OAO Uralkali, the world’s largest potash producer, lowered its forecast for global deliveries of the crop nutrient because of bad weather in Canada and delivery issues in Europe this year, saying prices may gain.
Deliveries should reach 56 million metric tons to 58 million tons this year, up 6 percent to 7 percent from a year earlier, Uralkali said today in a statement. In November, the company forecast 58 million to 60 million tons.
Uralkali roiled markets in July when it withdrew from a marketing venture with Belarus that controlled 40 percent of global exports, accusing partner Belaruskali of selling potash outside their agreement, and moved to increase its own output.
Harsh weather and railway snarls in Canada in particular, as well as issues in Israel and Germany, have tightened the market, Oleg Petrov, Uralkali’s chief of sales, said today on a conference call, explaining the forecast cut.
“Uralkali has been benefiting from higher volumes, as it gained market share while other players are adapting to the new market paradigm –- an unsustainable development,” Elena Sakhnova, an analyst at Moscow-based VTB Capital, which has a sell recommendation on the stock, wrote today in a note.
Potash Corp. of Saskatchewan Inc. also lowered its forecast in February to as much as 57 million tons from as much as 58 million tons. The average export price declined 28 percent last year to $268 per ton, Uralkali said today.
Uralkali won back a 23 percent share of the global potash market last year from 17 percent it had in the first half, when it was marketing potash through its venture with Belarus, according to a presentation on its website. As regards pricing, signs of a reconciliation with its former partner, Belaruskali, would be supportive, Sakhnova said.
Uralkali is “not aware of any talks at the moment” between its owners and Belarus to restore the partnership, Chief Executive Officer Dmitry Osipov said on the call.
Uralkali’s full-year net income fell 58 percent to $667 million, according to the statement. Earnings before interest, taxes, depreciation and amortization declined 31 percent to $1.6 billion, in line with the average estimate of 12 analysts surveyed by Bloomberg. Revenue dropped 16 percent to $3.3 billion.
The results are the weakest since Uralkali merged with OAO Silvinit in 2011, passing Potash Corp. to become the biggest producer.
Profit was affected by revaluation of assets, payments to executives as a part of the long-term incentive program, and one-off expenses, including provision for resettlement of the residents in Berezniki, Russia, where Uralkali’s main assets are located, according to the statement.
“We saw some improvement in the company’s results and the market situation in the second half of 2013 and expect to build on this momentum in 2014,” Osipov said in the statement.
Uralkali expects potash demand in China to grow by as much as 7 percent to 11.7 million tons in 2014, while it sees demand in India reaching as much as 4 million tons, according to the presentation.
Billionaire Mikhail Prokhorov’s Onexim Group controls 27 percent of Uralkali, while billionaire Dmitry Mazepin’s OAO Uralchem holds almost 20 percent. They bought stakes from billionaire Suleiman Kerimov and his partners in December after Belarus President Aleksandr Lukashenko called for a change of ownership before talks could resume on rebuilding a partnership with Belaruskali.
Uralkali will continue to work at its maximum possible capacity, with plans to produce almost 12 million tons of potash this year, Osipov said.