PotashCorp unveiled a bigger downgrade than many investors had expected to its earnings forecasts as it unveiled the extent of the hit to potash demand from the failure of China and India to renew import contracts.
The Canada-based group, which earlier this month warned that its full-year earnings would "fall below the low end" of the range of $2.80-$3.20 per share it had targeted, on Thursday restated its guidance to $2.40-2.60 per share.
Even taking out one-off charges, notably a downgrade equivalent to $0.39-a-share on its investment in China's Sinofert, the target figure fell short of the $3.18 a share that analysts have factored in, according to a ThomsonReuters poll.
PotashCorp's New York-listed shares eased 0.2%to $40.49 in morning deals.
The revised reflected a $500m cut, to $2.1bn-2.3bn, in the group's estimate of its gross margin from potash, of which it is the top producer by capacity, after China and India failed to sign new supply contracts, as had been expected.
Indeed, while typically the world's top potash importing countries, China accounted for only 12% of sales by Canpotex, the North American export marketing consortium, in the July-to-September quarter, and India 5%.
Other Asian countries accounted for 41%, and Latin America 32%.
In the first nine months of 2012, Canpotex shipped 5.9m tonnes of potash, down more than 20% year on year.
China, India outlooks
And PotashCorp, while forecasting a "resolution" during 2012 to the stand-off with China, was more circumspect over prospects for a deal with India, where "a number of near-term challenges are continuing to create uncertainty".
While agriculture fundamentals suggested India had been "significantly" skimping on potash applications, it was "unclear" how India will address this issue.
"We believe an increase in demand will begin to unfold in 2013, although the extent to which that happens remains uncertain at this time."
PotashCorp cut its estimate for its own potash shipments in 2012 to 7.6m-8.3m tonnes, from 8.8m-9.2m tonnes.
World industry potash shipments were pegged at 50m-52m tonnes, downgraded from a previous forecast of 53m-56m tonnes.
The group remained, nonetheless, upbeat on its long-term prospects, saying growth in potash markets "has often occurred in uneven waves, with increases in demand sometimes punctuated by periods of contraction".
PotashCorp chief executive Bill Doyle said: "The agricultural fundamentals that drive our business – rising food demand, supportive crop prices and the scientific need to replenish nutrients – remain strong despite some disruption in deliveries to offshore potash markets."
In the July-to-September period, the group had achieved record sales volumes, for the third quarter, of 1.0m tonnes in its home North American market.
Shipments over the full July-to-December period as a whole looked like setting a record, as farmers "work to address their soil nutrient needs as they seek to capitalise on supportive crop economics – driven by strong crop prices and the affordability of fertilizer".
For the quarter, PotashCorp reported earnings down 22% at $645m, on revenues down 7.7% at $2.14bn.
Earnings per share, at $0.74, fell just short of the $0.75 that Wall Street had expected.
The group earlier this month said its earnings for the period would "be at the low-end of the $0.70-0.90-per-share guidance range previously provided".