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CIBC World Downgrades Potash Corp. of Saskatchewan


CIBC World downgraded the fertilizer producer Potash Corporation of Saskatchewan (POT) to sector underperform from sector perform, citing unfavorable supply and demand dynamics for pricing the company's fertilizer ingredient potash.

Analyst Jacob Bout says The Fertilizer Institute reported in October that North American potash inventory levels amounted to 1.3 million tonnes, close to double the potash levels of last year, approaching 5-year average levels. He believes this indicates that the potash supply/demand balance not as "tight" as earlier thought. As such, he thinks Potash Corporation of Saskatchewan will be forced to cut production (or at least reduce growth in production) to maintain current potash pricing. Also, he doesn't think Potash Corporation of Saskatchewan deserves to trade at a premium multiple to peers. He cut his $4.96 2005 earnings per share estimate to $4.92, his $5.72 2006 estiamte to $5.44, and his price target to $70.


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