Profits Drop 80 Percent for World’s Largest Fertilizer Market
October 27, 2009 Bloomberg
Potash Corp. of Saskatchewan Inc., the largest fertilizer maker, said profit plunged 80 percent and forecast fourth-quarter earnings that trailed analysts’ estimates amid slumping demand for its namesake crop nutrient.
Net income tumbled to $248.8 million, or 82 cents a share, in the third quarter from $1.24 billion, or $3.93, a year earlier, the Saskatoon, Saskatchewan-based company said today in a statement. The average estimate of 18 analysts surveyed by Bloomberg was for profit excluding some items of 80 cents a share. Sales fell 64 percent to $1.1 billion.
Chief Executive Officer Bill Doyle has cut potash output as farmers and distributors in the U.S. slow purchases of the nutrient in anticipation of even lower prices. China, the world’s largest importer of seaborne supplies of the form of potassium, has essentially halted purchases, said Edlain Rodriguez, an analyst at Broadpoint AmTech in New York.
“This is the continuation of a bad year — the focus has shifted to 2010,” Rodriguez said today in a telephone interview. “Until China comes in, the fundamentals of the potash market won’t change.” Rodriguez rates Potash shares a “buy” and has a 12-month per-share price target of $116.
Potash forecast fourth-quarter per-share profit of 65 cents to 85 cents. Analysts had expected $1.18, on average.
Terra Industries Inc., a U.S. maker of nitrogen-based fertilizers, said today its third-quarter net income plunged 73 percent to $45.9 million, or 46 cents a share, from a year earlier, as crop nutrient prices fell.
“Fertilizer producers as a group have been consistently bullish about the speed and extent of a recovery,” Mark Connelly, a New York-based analyst at Sterne, Agee & Leach Inc., said. “They’ve also been consistently ahead of reality.”
Potash Corp. said global sales of potash next year will be about 50 million metric tons, down from its previous forecast of 50 to 55 million tons.
“The uncertainty among fertilizer buyers has lasted far longer than we anticipated, but cannot continue indefinitely,” Doyle said. “Our focus is on preparing for the demand rebound that we believe will inevitably follow.”
Potash Corp., which also produces phosphates and nitrogen- based fertilizer, said an eventual settlement of contract talks with China will increase demand for the nutrient.
Potash, Mosaic Co. and Agrium Inc., North America’s largest fertilizer producers, market potash outside of the continent through Canpotex Ltd., a joint venture, and have historically adopted terms agreed upon in talks between China and BPC.
Farmers in the U.S., Australia and Brazil have scaled back fertilizer purchases as corn, soybean and wheat prices fell from record highs last year.
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