Potash Corp of Saskatchewan Inc Company Overview
33 percent drop in quarterly profit was reported for Potash Corp of Saskatchewan Inc on Thursday and it also lowered its expectation for the year. This pulled down the shares of the top fertilizer maker in the world.
With almost 60 % decline in crop nutrient potash shipments has led to this big downfall in the first-quarter profit of Potash Corp’s, more than expected by analysts. The industry leader also cut down on its estimate for worldwide demand for potash in 2012 as well as lowered its forecasts for profits and shipments.
Bill Doyle, the Chief Executive issued a statement saying that the buyers moved cautiously in the start of the year, particularly with the purchase of potash. He also mentioned that even though they expected an improvement in fertilizer purchasing globally, it may not happen till the second half of the first quarter. The demand took longer than expected to emerge. He included that he expected an increase in potash demand to reinforce in the remaining part of the year.
However a few analysts are sceptical and this has prompted Robert Winslow, analyst for National Bank to cut rating on the shares of Potash Corp from “sector performs” to “underperform”.
Winslow wrote that they also expected strong buying in spring but feel that there is more risk of downside than of increase in prices. This view indicates the chances of further weakness in demand for fertilizer in the year. He trimmed his target price on Potash Corp stock from $45 to $42.
On Thursday Potash Corp shares in the New York Stock Exchange closed at $42.87, 3.2 percent lower, as its shares listed in Toronto fell by the same difference to C$42.25.
Disappointing Outlook to stock projection
The company is expecting their 2012 earnings in the range of $3.20 to $3.60 per share after an unsuccessful $39 billion hostile takeover attempt by the mining leader BHP Billiton. That is also below the earlier estimate of $3.40 to $4 and much less than the present analyst average estimate of $3.64.
PJ Juvekar Citigroup analyst wrote a note to clients saying that they believe that investor expectations is comparatively low going during the quarter, but the guidance cut 2012 was bigger than expected.
As per Thomson Reuters I/B/E/S the company expects its earning in second-quarter between 90 cents to $1.10 per share. Presently Wall Street is expecting earnings of $1.06 per share.
Potash Corp now forecasts total potash demand globally to be in the range of 53 million to 56 million tonne this year and its own volume of sales will be from 8.8 million to 9.2 million tonnes. The company had estimated sales of 55 million to 58 million tonnes globally in January, with its delivery about 9.2 million to 10 million tonne.
From its main potash business Potash Corp is expecting gross profits of $2.6 billion to $2.9 billion as to its previous estimate of $2.9 billion to $3.3 billion.
Saskatchewan-based Potash Company Saskatoon that also manufactures nitrogen and phosphate-based fertilizers is expecting collective gross profits of $1.3 billion to $1.5 billion from the two segments. They had earlier forecast a collected profit from the two segments as $1.3 billion to $1.6 billion. Outlook from Potash Corp differ the forecast made by its rival enterprise Mosaic Co. This company based in Minnesota is expecting its fertilizer sale to be at the top of an earlier made forecast.
Mosaic’s business concentrates more on the phosphate products and Potash Corp results on its phosphate operations have exceeded expectations of some analysts.
Profit Gaps - Lead to Stock Losses
Profit in the first-quarter fell to 56 cents from 84 cents a share or to $491 million from $732 million from the previous year. As stated by Thomson Reuters I/B/E/S Wall Street was expecting earnings of 63 cents a share.
Sales volume of potash fell to 1.2 million tonnes from 2.8 million tonnes for the quarter as compared to previous year. This transformation was a result of slow sales to China, where they were not able to seal a new contract till late March. India and North American buyers also delayed main potash purchases which is extensively used for increasing yields of various grains.
Even with the price of potash pricing fell slightly quarter-on-quarter basis in the spot market, Potash Corp stated that average realized potash price for ten went up almost 20 % from last year levels. The gains mirror the lower volume percentage shipped to contract markets India and China, who typically buy products at a lower price.
It is true that in the past few months’ potash prices are not as volatile as of other crop nutrients like nitrogen and phosphate. Potash Corp feels that the rates have gone down recently because of pressure of competitions and limited demand.
During the first quarter Potash Corp closed few of its potash mines to keep inventories in control. It said on Thursday that during the present quarter they expected no inventory