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PotashCorp earnings to fall faster than expected, as nutrient prices tumble

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PotashCorp issued a downbeat forecast for its prospects this year, cutting hopes for conditions in all three major nutrient markets, including the potash sector key to the group's fortunes.

Prices for the plant nutrient have been tumbling, forcing PotashCorp to mothball its Piccadilly mine in New Brunswick, Canada, earlier in the month.

And prospects for nitrogen and phosphates are also looking tough, as the Canadian fertilizer giant announced a "more cautious outlook for all three nutrients as we begin 2016".

PotashCorp forecast its 2016 earnings at $0.90-1.20 share, where the average analyst forecast stood at $1.33 a share, compared to $1.52 a share in 2015.

Prices for phosphates were seen below 2015 levels, due to "weaker market fundamentals," chief executive Jochen Tilik said.

PotashCorp forecast global potash shipments at 59m-62m tonnes, in line with shipments of 60m tonnes in 2015.

This week, Canada-based broker Raymond James cut its forecast for the price that buyers in China, the world's top importer, would pay for potash by $15 a tonne to $260 a tonne.

Chinese demand falls back

Demand was seen growing in North America, to 9.2-9.7m tonnes, due to lower dealer inventories, and consecutive years of large crops, which depletes soil potash.

Indian demand was also seen rising from 2015, when the weak monsoon disrupted planting, to 4.2-4.7m tonnes.

Latin America potash demand would also edge up, "although credit availability and currency weakness are anticipated to keep growth in this market relatively modest," PotashCorp said.

"For the full year, we forecast shipments of 10.8m-11.3m tonnes, slightly above 2015 levels."

But Chinese demand was seen falling back from record levels of over 15m tonnes, to 13.5m-14.5m tonnes.

Sales volumes to fall

PotashCorp forecast its 2016 sales volumes of 8.3m-9.1m tonnes, with margins on the mineral seeing a "sharp decline" as prices fall.

PotashCorp reported that potash prices were down 16% to $238 a tonne in the last three months of 2015.

And nitrogen prices slumped 29% to $288 a tonne over the same period.

Falling returns

The company also announced results for the three months to January 2016.

Net earnings over the last three months of 2015 were down 51% year on year, to $201m, or $0.24 a share.

This fell well short of the $0.30 a share analysts had expected.

Revenues also undershot expectations, falling 29% to $1.35bn, where analysts had expected $1.44bn.

The company trimmed its quarterly dividend by 34% to $0.25 per share.

By Agrimoney.com

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