Grass Roots Fertilizer Stocks

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Potash Corp sees better H2, then 'terrific' 2010

http://www.miningweekly.com/article.php?a_id=151429

By: Liezel Hill
Published on 23rd January 2009

TORONTO (miningweekly.com) – Potash Corporation of Saskatchewan, the world's biggest fertiliser company, expects potash demand to rebound significantly over the course of this year, followed by a “terrific” year in 2010, president and CEO Bill Doyle said on Thursday.

Although the timing remains difficult to predict, farmers will likely increase their planting and fertiliser use “in the near future”, he told analysts and investors on a conference call.

Demand for potash surged in early 2008, boosting prices, but has since softened, as farmers, squeezed by the economic downturn and credit crisis, defer their use of fertiliser.

Potash Corp announced in December that it would cut production of the crop nutrient by two million tons this month, citing deferred demand for the product across the globe, but plans to bring the capacity back online as demand picks up.

On Thursday, Doyle said the company expects that the first three months of the year will be “very slow” but that consumption will begin to turn around in the second quarter of 2009.

“We believe 2009 will be a reverse image of 2008, with a slower start, followed by a strong surge as demand returns.”

Thereafter, 2010 will prove a “terrific year” for the fertiliser business in general, he said, arguing that the industry's fundamentals remain intact, despite the negative effects of the financial crisis.

“We are really excited about where we are going here in the second half of 2009, and 2010 is going to be a bang-up year,” Doyle said.

Still, “if, for any reason, demand does not materialise on the anticipated timelines, we will continue to follow our strategy of managing production to meet market demand,” he added.

For 2009, the group has forecast a gross margin for potash of between $4,5-billion and $5,5-billion, with total shipments flat or slightly below 2008 levels.

Doyle said he expects that price negotiations with China are likely to drag on into the second quarter, but that he was still confident of securing a price increase.

Potash Corp is spending billions of dollars to raise its Saskatchewan potash production capacity by almost 8-million tons a year, to 18-million tons a year, between 2008 and the end of 2012.

The company will continue to invest in its growth projects, Doyle said, in preparation for when demand rebounds.

RECORD EARNINGS

Potash Corp posted its best-ever fourth quarter earnings on Thursday, of $2.56 a share, or $788-million, which was more than double profit for the same period a year earlier.

Full-year earnings more than tripled year-on-year, to $11,07, making 2008 the group's fifth consecutive year of record earnings.

The company shipped 1,4-million tons of potash in the fourth quarter, which was 37% lower than in the same period of 2007.

Full-year potash volumes also declined 9%, to 8,5-million tons.

Potash Corp shares rose 5,3% on Thursday, to C$91,19 apiece by 16:10 in Toronto.