Potash Corp., the world’s second-largest producer of its namesake fertilizer, cut its full-year profit forecast after crop-nutrient prices declined and China delayed signing key supply contracts.
Profit excluding one-time items will be 60 cents to 80 cents a share in 2016, the Saskatoon, Saskatchewan-based company said Thursday in a statement. That compared with a January estimate of 90 cents to $1.20. The forecast for potash production also was reduced. The shares fell in pre-market trading in New York.
Potash Corp. said first-quarter net income fell to 9 cents a share from 44 cents a year earlier. Sales dropped to $1.21 billion from $1.67 billion, exceeding the $1.1 billion average estimate.
“Lower prices for all nutrients weighed on our performance for the quarter and contributed to a more subdued outlook for the year,” Chief Executive Officer Jochen Tilk said in the statement. “We see better conditions for the remainder of 2016, but recognize that the timing and strength of a recovery is still unfolding.”
The delay in supply contracts with China, limited demand in India and “cautious buying patterns in spot markets” undercut the quarter’s lower potash deliveries, the company said. Global phosphate markets were “muted” amid high inventories in India and slack buying in Brazil.
Potash Corp. tumbled 5 percent to $17.31 at 6:59 a.m. in New York.
Buyers in China, the largest potash consumer, seem unwilling to enter into contract discussions until existing, higher-priced inventories are sold off, Morgan Stanley analyst Vincent Andrews said in a note last month. The annual supply accord is closely watched by the global market because it includes a fixed price that other countries use as a floor for their own negotiations.
Spot prices for potash have tumbled in the past year amid a slump in agricultural commodities. The crop-nutrient is used by farmers to strengthen plant roots and boost drought resistance. The company is reducing production of potash and lowered the forecast for annual sales volume to 8.3 million to 8.8 million metric tons.
- The 2016 capital-expenditure forecast was cut by about $100 million.
- The average potash price fell to $178 a ton in first quarter from $284 a year earlierr
- Second-quarter profit will be 15 cents to 25 cents a share, compared with the average of 27 cent forecast by analysts