Potash Corp. Cuts Forecast on Delayed China, India Sales

Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, cut its 2012 earnings forecast because of reduced sales of its namesake crop nutrient to China and India.

Earnings, excluding an impairment charge related to an investment in Sinofert Holdings Ltd. (297), will be $2.40 to $2.60 a share, the Saskatoon, Saskatchewan-based company said today in a statement. Potash Corp. said Oct. 17 that full-year results were expected to fall below its previous guidance of $2.80 to $3.20 a share. Analysts projected profit of $3.04 a share, the average of 27 estimates compiled by Bloomberg.

“China’s potash consumption has been strong, but it has been meeting its recent needs through domestic production, inventory withdrawals and rail deliveries” from Russia, Chief Executive Officer Bill Doyle said today on a conference call. He said he expects China to renew its supply contract with North America’s largest producers by the end of this year, and gave no forecast for when India would sign a new supply deal.

Potash Corp., Mosaic Co. (MOS) and Agrium Inc. (AGU), North America’s largest fertilizer producers, negotiate offshore potash exports through Canpotex Ltd., their jointly owned international trading arm.

Potash Corp. fell 0.3 percent to C$40.17 at the close in Toronto. The shares have declined 4.6 percent this year.

‘The Question’

Sales of potash, which helps strengthen plant roots and improve resistance to drought, generated 64 percent of the company’s gross profit last year, according to data compiled by Bloomberg.

“The question in the potash market and in our outlook for the balance of the year continues to be the timing of new supply contracts with China and India,” Doyle said on the call.

The delayed contract renewals led to a 25 percent decline in third-quarter shipments from North American producers to offshore markets, the company said in the statement.

Doyle declined to update Potash Corp.’s 2013 outlook for global potash shipments. Last month, the company forecast shipments of as much as 60 million metric tons.

The company today forecast the global fertilizer industry will ship 50 million to 52 million tons of potash this year. That’s down from 53 million to 56 million tons predicted in July.

Profit Drops

Third-quarter net income dropped 22 percent to $645 million, or 74 cents a share, from $826 million, or 94 cents, a year earlier, the company said today. Per-share profit was one cent less than the average of 22 estimates compiled by Bloomberg.

Revenue fell 7.7 percent to $2.14 billion from $2.32 billion a year earlier. The company, which also makes nitrogen- and phosphate-based nutrients, sold 2.1 million metric tons of potash in the quarter, down from 2.2 million a year earlier.

The company said this month it will halt production at two of its potash mines in Saskatchewan for about eight weeks each. The Rocanville mine will be idle from Dec. 2 to Jan. 26 while Lanigan will shut Nov. 18 to Jan. 12, the company said.

Doyle said he expects there will be further production curtailments.

“Potash is cutting production volumes to match demand,” John Hughes, a Toronto-based analyst at Desjardins Securities Inc., said today by telephone. “Ultimately, lower potash production means lower sales.”

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

To contact the editor responsible for this story: Steven Frank at sfrank9@bloomberg.net

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