Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, said the price of its namesake crop nutrient slumped 28 percent after the company’s largest rival announced plans to raise output.
Potash Corp. received an average price of $307 a metric ton for its potash in the third quarter, down from $429 a year earlier, the Saskatoon, Saskatchewan-based company said today in a statement. Third-quarter net income dropped to $356 million, or 41 cents a share, from $645 million, or 74 cents, a year earlier as potash sales volumes fell.
“Fertilizer customers faced with uncertainty act with extreme caution,” Potash Corp. Chief Executive Officer Bill Doyle said in the statement. “This was the case during the third quarter, particularly in offshore potash markets, where significant purchases were delayed as Russian producer pronouncements left buyers waiting in anticipation of weaker prices.”
Buyers of potash, a form of potassium used to boost crop yields, have deferred purchases since the end of July after OAO Uralkali (URKA), 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.
“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.”
Potash Corp. expects global potash shipments of 53 million to 54 million metric tons this year and 55 million to 58 million tons in 2014, Doyle said today on a conference call. Doyle said shipments slowed in the second half of this year after reaching about 29 million tons in the six months ended in June.
“We were humming along” in the first half, he said, adding that the Russian moves caused “a real paralysis” in potash markets. Potash Corp. forecasts its mines to run at about 64 to 64.5 percent of production capacity this year, Doyle said.
Potash Corp. dropped 1.6 percent to C$32.41 at the close 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 percent less than a sales accord the Uralkali-Belarus venture signed in February.
Retail potash prices in the U.S. fell 13 percent 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 percent 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.
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