Intrepid Potash: An investor's guide to the American producer (Part 1 of 8)
Intrepid Potash, Inc.’s (IPI) share price has decreased ~33.6% over the past year mainly due to lower prices of its main product offering: potash. The company, however, still has a trailing 12-month P/E ratio of 25.28, which is almost 3 times larger than its competitors as of February 2014. With 2012 revenues of $451.3 million and a market cap of $1.17 billion, IPI is considered a small cap.
What does IPI sell?
Intrepid Potash is the largest potash producer in the U.S. Potash represents 84.6% of IPI’s sales and is one of the three main fertilizers used by farmers; the other two being nitrogen and phosphate. IPI is also one of the two producers of langbeinite (sulfate of potash magnesia); a less-utilized fertilizer product that’s commercialized as Trio and represents the remaining 15.4% of IPI’s sales.
As of 2012, IPI supplies on an average 1.5% of world potash consumption and 9.2% of U.S. potash consumption annually. It should be noted that the U.S. imports 85% of its potash consumption. IPI sells its products to the agricultural market (81%) as fertilizer, the industrial market (12%), and the animal feed market (7%) as nutrient.
Whom does IPI play against?
Locally, IPI’s largest competitors are Mosaic (MOS), and Canadian producers Potash Corp (POT) and Agrium (AGU), all of which mine most of the products in Canada. Internationally, companies such as Belaruskali (Belarusian), Uralkali (Russia), Israel Chemicals (Israel), Arab Potash Company (Jordan) and Sociedad Quimica y Minera de Chile (SQM) are some of the biggest potash producers. Contrary to IPI, most of these companies have a slightly more diversified product offering that includes one or both of the main fertilizers. IPI takes up most of the potash production share in the U.S., while Mosaic (MOS) takes up most of the remaining part. Even though IPI’s productions are small compared to its main competitors, it is focused in satisfying the U.S. consumption only.
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