PotashCorp expects potash sales volumes to rise – 8.6 mt in 2016 to 8.7 – 9.4 mt in 2017
Thu Jan 26, 2017 | 8:54am EST
Potash Corp outlook disappoints, fertilizer slump deepens
By Rod Nickel and John Benny
Jan 26 Canada’s Potash Corp of Saskatchewan Inc forecast a less profitable year on Thursday than analysts expect, and reported a surprisingly big drop in quarterly profit as a deep slump continued in the oversupplied fertilizer sector.
U.S.-listed shares of the world’s biggest fertilizer producer, which reported a 22 percent slide in fourth-quarter sales, dropped 4 percent in premarket trading.
Potash prices are hovering around their lowest in nearly a decade, amid bloated capacity and weakening farm incomes, spurring consolidation. Adding to miners’ problems, several new low-cost mines are scheduled to start production in the coming years, starting in 2017.
Potash Corp said it expected earnings of 35 cents to 55 cents per share in 2017, including costs related to its pending merger with Agrium Inc of 5 cents per share.
The forecast was well short of analysts’ average expectation of 62 cents a share, according to Thomson Reuters I/B/E/S.
The midpoint of Potash’s 2017 forecast, 45 cents, would be the second-lowest annual profit in 13 years.
“We remain concerned these so-called ‘trough’ earnings levels could linger for years,” said BMO analyst Joel Jackson, in a note.
With prices weak, demand for potash is strong in key markets, China and India. The company expects potash sales volumes to rise in 2017 to between 8.7 million and 9.4 million tonnes, from 8.6 million in 2016.
Potash Corp and rival Agrium announced in September a plan to merge, combining Potash Corp’s fertilizer capacity and Agrium’s farm retail network, the world’s biggest.
Agrium said on Wednesday the merger had received regulatory approval from Russia and Brazil but was awaiting approval from the United States, Canada, China and India.
Potash Corp Chief Executive Jochen Tilk said the deal was still expected to close in mid-2017.
The company said the value of certain assets was being assessed for potential impairment. The assessment, to be completed by late February, will focus on phosphate assets, Potash Corp said.
The company’s fourth quarter net earnings plunged to $59 million, or 7 cents per share, from $201 million, or 24 cents per share, a year earlier.
Analysts on average had expected earnings of 9 cents per share.
The company’s sales fell to $1.06 billion from $1.35 billion.