Potash Corp. Cuts Forecast as Earnings Miss Estimates
Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer, cut its profit forecast and posted earnings and revenue that trailed analysts’ estimates after demand recovered more slowly than expected.
First-quarter net income dropped to 56 cents a share, compared with the 64-cent average of 26 estimates compiled by Bloomberg. Sales of $1.75 billion missed the $1.79 billion average of 16 estimates. Profit in 2012 will be $3.20 to $3.60 a share, the company said today in a statement, down from its January projection of $3.40 to $4.
Potash Corp. lowered its forecasts for its full-year potash production and global demand for the mineral, which is used to strengthen plant roots and defend against drought. Some U.S. and Canadian fertilizer distributors deferred purchases in the first quarter in anticipation of further prices declines, spurring the Saskatoon, Saskatchewan-based company to cut output at its mines.
“Although we anticipated that an increase in global fertilizer purchasing would not take hold until the latter half of the first quarter, it took longer than we expected for demand to emerge,” Chief Executive Officer Bill Doyle said in the statement.
Potash Corp. declined 3.2 percent to close at C$42.25 in Toronto. The shares have gained less than 1 percent this year.
First-quarter net income fell 33 percent to $491 million from $732 million a year earlier as sales declined 21 percent. The company plans to ship 8.8 million to 9.2 million tons of potash this year, down from a January forecast of 9.2 million to 10 million tons. Potash Corp. sees global demand of 53 million to 56 million tons, compared with 55 million to 58 million tons in a previous projection.
“The weakness in the the potash market was more pervasive than many people had feared,” Spencer Churchill, a Toronto- based analyst at Paradigm Capital Inc., said today in an interview. “The shares are reacting as they should given the reduction in the full-year profit forecast.”
Retail potash prices in the U.S. Midwest advanced 10 percent to $702 a ton in the first quarter, up from an average of $638 a year earlier, according to data compiled by Bloomberg.
Potash Corp. said second-quarter earnings will be 90 cents to $1.10 a share. That compares with the $1.06 average of 23 analysts’ estimates.
Doyle said potash demand began to accelerate at the end of the first quarter and that will continue, underpinning purchases in the rest of 2012. The company said it may be on track for record second-quarter potash sales volumes.
Potash represented 46 percent of the company’s 2011 revenue, with phosphate and nitrogen fertilizers accounting for the rest. The company said today that purchases of phosphate products accelerated as it entered the second quarter while “strong” demand helped raise benchmark nitrogen prices.
Mosaic Co. (MOS), a potash producer and North America’s largest maker of phosphate nutrients, yesterday said sales volumes for potash and phosphate fertilizers in the three months through May will be at the upper end of a previous forecast because of a “rapid acceleration in demand.”
Bunge Ltd. (BG), a U.S.-based commodity trader and fertilizer distributor, said today in a statement that its profit margins on crop nutrients were “pressured” by falling international prices during the quarter.
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