Shares in PotashCorp jumped 5% in early trading on Friday after the fertilizer giant raised its earnings hopes, thanks to a market rebound set to bring a record quarter for North American potash volumes.
The Canada-based company, the world's biggest fertilizer group, lifted to $1.30-1.50 a share its estimate for earnings in the first three months of the year.
The forecast put earnings growth back on the cards, after a year marred by profits warnings as global fertilizer sales slumped as farmers cut back spending in the face of weak crop prices and tight credit.
And the revision was far better than the expectations of analysts, who had expected the group would manage a first-quarter result towards the top of the $0.70-$1.00 a share band it had previously guided to.
PotashCorp shares stood Can$6.00 higher at Can$125.73 in early deals in Toronto.
'Record quarter'
The group attributed its revision to a "sharp rebound" in potash demand, which has been noted by rivals including Germany's K+S, which on Thursday forecast a 40% jump in global sales of the nutrient, and America's Intrepid Potash, which is to reopen mothballed mining capacity.
North American potash sales were on course for record quarter, by volume, while margins in nitrogen and phosphate, the other two major nutrients, would beat expectations.
"Strong farmer returns, a depleted distributor pipeline and the agronomic need to replace soil nutrients have kick-started a potash rebound," Bill Doyle, the PotashCorp chief executive, said.
He added that while the recovery may yet face hiccups, the recovery "represents the beginning of a return to long-term growth in demand".
Market shift
The upgrade followed hours after PotashCorp, in a quarterly report, dismissed last year's fall in potash demand as a temporary interruption to a market shift which had put producers in the driving seat.
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Forecasts for 2010 potash use and imports (approx annual change)
North America: use of about 9m tonnes (+50%), purchases of 8.5-9.5m tonnes (+140%)
China: use of 8-9m tonnes (+35%), imports of 4.5m-5.0m tonnes
Brazil: use of about 6.5m tonnes (+20%), imports of 5.5m-6.5m tonnes (+75%)
India: use of about 5.8m tonnes (+12%), imports of 5.5m-6.0m tonnes
South East Asia: use of about 4.5m tonnes (+50%), imports of 4m-5m tonnes (+125%)
Source: PotashCorp |
"By 2003, operating rates exceeded 80% and we believe the potash industry shifted from one defined by excess capacity to one that is likely to remain supply-challenged for years to come," the group said.
The report forecast global potash shipments jumping by two-thirds to 50m tonnes this year, hitting 60m tonnes in 2011.
"Potash shipments near or above trend are expected from 2011 through 2014 in order to restore distributor inventory and nutrient levels in the soil," the briefing said.
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