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PotashCorp narrows Q1 profit, sees weaker-than-expected Q2 earnings

PotashCorp narrows Q1 profit, sees weaker-than-expected Q2 earnings

Photo by Reuters

24th April 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – The world’s largest potash producer, Potash Corporation of Saskatchewan (PotashCorp), on Thursday reported a 39% slide in net income for the three months ended March 30, but beat analyst expectations and its own guidance for the period.

The Saskatoon, Saskatchewan-based company reported first-quarter earnings of $340-million, or $0.40 a share, compared with $556-million, or $0.63 a share, in the same period a year earlier.

The first-quarter profit included a $69-million special dividend from its investment in Israel Chemicals and a $38-million noncash impairment charge related to an investment in Sinofert Holdings.

Late in January, PotashCorp said it expected earnings of between $0.30 and $0.35 a share, and Wall Street analysts had on average expected earnings of $0.35 a share on revenue of $1.49-billion.

PotashCorp said given a slightly improved potash pricing and demand outlook for the year, it expected second-quarter earnings of $0.40 to $0.45 a share. It also expected earnings of between $1.50 and $1.80 a share for the full year, compared with analyst expectations of $1.65 a share.

"After an especially challenging environment in the second half of 2013, greater demand and stability emerged early in the year. We saw strong customer engagement ahead of the spring planting season, particularly in potash. Despite weather-related issues that impacted our results, especially in phosphate, we were able to deliver earnings above our quarterly guidance range,” said PotashCorp president and CEO Bill Doyle.

During the first quarter, PotashCorp’s revenue contracted 20% year-on-year to $1.68-billion, down from $2.1-billion a year ago, as margins crumbled 35% over the company’s three main product segments.

The global potash market showed signs of recovery from a slide in prices, owing to recent years of soft demand, soft grain prices, growing supplies and last year's breakup of rival Belarusian Potash Company.

Potash prices began to trend upward in key markets as the quarter progressed, but the sharp decline during the second half of 2013 weighed on realisations. "As a result, our first-quarter average realised potash price of $250/t was well below the $363/t of the same period last year," noted the company.

Potash demand and spot market pricing strengthened throughout the first quarter. In North America, demand was robust as fertiliser distributors worked to position product ahead of the spring planting season. Even as shipments from domestic producers climbed 48% above those during the same period last year, ongoing rail constraints – precipitated by harsh winter conditions and a record grain harvest in Canada – kept dealer supplies tight.

“Amidst strengthening market fundamentals, potash prices in all spot markets increased from the beginning of 2014 – most notably for granular product – but remained well below those of the comparative period in 2013,” the company said.

In nitrogen, gross margin for the first quarter totalled $239-million compared with $271-million in the same period of 2013, as the positive impact of increased sales volumes was more than offset by weaker price realisations.

While PotashCorp was starting to see an improvement in rail deliveries helping address the backlog of orders from the first quarter, it expected that significant product demands would keep pressure on North American carriers.

The company said it would continue to work closely with its transportation partners to reduce disruptions.

For the full year, PotashCorp expected global potash shipments to total 55-million to 57-million tonnes.

PotashCorp earlier this month appointed former Inmet Mining chief Jochen Tilk its new president and CEO, effective July 1, to take the reins from outgoing Doyle. After a stint of 27 years at the helm of the company, Doyle would step down as president and CEO, but remain employed by the company as a senior adviser until June 2015.

Edited by Creamer Media Reporter

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