Intrepid Potash backed ideas of a firm outlook for potash
markets even as it revealed a slump in quarterly profit, undermined by a drop in
prices of the nutrient.
The Denver-based group, the largest producer of US potash, said
that buying trends suggested "good overall demand" across its key North America
market "for the upcoming growing season".
Bob Jornayvaz, the Intrepid executive chairman, said: "We
see favourable trends in the coming year," with orders spurred by farmers'
desire to boost productivity by means including fertilizer applications.
"Specifically, the high commodity prices and low
stocks-to-use ratios should have farmers looking to maximise yields through a balanced
fertilization approach," he said.
Furthermore, growers had the cash to support purchases, with
the impact of last year's drought-hit yields offset by higher crop prices and
"The belief is that, on average, farmer cash flows from the
2012 growing season were above average due to these higher commodity prices and
the benefit of crop insurance," Intrepid said.
On Wednesday, Deere & Co, the maker of John Deere farm
equipment, upgraded by $1.1bn, to $215.5bn, its forecast for crop farmers' net
cash receipts last year, up from $208.3bn reaped in 2011.
Intrepid's comments echo those of Canadian potash giant PotashCorp which two weeks ago highlighted a strong North American market, which would help lift world potash shipments of the nutrient to 55m-57m tonnes this year, from last year's 51m tonnes.
Intrepid forecast its potash sales rising to 850,000-870,000
short tons in 2013, up from 839,000 short tons last year, but cautioned over a potentially soft start to the year.
The group pegged potash sales for the current quarter at
170,000-200,000 short tons, below the 203,000 short tons recorded in the January-to-March
period of 2012.
The group added that, with fertilizer dealers, which were badly
caught out by the late-2008 slump in nutrient values, seeking to keep
inventories to a minimum, and relying on just-in-time deliveries, it was "difficult
to predict the timing of sales".
Its quarterly performance "may be impacted by this
For the October-to-December period, Intrepid reported a 42%
slump in earnings to $14.5m.
While potash sales rose 10.9% by volume, also to 203,000
short tons, the profitability of this business was hurt by a 12.7% drop in
prices to $434 per short ton, equivalent to $479 per tonne.
Furthermore, the group faced a 34% jump in freight costs. Fertilizer
groups, like grain merchants, have been forced by low Mississippi water levels
to pay higher barge charges, or switch to rail.
Operating costs also rose, while the group swallowed a
one-off charge on the value of deferred tax assets.
The group's underlying earnings per share, at $0.26,
beat Wall Street estimates of a $0.24-a-share result.
Nonetheless, the results, and the forecast of a drop in potash volumes this quarter, received a cool response from investors. Susquehanna cut its price target for Intrepid shares to $21 from $26.
The stock closed down 6.3% at $22.03 in New York.