Potash Tops Estimates, Profit Up

Zacks

Potash Corp of Sakatchewan Inc.’s (POT) earnings of 63 cents per share in the first quarter of 2013 exceeded the Zacks Consensus Estimate of 61 cents, reflecting a positive surprise of around 3.3%. The company posted a profit of $556 million in the reported quarter, up roughly 13% % from $491 million (56 cents a share) recorded a year ago.
Sales came in at $2,100 million in the quarter, up 20.3% from $1,746 million registered a year ago, and ahead of the Zacks Consensus Estimate of $1,923 million. The year-over-year increase was due to improved global potash demand and record first-quarter nitrogen contributions. 
Gross margin for the quarter increased 24.2% to $867 million compared with $698 million generated in the same period last year. 
Segment Review
Potash: Sales volumes of 2.2 million tons in the reported quarter were up from 1.2 million tons in the year-ago quarter. Potash sales volumes surged 78% from first-quarter 2012 as there was strong momemtum in key markets. Demand for potash remained strong in North America, resulting in doubled sales volumes in the reported quarter, while offshore demand accelerated during the quarter.These were partially offset by the impact of lower realized prices. Potash shipments to all major markets increased during the quarter. Gross margin increased 54.2% year over year to $504 million.
Average realized potash price was $363 per ton, down 16.5% from the prior-year quarter due to lower pricing late in that year.
Phosphate: Sales volumes of 0.9 million tons were relatively flat year over year, despite allocations of products to feed and industrial customers remained at higher percentages. Average realized phosphate price was $549 per ton, down 9.5% year over year on lower solid and liquid fertilizer prices resulting from weak demand. 
 
Gross margin went down 39.5% to $92 million due to the impact of lower realized prices. Uncertainty on return demand of solid phosphate fertilizers from India continued to challenge the phosphate market, partially offset by a rebound in North American demand and strong U.S. producer exports to Latin America.
 
Nitrogen: Sales volumes for the segment increased 7.7% to 1.4 million tons due to reduced impact from natural gas curtailments in Trinidad and an additional ammonia capacity at Geismar and Augusta. Gross margin increased 23.7% to $271 million in the reported quarter. Average realized prices for nitrogen products increased 12% to $429 per ton.
 
Financial Condition
 
Cash and cash equivalents amounted to $585 million as of Mar 31, 2013, versus $417 million as of Mar 31, 2012. Long-term debt was $3,467 million versus $3,457 million a year ago. Capital expenditure for the first quarter amounted to $496 million while operating cash flow came in at $738 million.
 
Outlook
 
Potash Corp., which is among the prominent players in the fertilizer industry along with CF Industries Holdings, Inc. (CF) and Agrium Inc. (AGU), expects earnings for the second quarter and full-year 2013 in the range of 70 cents to 85 cents per share and $2.75 to $3.25 per share, respectively.
 
Potash Corp. expects gross profits from its potash business in the range of $1.9 billion to $2.4 billion in 2013. It expects shipments in the range of 8.5-9.2 million tons in 2013. 
 
Capital expenditures for the year are anticipated to be about $1.5 billion and income from offshore investments is expected to be in the range of $370-$400 million. 
Potash Corp. currently retains a Zacks Rank #3 (Hold).
Another fertilizer company having a favorable Zacks Rank is CVR Partners, LP (UAN) which carries a Zacks Rank #2 (Buy).
Potash Corp of Sakatchewan Inc.’s (POT) earnings of 63 cents per share in the first quarter of 2013 exceeded the Zacks Consensus Estimate of 61 cents, reflecting a positive surprise of around 3.3%. The company posted a profit of $556 million in the reported quarter, up roughly 13% % from $491 million (56 cents a share) recorded a year ago.
 
Sales came in at $2,100 million in the quarter, up 20.3% from $1,746 million registered a year ago, and ahead of the Zacks Consensus Estimate of $1,923 million. The year-over-year increase was due to improved global potash demand and record first-quarter nitrogen contributions. 
 
Gross margin for the quarter increased 24.2% to $867 million compared with $698 million generated in the same period last year. 
 
Segment Review
 
Potash: Sales volumes of 2.2 million tons in the reported quarter were up from 1.2 million tons in the year-ago quarter. Potash sales volumes surged 78% from first-quarter 2012 as there was strong momemtum in key markets. Demand for potash remained strong in North America, resulting in doubled sales volumes in the reported quarter, while offshore demand accelerated during the quarter.
 
These were partially offset by the impact of lower realized prices. Potash shipments to all major markets increased during the quarter. Gross margin increased 54.2% year over year to $504 million.
 
Average realized potash price was $363 per ton, down 16.5% from the prior-year quarter due to lower pricing late in that year.
 
Phosphate: Sales volumes of 0.9 million tons were relatively flat year over year, despite allocations of products to feed and industrial customers remained at higher percentages. Average realized phosphate price was $549 per ton, down 9.5% year over year on lower solid and liquid fertilizer prices resulting from weak demand. 
 
Gross margin went down 39.5% to $92 million due to the impact of lower realized prices. Uncertainty on return demand of solid phosphate fertilizers from India continued to challenge the phosphate market, partially offset by a rebound in North American demand and strong U.S. producer exports to Latin America.
 
Nitrogen: Sales volumes for the segment increased 7.7% to 1.4 million tons due to reduced impact from natural gas curtailments in Trinidad and an additional ammonia capacity at Geismar and Augusta. Gross margin increased 23.7% to $271 million in the reported quarter. Average realized prices for nitrogen products increased 12% to $429 per ton.
 
Financial Condition
 
Cash and cash equivalents amounted to $585 million as of Mar 31, 2013, versus $417 million as of Mar 31, 2012. Long-term debt was $3,467 million versus $3,457 million a year ago. Capital expenditure for the first quarter amounted to $496 million while operating cash flow came in at $738 million.
 
Outlook
 
Potash Corp., which is among the prominent players in the fertilizer industry along with CF Industries Holdings, Inc. (CF) and Agrium Inc. (AGU), expects earnings for the second quarter and full-year 2013 in the range of 70 cents to 85 cents per share and $2.75 to $3.25 per share, respectively.
 
Potash Corp. expects gross profits from its potash business in the range of $1.9 billion to $2.4 billion in 2013. It expects shipments in the range of 8.5-9.2 million tons in 2013. 
 
Capital expenditures for the year are anticipated to be about $1.5 billion and income from offshore investments is expected to be in the range of $370-$400 million. 
 
Potash Corp. currently retains a Zacks Rank #3 (Hold).
 
Another fertilizer company having a favorable Zacks Rank is CVR Partners, LP (UAN) which carries a Zacks Rank #2 (Buy).
Read the Full Research Report on POT

Read the Full Research Report on UAN

Read the Full Research Report on CF

Read the Full Research Report on AGU

Zacks Investment Research



More From Zacks.com
View Comments (3)