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Potash Corp. Cuts Profit Forecast Amid ‘Market Uncertainty’

October 11, 2013

Potash Corp of Saskatchewan Inc., North America’s largest producer, cut its profit forecast as estimates of lower prices for its main product delayed sales.

The company declined in after-market trading after saying yesterday that third-quarter earnings would be about 41 cents a share, down from the 45 to 60 cents estimated in July.

The world potash market was shaken at the end of that month after OAO Uralkali, the biggest producer, exited a trading joint venture with its Belarusian rival. The Russian company also said it would increase output, sending fertilizer shares plunging around the world. Potash Corp. is down 30 percent since then.

The cut in profit estimate "primarily reflects lower-than- forecasted potash sales volumes late in the quarter as buyers continued to defer significant purchases amidst near-term market uncertainty," the Saskatoon, Saskatchewan-based company said in a statement yesterday. The average of 27 estimates by analysts compiled by Bloomberg was 47 cents, excluding one-time items.

Potash Corp., which fell to $31.70 in after-market trading, is scheduled to report quarterly earnings Oct. 2. Eight analysts recommend buying the stock, 18 rate it a hold and five recommend selling the company, according to data compiled by Bloomberg.

Uralkali Chief Executive Officer Vladislav Baumgertner in July said the price of potash, which strengthens plant roots and improves drought resistance, may fall to less than $300 a metric ton as his company moves to full output to grab market share. On Sept. 10, Uralkali tempered that view by saying it sees support for prices staying above $300 a ton on Asian and Brazil demand. The company ran at an average 70 percent of capacity in 2012.


Strengthen Roots


The $20 billion global market for potash was "paralyzed" by Uralkali’s decision to exit the Belarusian Potash Co. venture with its partner Belaruskali, according to Potash Corp. Chief Financial Officer Wayne Brownlee, speaking on Sept. 18.

The spot price in China fell to $325 a ton in September, according to Uralkali, compared with $340 a ton in July. The last contract that BPC signed with China was at $400 a ton. The venture partners had controlled 40 percent of the market.

Uralkali shipped 800,000 tons of potash in August including sales to China and India, the two largest potash consumers.

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