Bloomberg News

Potash Forecast Misses Estimates as Output Seen Declining

July 26, 2012

Potash Forecast Misses Estimates as Production Seen Declining

A worker prepares a railcar to transport potash from the Potash Corp. of Saskatchewan Lanigan mine in Lanigan, Sasketchewan. Photographer: Geoff Howe/Bloomberg

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, forecast lower-than- expected third-quarter profit as scheduled maintenance reduces output and raises costs.

Earnings will be 70 cents to 90 cents a share, the Saskatoon, Saskatchewan-based company said today in a statement. The average of 22 analysts’ estimates compiled by Bloomberg was 95 cents.

“With our potash production expected to decline in the third quarter as a result of significant scheduled maintenance and capital downtime, we anticipate a higher per-tonne cost of goods sold compared to the second quarter,” Potash Corp. said.

The company, which said it increased potash stockpiles ahead of the planned temporary shutdowns, expects record shipments in North America in the second half of the year. Drought in some parts of the U.S. has kept dealers from committing too far ahead of orders, it said.

The shutdowns are for routine maintenance and the tie-in of expanded production capacity at the Allan potash mine in Saskatchewan, Bill Johnson, a spokesman, said today in a phone interview.

Potash, a form of potassium used to strengthen roots and help plants resist drought, represented 46 percent of the company’s 2011 revenue. Phosphate and nitrogen fertilizers accounted for the rest.

Potash Corp. rose 0.6 percent to C$45.54 in Toronto. The shares have risen 8.2 percent this year.

Falling Income

Second-quarter net income fell 38 percent to $522 million, or 60 cents a share, from $840 million, or 96 cents, a year earlier. Profit excluding one-time items was $1.01 a share, a penny less the $1.02 average of 24 estimates compiled by Bloomberg. Sales rose to $2.4 billion from $2.33 billion, exceeding the $2.38 billion average of 15 estimates.

Potash Corp. forecast full-year profit of $2.80 to $3.20 a share.

The company’s total potash sales in the first six months were 3.9 million metric tons, less than the record 5.3 million metric tons sold a year earlier, “largely because of buyer destocking during the first quarter of this year,” Potash Corp. said.

“As with any basic materials customers, they will try to time their purchases for a lower price,” Jason Miner, a Princeton, New Jersey-based chemicals analyst at Bloomberg Industries, said by phone before the results were released.

Global Demand

Potash Corp. sees global potash demand at 53 million to 56 million metric tons this year, unchanged from its previous forecast.

“Our expectation of weaker Indian demand is likely to result in totals at the lower end of this range,” the company said.

Completion of an expansion of the company’s potash production facilities in New Brunswick will cost an additional C$500 million ($496 million), raising the total cost of the project to C$2.2 billion, according to the statement.

“The adjusted cost estimate reflects our expectations for remaining work at New Brunswick and does not impact our estimates for other projects,” the company said.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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