Low prices push down earnings at Potash Corp

With potash prices hovering at $356/tonne, Potash Corp. sees its fourth straight quarter of lower-than-anticipated profits.

Shifts to be cut at Rocanville, Lanigan mines

Potash Corp. expects to finish the next quarter with potash inventory 'at its lowest mark in years'. (CBC)
Low prices and reluctant buyers in India and China are taking a toll on the world's biggest potash company.

Second quarter profits slumped today at Potash Corp.

For this quarter, analysts had predicted earnings between 79 and 81 cents a share. The Saskatoon-based fertilizer giant reported 73 cents a share this morning. Overall earnings to date for 2013 are $1.2 billion.

In what some analysts describe as a 'subdued' update this morning, Potash Corp. CEO Bill Doyle said he still believes global potash demand will bounce back.

Earnings downgraded

However, the company downgraded its earnings forecast for the rest of the year by 30 cents a share. It anticipates ending the year with earnings between $2.45 and $2.70 per share.

"India remains a challenge," said Doyle, who attributes low sales in India to politics. A weak rupee and fewer subsidies have made it more expensive for Indian farmers to buy fertilizer.

"The nutritional value and quality of India's crops is suffering, and recent data suggests yields are declining from already-low levels," said Doyle.

A production supervisor at the Potash Corp. mill in Rocanville, Sask. ((David Stobbe/Reuters))
By volume, shipments are still strong, but the company said prices for potash and other crop nutrients remain low. Its average realized potash prices sank to $356/tonne -- down $77 from the same time last year.

Cuts to production at Lanigan, Rocanville mines

"The tone is noticeably more bearish," said Jennifer Wood, an analyst at Altacorp Capital. She noted contracts with China have yet to be signed, and sales volumes are typically lower during the summer months.

To compensate, Doyle said workers in Saskatchewan can expect cuts to shifts, as well as normal maintenance shutdowns in the months ahead.

"We also are planning to operate our Lanigan and Rocanville facilities at reduced rates for the balance of the year," Doyle said. "We expect to exit the third quarter with our inventories at their lowest mark in years, and leave 2013 with supplies well below historical levels."

Earlier this week, the company also tried to sweeten the deal this week for investors, offering a two billion dollar share buyback plan, over the next 12 months.

Potash Corp. shares on the Toronto Stock Exchange dipped to just above $37/share when the markets opened this morning. They closed at $38.35.