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Potash Corp.'s profit, forecast disappoint

Potash waits 1000 metres (3280 feet) below surface at the Rocanville Potash Corp. mine before being loaded up the shaft and carried to surface in Saskatchewan September 30, 2010.


Potash Corp. of Saskatchewan Inc. conceded the current volatile economy has curbed demand for its crop nutrient, but remains convinced sales will soon bounce back amid the growing global food shortage.

Saskatoon-based Potash Corp., the world's largest fertilizer producer, reported fourth-quarter earnings and a first-quarter forecast Thursday that were well below expectations.

"While the need to increase food production is relatively constant, the past few months have reinforced that fertilizer buying can, at times, happen in waves," Potash Corp. chief executive officer Bill Doyle told investors on Thursday.

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"The seas were more still than we predicted."

Still, Mr. Doyle insisted demand will return as the spring planting season nears in North America and farmers continue to use fertilizer to help increase yields at a time when prices of crops such as corn and soybeans are near record levels.

"The world's farmers need to grow more food and our products have an essential role in improving crop yields," he said.

Potash Corp. and other major producers are curbing annual production by up to 10 per cent to prevent a sharp drop in price of the fertilizer ingredient last seen in 2008. That's when prices jumped to nearly $1,000 (U.S.) a tonne, then fell to $300 within months when farmers temporarily stopped buying potash, saying they could not longer afford it.

Potash prices have bounced back to around $550 a tonne today, amid record volumes and a long-term view that more potash will be needed to help boost crop yields and feed the world's growing population.

"Short term fluctuations in markets like India and China do not alter the reality that there is tremendous pressure on their food supply," Mr. Doyle said.

Potash Corp. reported earnings of $683-million, or 78 cents a share, in the fourth quarter, up from $508-million, or 56 cents, a year earlier, but below the Thomson Reuters mean estimate of 88 cents a share.

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Sales were up slightly from a year earlier, to $1.87-billion from $1.81-billion, but also missed the $2.08-billion analysts were projecting.

The company forecast earnings of 55 cents to 75 cents a share for the first quarter, well below expectations of 84 cents from analysts surveyed by Thomson Reuters. For 2012, the company expects to earn $3.40 to $4 per share, compared with expectations of $3.96.

The company also lowered it guidance for global potash shipments in 2012 to 55 million to 58 million tonnes, down from an earlier forecast of 60 million tonnes, citing the Indian market as challenging.

"From our take, buyers do not appear to be pessimistic, but are setting up for a sharply back-end-loaded spring in Europe and North America within a strong agricultural commodity pricing environment," BMO Nesbitt Burns analyst Joel Jackson said in a note, citing moderate volume increases in parts of Asia and Brazil.

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About the Author

Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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