Why Did Intrepid Potash’s 4Q15 Shipments Decline?
Did Intrepid Potash's 4Q15 Earnings Beat Analysts' Estimates?
Shipment
Revenue for Intrepid Potash (IPI) and companies such as CF Industries (CF), CVR Partners (UAN), and Israel Chemicals (ICL) is a function of shipment and average selling price. Intrepid Potash’s shipments have been declining rapidly over the past three quarters. Overall shipments for Intrepid Potash declined to 127,000 tons in 4Q15 from 251,000 tons in 4Q14. Let’s look at why shipments fell so sharply.
Potash shipments
Most of this decline came from the potash segment, which shipped 89,000 tons in 4Q15 compared to 210,000 tons in 4Q14, a 58% decline in shipments. Intrepid sells 75% of its potash to the agricultural fertilizers market, 17% to the industrial market, and the remaining 8% to the animal feed market.
According to the company, the decline in shipments was driven by customers delaying their purchases in anticipation of a decline in potash prices in the future. Customers making purchases and holding products in inventories are exposed to the risk of potash prices falling further. Potash shipments to industrial customers declined as a result of falling demand from the North American oil producers, which have been affected by falling oil prices. Potash is used by oil producers during their oil extraction process.
Trio shipments
The Trio segment shipped 38,000 tons in 4Q15 compared to 41,000 tons in 4Q14. This translates to a decline of 7%. According to the company, Trio’s shipments were down due to overall weakness in the fertilizer industry, which has also negatively affected the Market Vectors Agribusiness (MOO).
Outlook
Intrepid Potash stated that oversupply will result in companies curtailing their production. The company noted that the “supply surplus will continue for the foreseeable future.” This is due to capacities expected to come online in the next two years. Thus, the outlook for potash shipments remains bleak. For Trio, the company stated that its demand will pick up when customers rationalize its use over that of other complex blends.
In the next part of this series, we’ll look at Intrepid Potash’s production data.
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