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PotashCorp lifts profit outlook, Q2 earnings beat expectations

PotashCorp lifts profit outlook, Q2 earnings beat expectations

Photo by Reuters

25th July 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Canadian fertiliser producer Potash Corp of Saskatchewan (PotashCorp) this week reported a near 27% drop in second-quarter profit at $472-million, or $0.56 a share, as lower potash prices dragged revenue down.

However, the results for the period ended June 30 beat analyst expectations and improving market conditions prompted the company to lift its full-year profit guidance for the year.

The Saskatoon, Saskatchewan-based company said all three of its critical crop nutrient divisions posted stronger performances, benefitting from improved quarter-over-quarter potash and nitrogen pricing and cost efficiencies.

The company on Thursday reported that sales fell to $1.89-billion from $2.14-billion, but came in ahead of the $1.68-billion analysts were expecting. Analysts on average also expected earnings of $0.43 a share.

PotashCorp said its gross margin fell to $747-million from $979-million in the comparable period a year earlier, with the gross margin for potash falling 36%, on lower prices compared with a year earlier.

Average potash prices were $263/t in the quarter, down $93/t from a year earlier, and up $13/t from the first quarter of the year.

The global potash market showed signs of recovery from a slide in prices, owing to recent years of soft demand, soft grain prices, growing supplies and a period of market uncertainty following last year's breakup of rival Belarusian Potash Company.

"Robust global fertiliser demand provided a supportive earnings environment during the quarter. Performance in all three nutrient segments improved from the beginning of the year and resulted in our second-quarter earnings exceeding the upper end of our guidance range. Although results were below those of the same period last year, an improving price environment and – in the case of our potash and nitrogen businesses – cost efficiencies contributed to our bottom line,” PotashCorp president and CEO Jochen Tilk said.

Former Inmet Mining chief Tilk took the reins as the company’s new president and CEO from July 1, replacing Bill Doyle.

The company raised its outlook for the second half of the year, saying that it expected global potash shipments to rise to between 56.5-million tons and 58-million tons on the strength of record first-half demand.

The company said it had started the second half of the year with a strong domestic order book and that Canpotex, a potash-marketing cartel comprising PotashCorp, Agrium and Mosaic, was fully committed in offshore markets through the third quarter. Further, producer inventories in North America ended the first half at their lowest level since 2011 and were expected to remain tight as scheduled maintenance downtime was expected to limit output for most producers in a period of relatively robust demand.

PotashCorp expected a profit of between $0.35 and $0.45 a share for the current quarter, in line with the average analyst expectation of $0.40 a share. Full-year profit was expected to range between $1.70 and $1.90 a share, up from its previous guidance of $1.50 to $1.80 a share and in step with the $1.71 a share analysts were expecting.

PotashCorp’s NYSE-listed stock on Friday traded at $36.51 apiece, having gained 10.22% since the start of the year.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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