Potash Raises Earnings Forecast as Fertilizer Buyers Return

Jul 24, 2014 4:18 pm ET

(Updates share price in seventh paragraph.)

July 24 (Bloomberg) -- Potash Corp. of Saskatchewan Inc., the world’s largest fertilizer producer by market value, raised its full-year earnings forecast and said Chinese demand for its namesake crop nutrient will be more than previously expected.

Profit will be $1.70 to $1.90 a share, the Saskatoon, Saskatchewan-based company said today in a statement, up from its April guidance of $1.50 to $1.80. The shares rose 4.6 percent in New York.

The company increased its forecast for industrywide potash shipments to as much as 58 million metric tons, up from as much as 57 million previously. Latin American demand may reach a record this year and Chinese usage will now exceed 12 million metric tons, it said.

Buyers of potash, a form of potassium that strengthens plant roots and boost drought resistance, have returned to the market after a plunge in prices last year. That slump followed a move by Russia’s OAO Uralkali, the largest producer, to abandon a sales pact and boost sales.

Since then, Potash Corp. has reduced its production capacity while North American stockpiles have fallen. Uralkali last month reduced its full-year output target by about 8 percent to help support prices.

“Prices are still down year-on-year but are inching higher,” Mark Gulley, a New York-based analyst at BGC Partners LP, said in an interview before the results were released. “Pricing stability is drawing buyers back to the potash market.”

Tight Supply

Potash Corp. rose 0.3 percent to C$38.92 at the close in Toronto. The shares have gained 11 percent this year.

For the second quarter, net income dropped to $472 million, or 56 cents a share, from $643 million, or 73 cents, a year earlier. The average of 24 analysts’ estimates compiled by Bloomberg was for profit of 45 cents a share.

Sales fell 12 percent to $1.89 billion, beating the $1.68 billion average estimate.

The company said that North American inventories ended the first half at their lowest since 2011 and will remain tight as scheduled maintenance limits output.

Potash Corp. also produces phosphate and nitrogen fertilizers.