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Potash Corp. profit plunges on lack of Asian sales Add to ...
PAV JORDAN - MINING REPORTER
The Globe and Mail
Published Thursday, Jan. 31 2013, 6:25 AM EST
Last updated Thursday, Jan. 31 2013, 10:18 AM EST

Slumping demand in Asia saw Potash Corp. of Saskatchewan Inc. turn in a much worse than expected fourth quarter, driving its shares down by nearly 3 per cent on the Toronto Stock Exchange early on Thursday.

The Saskatoon-based company said demand for potash, a key crop nutrient that helps make plants more resistant to drought and disease, would pick up in 2013, but challenges facing the massive Indian market will likely persist.

“Our fourth-quarter results were adversely affected by weaker performance in all three nutrients as global fertilizer markets paused in the absence of significant immediate needs and amid lack of direction, particularly in phosphate and potash,” Potash Corp. president and chief executive officer Bill Doyle said in the statement of results after a lacklustre year marked by falling prices.

“We recognize that ebbs and flows in fertilizer demand will always be part of our business, but we believe the factors that limited demand this past year – destocking and deferred purchases – will begin to drive an even greater need for our products in 2013 and beyond,” Mr Doyle said.

Potash Corp., the world’s largest fertilizer producer and the dominant potash miner, reported profit of just $421-million for the last three months of the year, or 48 cents a share, below analysts’ consensus expectations of 57 cents a share. The result was also impacted by a $41-million provision for settlement of antitrust claims in the United States.

In the year-ago period, the company reported profit of 78 cents a share, or $683-million.

The company said a late-season slowdown in global potash demand was more pronounced than usual as buyers awaited clarity on contract settlements with Asian customers.

Shipments to offshore markets are down a whopping 43 per cent in the fourth quarter.

“Agriculture is inherently an unpredictable business – from variability in weather and growing conditions to government policy changes that can affect the decisions of farmers,” the company said.

Potash prices are around half where they were in 2008, after a five-year run saw them peak near $1,000 a tonne on the back of booming demand from China, India and Brazil.

That was just as the global economic crisis was gathering steam, and prices plunged to as low as $300 a tonne as farmers stopped buying potash, the crop nutrient that helps make plants more resistant to drought and disease.

The prices have edged up again since then, but stubbornly low-volume buying in India in particular but also China has held back a much anticipated market rebound.

Mr. Doyle said the outlook for 2013 was brighter, for the company and for the potash industry in general, predicting global shipments of the key crop nutrient to be as high as 57 million tonnes, nearly 12 per cent higher than in 2012.

The rise should be driven by strong demand from North American during the spring planting season and robust buying in Latin America, where agriculture giant Brazil has been buying since the year started.

A question mark continues to hang over Asia, however, where some of Potash Corp.’s largest buyers resisted signing new long-term supply contracts in recent months.

A deal early in the year with China’s Sinofert Holdings Ltd. broke a months-long stalemate but saw Canpotex Ltd., the offshore marketing company controlled by Potash Corp., Agrium Inc., and Mosaic Co, sell to its largest customer at a major discount to year-ago prices.

A deal with India is expected to be signed in the first quarter, and while demand is seen rising in 2013, Potash Corp. was not hopeful buying conditions would improve meaningfully. Indian farmers have stayed largely away from the potash market in recent years as reductions in government subsidies drove up retail prices.

Potash Corp. forecast earnings for the year of between $2.75 and $3.25 a share, compared to 2012 earnings of $2.37 a share.

http://www.theglobeandmail.com/globe-investor/potash-corp-profit-plunges-on-lack-of-asian-sales/article8030413/