Sask.’s PotashCorp bounces back in Q1
CEO optimistic as Sask. mining giant posts improved earnings of US$149M
Saskatchewan’s largest mining company has emerged from a year its chief executive described as “one of the toughest” in company history — 12 months defined by a mine closure, layoffs and a 74-per-cent plunge in profits — by reporting first-quarter earnings almost double what it made in the same period last year.
Potash Corp. of Saskatchewan Inc. on Thursday reported earning US$149 million in the first three months of 2017, up 99 per cent from the US$75-million profit it recorded in the first quarter of 2016 and about 46 per cent of the US$336 million in annual earnings it reported at the end of last year.
The company’s earnings remain well below 2015 levels, however. PotashCorp made US$370 million in the first three months of 2015, and eventually reported annual profits of US$1.27 billion. But that did not stop PotashCorp president and CEO Jochen Tilk from expressing optimism about the first quarter of 2017.
“Potash market fundamentals continued to improve in the first quarter, creating a supportive earnings environment,” Tilk said in a statement. “We expect improved consumption trends and nutrient affordability in key markets to support potash demand and our results through the remainder of 2017.”
Saskatchewan’s potash producers have been struggling amid cratering prices, which have plummeted to just over US$200 per tonne from a peak of around US$900 per tonne in 2008. The tumbling prices forced companies to adjust — in PotashCorp’s case, by shifting production toward its new Rocanville mine near Yorkton, Sask.
While the shift entailed the closure of the Saskatoon-based company’s Picadilly mine in New Brunswick and a permanent production cut at its Cory mine west of Saskatoon — moves that resulted in around 560 job losses — Tilk said Tuesday that the plan appears to be working.
“Our potash portfolio optimization and cost reduction strategy, which includes the ramp-up of our low-cost Rocanville mine, also contributed to stronger firstquarter results,” Tilk said in the statement, which raised the low end of PotashCorp’s annual earnings forecast by US$0.10 per share, to between US$0.45 and US$0.65 per share.
While many details remain under wraps, PotashCorp is “making good progress” toward its US$26 billion merger with Agrium Inc., which was announced last year amid “fierce” market conditions and is expected to close later this year, the company said in a news release issued early Thursday.
The company’s performance suggests the potash recovery is in “full force,” Sanford C. Bernstein & Co. analyst Jonas Oxgaard said in a note.
Canpotex — the joint venture handling overseas sales for PotashCorp and its two largest North American peers, Agrium Inc. and Mosaic Co. — has kept the market tight and driven up prices, while volumes have exceeded expectations in North America and export markets, a positive sign for the companies, he said.
“I think we’ve seen the turnaround already,” Oxgaard said by phone. “We expect continued price increases in potash.”
Potash market fundamentals continued to improve in the first quarter, creating a supportive earnings environment.