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New PotashCorp CEO hands out fistful of upgrades

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Jochen Tilk made an upbeat start his reign as PotashCorp boss by unveiling better-than-expected quarterly results, upgrading the group's full-year profit hopes and raising expectations for the potash sector recovery too.

Mr Tilk, in his first results statement as chief executive of the Canadian potash giant, highlighted "significant product demand" in the potash sector the April-to-June quarter, when PotashCorp achieved earnings of $472m.

While down 26% year on year, earnings were equivalent to $0.56 per share, ahead of the $0.46 per share that investors had expected.

"Robust global fertilizer demand provided a supportive earnings environment during the quarter," said Mr Tilk, who joined the group at the start of this month.

'Strong customer engagement'

Indeed, the group stressed that in its core potash market there was "strong customer engagement in all key markets", a reference to fresh demand from India and, in particular, China, the top importer of the nutrient.

PotashCorp raised by 500,000 tonnes to 12.0m tonnes its forecast for China's overall potash imports this year, forecasting that buyers will exercise options with suppliers for extra volumes.

With forecasts for North American volumes raise too, to 10m tonnes from 9.0m-9.5m tonnes, the group raised its estimate for world industry potash shipments to 56.5m-58.0m tonnes, from 55m-57m tonnes.

"We begin the second half with a strong domestic order book," PotashCorp said, adding that the Canpotex marketing cartel, of which it is the biggest member, was "fully committed in offshore markets" in the July-to-September quarter.

Earnings upgrade

For PotashCorp, the improved market conditions will see full-year earnings come in at $1.70-1.90 a share, up from a forecast in April of $1.50-1.80 a share, itself an upgrade.

The upgrade reflected better expectations for potash, for which margins are now expected to reach $1.2bn-1.4bn, a $100m upgrade at both ends of the range.

The revision reflects higher hopes for volumes, seen coming in at 8.9m-9.2m tonnes compared with a previous estimate of 8.3m-8.7m tonnes.

However, Mr Tilk also cited an "improving price environment" in potash, helped by a rundown in inventories, which in North America, one of the two key producing regions, have hit their lowest since 2011.

Price recovery

World potash prices have tumbled since the break-up a year of the Belarusian Potash Company cartel, which controlled more than 40% of world volumes, as its key member, Russia's Uralkali, switched to a higher volume sales strategy.

PotashCorp in the April-to-June period achieved $263 a tonne for its potash, down 26% year on year, but above the $250 a tonne in the previous quarter.

That represented the first quarter-on- quarter rise in more than two years.


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