Potash Corp. Earnings Fall on Nitrogen Prices

Potash Corp. of Saskatchewan Inc. posted a 12% drop in its second-quarter profit on Thursday and scaled back the top end of earnings guidance for the year as weaker nitrogen prices impacted results.

The Saskatoon, Saskatchewan company said increased global supply weighed on nitrogen prices in the quarter, though pricing for potash and phosphate—its two other key fertilizer nutrients—improved from a year earlier.

Potash Corp. said quarterly potash sales volumes of 2.5 million metric tons were in line with year-earlier levels, while its average realized price improved to $273 a ton from $263. Potash gross margin was $417 million, up from $395 million a year earlier.

It said sales volumes for nitrogen were also similar to year-earlier levels, at 1.6 million tons, while average nitrogen prices fell 15%. Phosphate sales volumes fell 20%, it said, though prices rose almost 9%.

Potash Corp. earned $417 million, or 50 cents a share, in the latest period, the midpoint of the company's guidance range. Analysts were expecting 51 cents a share.

Revenue fell 8.5% to $1.73 billion, just ahead of the $1.71 billion analysts expected.

For the year, Potash Corp. said it now expects earnings of between $1.75 and $1.95 a share, compared with its previous view of $1.75 to $2.05 a share.

It narrowed its full-year sales volume estimates for potash to between 9.3 million and 9.6 million tons from previous guidance of 9.2 million to 9.7 million. It said also lowered the high end of its potash gross margin range, now guiding for $1.5 billion to $1.7 billion, due to lower spot prices in some markets in the quarter.

As reported in late June, Potash made a takeover approach to German salt and fertilizer company K+S AG worth around $8.75 billion. The approach was rejected.

Potash Corp. said Thursday it still believes a business combination with K+S would benefit the companies and remains interested in holding talks with K+S management. It noted it hasn't yet decided to make a formal offer.

Write to Judy McKinnon at [e-mail]

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