Potash Corp cuts outlook more than expected as sales slump

Reuters

By Rod Nickel

Oct 24 (Reuters) - Potash Corp of Saskatchewan on Thursday reported a sharp drop inthird-quarter earnings and cut its full-year outlook more thanWall Street expected as buyers backed away from the keyfertilizer 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 apredictable response to an unpredicted event," said Potash CorpChief Executive Officer Bill Doyle. "As we have seen in thepast, fertilizer customers faced with uncertainty act withextreme caution."

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

The stock has lost 16 percent since late July, when thebiggest global producer, Russia's Uralkali OAO, quitits export partnership with Belaruskali and said it would seekto 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 resultssince 2010. It previously had forecast $2.45 to $2.70.

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

The lower outlook is "not too surprising, given the marketconditions," said analyst John Chu of AltaCorp Capital. "Some ofthe other players were already bringing down their numbers, sountil we get some sort of resolution (to the Russia-Belarusdispute), potash demand is going to remain weak in the nearterm."

Potash Corp said it expected to ship 8.0 million to 8.4million tonnes of potash in 2013, down from a July forecast of8.5 million to 9.2 million tonnes. The company idled productionat its Canadian potash mines longer than usual in the summer towhittle down a large stockpile, and said it would keep itsoperating 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, butharvest delays may push some U.S. demand into next year.

Potash Corp also said it expected Canpotex to resume salesto China sometime this quarter. The sales had stopped after afirst-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 74cents 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. Theanalysts' 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 arange of 45 cents to 60 cents.

The company's potash sales fell to 1.5 million tonnes in thethird quarter from 2.1 million tonnes year earlier. PotashCorp's average realized price dropped 28 percent to $307 pertonne.

"It seems like the market is basically frozen to a pointwhere we're trying to find a level of price that is supportiveof the producers and also the end users," said Edward Jonesanalyst Jeffrey Nelson.

Uncertainty in the potash market spilled into the other twocrop nutrients Potash Corp sells, phosphate and nitrogen, asbuyers gambled that prices would fall further.

Sales of phosphate amounted to 900,000 tonnes in the thirdquarter, similar to those of a year earlier, but Potash Corp'saverage realized price tumbled 13 percent to $467 per tonne,Demand from top importer India looks weak through the rest ofthe 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-quarterpotash 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 forthe price and sales volumes of potash and phosphate.

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