Prices, downsizing sink PotashCorp profits

CEO Bill Doyle sees suggestions market uncertainty is abating

— Potash Corporation of Saskatchewan says its fourth-quarter profit dropped to $230 million US — down 45 per cent from a year earlier as it took hits from lower fertilizer prices and downsizing.

The profit amounted to 26 cents per share, including a $60 million charge, or about five cents per share, for severance-related costs for a labour force reduction announced in December.

“This past quarter was a difficult one,” said PotashCorp CEO Bill Doyle in a statement Thursday.

“Pricing head winds—most notably in potash — weighed on our performance, although there were signs as the quarter came to a close that the uncertainty in global markets was beginning to abate.”

“Our focus remained on those things we can influence and we took important steps to enhance our competitive position across all three nutrients and prepare the company to deliver better performance.”

The Saskatoon-based company — one of the world’s largest producers of potash — announced in December that it would cut its workforce by about 18 per cent, affecting 1,045 people. PotashCorp said it still expects to book millions of dollars in noncash expenses during 2014, related to the downsizing.

The company said sales volumes were higher in the fourth quarter than in comparable periods but competitive pressures resulted in lower prices for its potash, nitrogen and phosphate.

Overall sales revenue fell to $1.54 billion, down from $1.64 billion in the fourth quarter of 2012, but above the consensus estimate of $1.4 billion. The company’s earnings were below analyst estimates of 31 cents per share, according to Thomson Reuters data.

The company’s profit estimate for the first quarter of 2014, between 30 and 35 cents US per share, was also well below estimates.

It said Thursday that the company is positioned to reduce its potash production costs by $15 to $20 per tonne from 2013 levels.

But it anticipates a $16-million increase in noncash costs due to depreciation of its Penobsquis mine in New Brunswick and $54 million related to ramping up two other operations.

It also foresees lower nitrogen profit margins while the phosphate business will likely maintain 2013 margins.

“Our non-cash costs will be elevated in 2014 (estimated at $43 million) as we accelerate depreciation on assets impacted by our previously announced operational changes,” the company said.