Potash Corp. Debt Outlook Cut by S&P on Industry Turmoil

Standard & Poor’s cut its outlook on Potash Corp. of Saskatchewan Inc. on concern the demise of a Russia-led venture that trades potash fertilizers will heighten competition and reduce prices.

S&P reduced Potash Corp.’s ratings outlook to negative from stable after OAO Uralkali, Russia’s largest potash producer, withdrew last week from a marketing venture, Belarusian Potash Co., the credit-rating company said today in a statement. Uralkali also said it planned to increase production volumes to full capacity.

Potash Corp.’s financial results could be “meaningfully hurt” by increased competition and lower prices for the crop nutrient.

“The negative outlook reflects our expectation that industry conditions in the potash sector could become significantly more competitive in the near-term thereby depressing Potash Corp.’s earnings and stretching its credit metrics beyond our leverage threshold,” S&P said in the statement.

Up until now, Belarusian Potash, Uralkali’s joint venture with Belaruskali, and Canpotex Ltd., a venture owned by Potash Corp. and two other North American producers, have dominated potash exports by representing their members in supply and pricing negotiations. That has meant that the producers don’t compete individually against each other in most export markets.

Potash Corp. rose 1.7 percent to C$30.54 at the close in Toronto. The shares of the Saskatoon, Saskatchewan-based company have fallen 25 percent this year.

(Updates with closing share price in final paragraph.)
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