PotashCorp shares dip on poor quarter
Net income drops to $356 million
Potash customers around the world are delaying buying fertilizer resulting in a poor third quarter for PotashCorp of Saskatchewan.
The Saskatoon- based fertilizer giant saw third quarter net income drop to $356 million, or 41 cents per share, from $645 million, or 74 cents, in the previous year.
Buyers of potash have deferred purchases since the end of July after OAO Uralkali, the world’s largest producer, quit a sales accord with its Belarusian rival and announced plans to boost output and take a larger market share. The move sent shares in potash producers tumbling globally on expectations of lower prices.
PotashCorp president and CEO Bill Doyle said the move has “created tremendous market uncertainty and a state of paralysis in most regions.”
But he said Uralkali has hurt themselves more than its competitors.
“We have seen a lot of people over the years, in charge of billions of dollars of assets in the fertilizer world, do some pretty silly things, but this is probably the single dumbest thing that I’ve ever seen.”
PotashCorp reduced its 2013 global estimate for potash demand to a range of 53 to 54 million tonnes and revised it’s full year sales volume to eight to 8.4 million tonnes.
“In 2014 we believe global potash demand could reach 55 to 58 million tonnes,” Doyle said, adding they see increased demand, notably from China and the U.S.
Doyle acknowledged the Uralkali turmoil has sent potash investors to the sidelines and stock prices of the major players have suffered.
But he said “the fundamental realities of food production and soil fertility continue to underpin our business.”
Production at its three mines, Lanigan, Rocanville and Cory, will be about 64.5 per cent of total capacity this year.
“The quarter is really reflective of just a market that is trying desperately to find equilibrium,” Jeffrey Nelson, a St. Louis-based analyst at Edward Jones, said in a telephone interview. “It’s just reflective of what’s going on in the potash marketplace and the uncertainty posed by moves by the Russians.”
Tim McMillan, Minister Responsible for Energy and Resources, said they expected the Uralkali announcement
“THE QUARTER
IS REALLY REFLECTIVE OF JUST A MARKET THAT IS TRYING DESPERATELY
TO FIND EQUILIBRIUM.”
JEFFREY NELSON
to have an effect on the potash market in Saskatchewan.
“We have a very strong industry and in any given quarter, some are up, some are down,” McMillan said. “Long- term, the potash industry is strong, our resource industry is strong. Saskatchewan is very well positioned, but the effects coming out of Russian and (Belarus) are certainly being seen in the report put out by Potash Corporation today.”
Potash Corp. shares dropped 52 cents to $32.41 in Toronto.
Uralkali CEO Vladislav Baumgertner said July 30 potash may fall to less than $300 a ton. Uralkali tempered that view on Sept. 10, saying it sees support for prices at more than $300 a metric ton on Asian and Brazil demand. The Russian company agreed to sell potash to India last month for $375 a metric ton, 12 per cent less than a sales accord the Uralkali-Belarus venture signed in February.
Retail potash prices in the U.S. fell 13 per cent to $594 a metric ton in the third quarter from a year earlier, according to DTN Energy data
Potash Corp.’s third-quarter sales declined 29 per cent to $1.52 billion, missing the $1.57 billion average of 20 analysts’ estimates compiled by Bloomberg. The company reduced its full- year 2013 profit forecast to $2 to $2.20 a share, less than the $2.45 to $2.70 it forecast in July. It was expected to earn $2.29, the average of 31 analysts’ estimates.
Potash stockpiles in Canada and the U.S. in September were 42 per cent more than the previous five-year average, according to Potash Corp.’s website.