a large stockpile, and said it would keep its operating level below that of the first half.

The crucial U.S. autumn fertilizer season is just under way, and applications are strong in some areas, the company said, but harvest delays may push some U.S. demand into next year.

Potash Corp also said it expected Canpotex to resume sales to China sometime this quarter. The sales had stopped after a first-half contract expired.

Net earnings for the third quarter at Potash Corp fell to $356 million, or 41 cents per share, from $645 million, or 74 cents per share, a year earlier.

Analysts on average expected the Saskatoon, Saskatchewan-based company to earn 42 cents a share.

Sales dropped about 29 percent to $1.52 billion. The analysts' average estimate was $1.50 billion.


'FROZEN' MARKET

Potash signaled the weak third quarter earlier this month, reducing its earnings estimate to 41 cents per share from a range of 45 cents to 60 cents.

The company's potash sales fell to 1.5 million tonnes in the third quarter from 2.1 million tonnes year earlier. Potash Corp's average realized price dropped 28 percent to $307 per tonne.

"It seems like the market is basically frozen to a point where we're trying to find a level of price that is supportive of the producers and also the end users," said Edward Jones analyst Jeffrey Nelson.

Uncertainty in the potash market spilled into the other two crop nutrients Potash Corp sells, phosphate and nitrogen, as buyers gambled that prices would fall further.

Sales of phosphate amounted to 900,000 tonnes in the third quarter, similar to those of a year earlier, but Potash Corp's average realized price tumbled 13 percent to $467 per tonne, Demand from top importer India looks weak through the rest of the year, the company said.

Nitrogen sales increased 27 percent to 1.4 million tonnes, but Potash Corp's average realized price plunged 29 percent to $327 per tonne.

In September, Agrium said it expected its third-quarter potash sales volumes to be about 30 percent lower than normal, with nitrogen down 20 percent and phosphate falling 30 percent. Mosaic Co also cut its third-quarter outlook for the price and sales volumes of potash and phosphate.