PotashCorp earnings dip, foresees fall in 2014 too

PotashCorp, blaming "challenging market conditions", unveiled a bigger decline profits than investors had expected and forecast another fall this year, hurt by depressed potash prices.

The Canada-based group said that earnings fell 45% to $230m in the October-to-December quarter, on revenues down 6.2% at $1.54bn, as a drop in fertilizer prices more than offset increases in sales volumes encouraged late in the year by the lower values.

The group achieved an average of $282 a tonne for potash, its main product, a price down 27% year on year. Foreign shipments achieved $227 a tonne the lowest in six years, since before the 2008 price spike prompted by soaring crop prices.

The declines reflected the collapse in the potash market, which spread to other fertilizers too, after the break-up in July of the Belarusian Potash Company cartel, which controlled more than 40% of world trade.

'Pricing headwinds'

"This past quarter was a difficult one," said Bill Doyle, the PotashCorp chief executive.

"Pricing headwinds most notably in potash weighed on our performance."

He highlighted signs as 2013 came to a close "that the uncertainty in global markets was beginning to abate", with North American potash exports soaring 38%, year on year, in the latest quarter, and PotashCorp's sales in its domestic region soaring 34% by volume to some 800,000 tonnes.

In nitrogen, volumes jumped 37% to 1.50m tonnes, with phosphate sales up 11.5% at 934,000 tonnes.

'Improved market engagement'

However, the lower price environment now entrenched will remain a spectre over the group's performance in 2014 too, PotashCorp said.

"In potash, the uncertainty that persisted over the past six months appears to be subsiding and we expect global demand to improve," the group said.

"We enter 2014 with improved market engagement.

But even as "near-term pressure on potash prices appears to have subsided, its impact is expected to suppress our offshore realisations through the early part of 2014".

Earnings to fall again

The group forecast full-year earnings of $1.40-1.80 a share this year, down from the 2013 result of $2.04 a share, and representing a third successive annual decline, and below market expectations of a $2,02-a-share result.

For the first three months of 2014, earning will come in at $0.30-0.35 a share, below the $0.47 a share that Wall Street has forecast.

In the latest quarter, earnings equated to $0.31 a share excluding one-off charges, a little below the $0.33 a share that analysts had expected.

Full year earnings for 2013 fell by 14.1% to $1.79bn, equivalent to $2.04 a share all-in, on revenues down 8.8% at $7.31bn.

PotashCorp's New York-listed shares stood 2.7% lower at $30.97 in lunchtime deals. having touched a three-month low of $30.091 earlier.

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