PotashCorp cut its forecast for full-year earnings by more
than analysts had expected as it revealed a collapse in its potash selling
prices in the aftermath of the break-up of the Belarusian Potash Company
The Canada-based group, which warned two weeks ago that it
was to cut its full-year guidance thanks to the potash market downturn caused
by July's surprise BPC break-up, on
Thursday revealed it was expecting earnings per share of $2.00-2.20.
That estimate, cut from a previous target of $2.45-2.70 a
share, was beneath the figure of $2.33 a share that Wall Street had expected.
The downgrade came as PotashCorp unveiled earnings down 45%
to $356m in the July-to-September quarter, equivalent to $0.41 per share, a
little below the $0.42 a share that analysts had forecast.
Sales dropped about 29% to $1.52bn.
The decline reflected "challenging" fertilizer markets, after
Russia's Uralkali quit BPC, and forecast a slump in potash prices, causing
buyers to withdraw from purchases of nitrogen and phosphate nutrients as well.
"The most recent quarter can best be characterised as a
predictable response to an unpredicted event," said Bill Doyle, the PotashCorp
"As we have seen in the past, fertilizer customers faced
with uncertainty act with extreme caution.
"This was the case during the third quarter, particularly in
offshore potash markets, where significant purchases were delayed as Russian
producer pronouncements left buyers waiting in anticipation of weaker prices."
The dynamics "did significantly slow market activity", he
PotashCorp sold potash to offshore markets at an average of
$285 a tonne during the period, down 12.0% on the previous quarter, and the
lowest in three years.
For potash sold in North America, the average price fell 21%
to $333 a tonne, the lowest for the region since the first quarter of 2008.
"Buyer caution and competitive pressures in all key markets
weakened the pricing environment," PotashCorp said.
The group flagged some signs of improvement, with North
American potash buyers "beginning to take the necessary steps to place product
in advance of the fall application season.
"They have been moving more aggressively… and are purchasing
additional product requirements."
In Latin America, the onset of the main planting season, "favourable
crop economics and the agronomic need to replenish nutrients in its soils
continue to support strong demand for all fertilizer products".
And while "challenges remain" in the market in India, the
second-biggest potash importer, top ranked China was expected to make
additional purchases from Canpotex, the North American consortium of which PotashCorp
is a member.
Nonetheless, the group lowered to 8m-8.4m tonnes, from
8.5m-9.2m tonnes, its forecast for its potash shipments in 2013, with gross
margin in the division seen at $1.5m-1.7m, down from a previous estimate of 1.8m-2.1m
For nitrogen and phosphate, PotashCorp lowered its full-year
gross margin guidance to $1.2m-1.3m, from $1.3m-1.5m.