PotashCorp marred an upbeat long-term picture for fertilizer
demand, supported by an "extended period" of elevated crop prices, with a succession
of near-term setbacks, from production hiccups to investment writedowns.
The fertilizer giant forecast "rising demand for our
products, specifically potash, in the years ahead", as farmers, lured by high
crop values, strive to rebuild world crop supplies sapped by a range of weather
"The farm production shortfalls expected this year will
support an extended period of crop prices at levels that encourage high-yield
agriculture, as these deficits are never made up in a single growing season,"
Canada-based PotashCorp said.
"Difficult weather conditions in certain parts of the world
are proving that nature doesn't provide a free lunch and appropriate steps must
be taken to enhance productivity.
"Potash, specifically, is essential for plant health during
periods of crop stress."
However, while forecasting record North American shipments
in the second half of the year, the group cautioned that, thanks to weaker Indian
demand, world potash demand for 2012 as a whole was likely to come at "at the
lower" end of the range of 53m-56m tonnes it has guided to.
Indian purchases of fertilizer have been dented both by a
weak rupee and a less generous nutrient subsidy regime.
And PotashCorp trimmed to $2.6bn-2.9bn its forecast for its gross
margin in potash over 2012, noting that "significant scheduled maintenance" at
its mines over the summer would raise the cost per tonne of nutrient produced.
With estimate for capital spending in 2012 nudged higher too,
by $100m to $2.2bn, the group forecast earnings per share of $0.70-0.90 a share
in the July-to-September quarter.
Analysts have factored in earnings of $0.94 a share.
And this as PotashCorp revealed that its earnings for the
April-to-June period had fallen short of forecasts of $1.02 a share too -
tumbling to $0.60 a share, from $0.96 a share the year before.
The decline reflected writedowns of $29m at the group's
phosphate segment, and of $341m in the value of its investment in Sinofert, the
Chinese fertilizer group.
"This was incurred due to the significant amount by which
fair value was below our cost," said PotashCorp, which paid $579m for its SInofert
The group cut to $2.80-3.20 a share, from $3.20-3.60 a share,
its forecast for full year earnings to reflect the writedowns.
Investors have been forecasting a $3.46-a-share result,
according to a ThomsonReuters poll.
PotashCorp shares recovered early losses to close 1.1% higher at $44.99 in New York.