Potash Forecast Misses Estimates as Fertilizer Demand Falls

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, forecast first-quarter profit that trailed analysts’ estimates as distributors delayed purchases.

Profit excluding one-time items will be 55 cents to 75 cents a share, the Saskatoon, Saskatchewan-based company said today in a statement. That’s less than the 84-cent average of 19 estimates compiled by Bloomberg. The company also reported lower-than-expected fourth-quarter earnings and sales.

In North America, “the current cautious approach of dealers managing their potash inventories is expected to keep shipments for the first quarter below those of the opening quarter of 2011,” Chief Executive Officer Bill Doyle said in the statement. Demand from China, the second-largest potash user, may pick up by the end of the quarter, the company said.

Potash Corp. is cutting output at three Canadian potash mines after demand weakened. Fertilizer distributors and farmers are delaying potash purchases in anticipation of lower prices ahead of the U.S. planting season. Potash, which is the largest source of Potash Corp.’s revenue, helps to strengthen plant roots and defend crops against drought.

Full-Year Forecast

The company forecast 2012 full-year profit of $3.40 to $4 a share. The average of 26 estimates was for $3.95. Potash Corp. said global potash industry shipments will be 55 million to 58 million tons this year. In October, it forecast 58 million to 60 million.

Fourth-quarter net income rose 34 percent to $683 million, or 78 cents a share, from $508 million, or 56 cents, a year earlier. The average of 25 analysts’ estimates was for 87 cents a share. Sales gained 2.9 percent to $1.87 billion from $1.81 billion, lagging behind the $2.10 billion average of 12 estimates.

“The drag of global economic concerns shook the confidence of fertilizer buyers and caused a greater decline in fourth- quarter demand than we had anticipated,” Doyle said in the statement.

Fertilizer markets will improve later in the year, said Edlain Rodriguez, a New York-based analyst at Lazard Freres & Co.

“It’s not a major surprise that conditions were/are challenging in Q4 and 1Q12, but market conditions will improve and that’s where the focus is/should be,” Rodriguez said today by e-mail.

Potash Corp. rose 1.1 percent to close at C$45.99 in Toronto.

Potash prices were higher on average in the fourth quarter compared with a year earlier. Midwest retail potash prices, helped by higher corn futures, were up 25 percent, according to data compiled by Bloomberg Industries.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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