PotashCorp sales, profit slip in fourth quarter
The cutting face of a potash borer is shown in a deep shaft at the Rocanville potash mine, owed by the PotashCorp of Saskatchewan, in Rocanville, Sask., in this 2007 photo. (Troy Fleece / THE CANADIAN PRESS)
Published Thursday, January 31, 2013 10:49AM CST
Potash Corp. profits fell by 38 per cent during the fourth quarter, missing analyst expectations, as customers held off on buying crop nutrients while international sales contracts were worked out.
The fertilizer producer's net income was US$421 million, or 48 cents per share during the last three months of 2012. Analysts surveyed by Thomson Reuters were on average expecting PotashCorp to post earnings of 57 cents per share.
During the same quarter of 2011, the Saskatoon-based fertilizer giant posted earnings of $683 million, or 78 cents per share.
CEO Bill Doyle said demand for all three major types of fertilizer -- potash, phosphate and nitrogen -- was affected by "the absence of significant immediate needs and amid lack of direction, particularly in phosphate and potash."
"Despite these temporary challenges, we operated with a consistent approach -- temporarily slowing potash production and leveraging our diversified product mix in our other nutrients -- to best position our company for the expected rebound in fertilizer demand in 2013."
Potash, the mineral from which the company derives its name, normally sees a dip in demand around this time of year, but it was made more severe this time as buyers waited for contracts to be settled before committing to purchase supply.
Shipments to offshore markets declined by 43 per cent during the fourth quarter compared to a year earlier. However, domestic shipments in North America rose by 38 per cent.
However, things are looking up. A recent contract settlement with China has boosted buyer confidence, and the company expects global potash shipments in 2013 to be between 55 million and 57 million tonnes -- well ahead of the 51 million tonnes it shipped last year.
Revenue for the quarter was $1.64 billion, down from $1.86 billion a year earlier.
Also Thursday, the company provided earnings estimates for the first quarter of 2013 and the full year, calling for between 50 and 65 cents per share in the three months ending March 31 and between $2.75-$3.25 per share for full year.
The consensus estimate has been for 64 cents per share of earnings in the first quarter and $3.27 per share of net earnings, or $3.19, for all of 2013
On Wednesday, Potash announced it will raise the quarterly dividend to shareholders to 28 cents per share, up 33 per cent or seven cents per share from the previous rate.
It was also one of three companies -- along with Calgary-based Agrium (TSX:AGU) and Minnesota-based Mosaic Co. (NYSE:MOS) to settle U.S. antitrust suits filed in 2008.
Potash and Mosaic each agreed to pay $43.75 million and Agrium agreed to pay $10 million.
The three fertilizer companies deny any wrongdoing and say they decided to settle to avoid the cost and distraction of a protracted legal fight.
Potash's results included a $41 million, or four-cent-per-share, provision for the settlement during the fourth quarter.
The company's full-year earnings for 2012 were $1.2 billion, or $2.37 per share. That included a second-quarter $341-million writedown related to its investment in Sinofert Holdings Ltd. in China.
The 2012 profit was down substantially from 2011, when PotashCorp's net income was $3.1 billion or $3.51 per share.
The company says its offshore investments in Jordan, Israel and Chile contributed $94 million to earnings in the fourth quarter of 2012. For the full year, contributions from these investments -- and a dividend from Sinofert -- reached a record $412 million.
Potash shares fell two per cent to $42.32 in late-morning trading on the Toronto Stock Exchange.