Intrepid upbeat, but cautions on rail squeeze

Intrepid Potash unveiled a second successive quarterly loss, and warned of continued industry headwinds from a squeeze on rail logistics, but remained upbeat over its prospects nonetheless.

The US potash group unveiled a loss of $355,000 for the January-to-March quarter, compared with a profit of $14.9m a year before.

The result, which followed a $5.99m loss in the last three months of 2013, reflected 24% slump to $350 a tonne year on year in the price the group achieved for its potash.

The decline more than offset the boost from a 31% jump in volumes, besides lower administration costs and, indeed, the loss would have been even wider were it not for a $2.78m tax benefit, contrasting with an $8.70m payment a year before.

Demand for rail

Intrepid Potash also cautioned of a continued challenge to the potash industry from a squeeze on the North American rail network, which is attempting to catch up on volumes reduced by the harsh winter, which forced trains to run at shorter lengths and at slower speeds – if they ran at all.

"Rail car availability… remains below expectations," the group said, adding that this shortfall was an "additional risk" to its performance in the current quarter.

"The challenge comes from the fact that, if fertilizer is not in place for application before the seeding windows, there is a reasonable change that farmers will reduce or skip application until the fall."

Bill Doyle, chief executive at sector giant PotashCorp, said last week that the rail logistics situation "is improving", but warned that "there is a still a significant amount of product that needs to move".

Trucks instead of trains

Nonetheless, Intrepid Potash said that its own exposure to logistical difficulties was limited by its status as a US producer, nearer to customers, meaning it could use trucks to make deliveries, besides its strategy of using regional warehouses, again limiting transport needs.

"In the first quarter, and throughout the spring, Intrepid has been able to sell inventory that it had in place in its field warehouses," the group said.

Furthermore, its costs were due to fall thanks to mine investments

"The benefits of these investments, which have begun to positively influence financial results, will be more evident in the second half of this year," Intrepid said.

'Created momentum'

The group also nudged higher by 10,000 tonnes, to 860,000-900,000 tonnes, its forecast for potash sales this year, albeit lifting its forecast for some costs too, with the estimate for the full year depreciation charges lifted  to $76m-82m, from $70m-80m.

Selling and administrative expenses were pegged at $76m-82m, up from a previous forecast of $70m-80m.

Bob Jornayvaz, Intrepid's co-founder and executive chairman, said: "We have created momentum in the first quarter toward fully realising the benefits of our recent capital investments."

The group's shares stood unchanged at $16.30 in morning deals in New York.

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