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Potash Corp. Cuts Profit Forecast Amid ‘Market Uncertainty’

October 11, 2013
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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.

Uralkali’s price for India from last month was $375 a ton, a 12 percent discount to the level set at the start of the year with BPC, the fertilizer producer’s press-service said.

 

Suppliers Struggling

 

"The suppliers are struggling to find buyers willing to commit in many markets apart from Brazil," Argus FMB Potash, an industry researcher, said last month. Purchasers elsewhere are holding back in case someone offers them a lower price, it said.

"While Uralkali heavily sells to China by rail, and ships potash to India, it leaves almost no space for other producers," VTB Capital analyst Elena Sakhnova said by phone.

Uralkali’s Baumgertner was arrested in Minsk on Aug. 26 after a meeting with the Belarusian prime minister. He was held in a Belarus KGB cell for a month before being moved to house arrest in a rented apartment, where he remains.

Billionaire Suleiman Kerimov, controlling 33 percent of the Berezniki-based potash producer with two business partners, has held talks on selling his stake since Baumgertner’s detention.

China gained a 12.5 percent holding in Uralkali last month after a unit of sovereign wealth fund China Investment Corp. exchanged bonds for shares in the company.




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