Potash Corp. 2014 Forecast Trails Estimates After Price Drop

Jan 30, 2014 4:40 pm ET

(Updates with closing share price in seventh paragraph.)

Jan. 30 (Bloomberg) -- Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, forecast 2014 earnings that trailed analysts’ estimates after the price of its namesake crop nutrient fell 24 percent.

Profit will be $1.40 to $1.80 a share, the Saskatoon, Saskatchewan-based company said today in a statement. That compares with the $2 average of 28 analysts’ estimates compiled by Bloomberg. Potash Corp. also cut its estimate for 2014 global shipments. The shares fell as much as 5.5 percent.

Potash Corp.’s “projections for its sales and for the global market would seem to indicate that demand response from farmers to lower potash prices has not yet been robust,” Greg Barnes, a Toronto-based analyst at TD Newcrest Inc., said today in a note to clients.

Buyers of potash, a form of potassium used to increase crop yields, deferred purchases in the second half of 2013 after OAO Uralkali, the world’s largest producer, quit a sales accord in July with its Belarusian competitor and announced plans to boost output. The rift has undermined prices and raised concern among investors that the market will remain oversupplied.

Potash Corp. said global potash shipments this year may rise about 5 percent to 55 million to 57 million metric tons. In December, the company gave an estimate of 56 million to 58 million tons.

China Accord

“Although we believe conditions are supportive for record potash demand, achieving such levels will largely depend on consistent buyer engagement,” it said in today’s statement.

Potash Corp. dropped 1.9 percent to C$34.89 in Toronto. The shares have declined 19 percent in the past 12 months.

Uralkali earlier this month agreed to sell 700,000 tons of potash to China for $305 a ton, 24 percent less than the price it agreed to before it exited the joint supply arrangement with Belaruskali that controlled 40 percent of global exports.

Potash Corp. sold potash on average for $282 a ton in the fourth quarter, 27 percent less than a year earlier. Potash Corp. also produces nitrogen and phosphate crop nutrients and said prices for both also fell during the period.

“Expectations for the whole industry are pretty low,” Jeffrey Nelson, a St. Louis-based analyst at Edward Jones, said today in a telephone interview. “This is really shaping up to be a transition year for producers.”

Canpotex Sales

Fourth-quarter net income dropped to 26 cents a share from 48 cents a year earlier. Profit excluding severance costs was 31 cents a share, less than than the 32-cent average of 25 estimates compiled by Bloomberg. Sales declined 6.2 percent to $1.54 billion, topping the $1.41 billion average estimate.

Potash Corp. expects to sell 8.2 million metric tons to 8.6 million tons of potash this year. Canpotex Ltd., the offshore marketing agent for Potash Corp., Mosaic and Agrium, agreed to sell 700,000 tons of potash to buyers in China in the first half of this year, according to a Jan. 24 statement. Saskatoon-based Canpotex didn’t disclose a price.

--Editors: Simon Casey, Jasmina Kelemen