Vancouver — Potash Corp. of Saskatchewan (POT-T, POT-N) delivered record second-quarter earnings of US$175.1 million (US$1.65 per diluted share) on continued strong sales of nitrogen and phosphate, investment returns and favourable tax rate changes.
Performance for the latest quarter surpassed the previous record of US$164.2 million set in the second quarter of 2005.
A strengthening Canadian dollar negatively affected earnings in the quarter by boosting foreign exchange losses and driving up production costs in Saskatchewan. Offsetting this was a 42% increase in investments in foreign fertilizer chemical producers in Jordan, Chile and China. In addition, Saskatchewan provincial mining taxes were reduced by almost US$30 million in the latest quarter.
Market conditions for potash remained constrained over the quarter due to unresolved product pricing in China and India. The impasse also affected a number of markets in Southeast Asia and Latin America with product pulled from internal inventories and purchases delayed while pricing was monitored. North American market sales were also off over the quarter with consumption down 10-15%, attributable to lower crop commodity prices and decreased planting. The potash gross margin for the period was US$132.8 million, US$90.5 million below that of last year’s corresponding quarter.
Nitrogen and phosphate demand was below average as dealers worked through inventories. Nitrogen gross margin for the latest quarter was US$91.7 million, the second highest in the company’s history and just US$7.7 million short of the 2005 second-quarter record. Phosphate generated US$28.9 million in gross margin in this year’s second quarter, its second best performance since 1999 due to higher prices.
Potash Corp. anticipates negotiations for 2006 potash shipments from Canpotex, an offshore marketing company, to the Chinese company Sinofert to be settled soon; the parties have already agreed to a US$25-per-tonne increase. Pent up market demand is expected as customers look to replace depleted inventories.
Shares of Potash Corp. gained over 6.5% on the earnings report to close at around $106. The stock has traded in a 52-week range of $84.76 to $137.99.
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