Potash Corp. posts second-highest Q3 earnings

Rising prices for crop commodities that have driven up demand for potash contributed to the second-highest third quarter earnings in the history of Potash Corporation of Saskatchewan (POT-T, POT-N).

The world’s largest and lowest-cost publicly traded potash producer posted third-quarter earnings of $1.32 per share or $402.7 million — far surpassing the $0.82 per share or $247.9 million of the same period last year.

In the first nine months of the year, earnings of $4.34 per share or $1.3 billion exceeded all previous full-year totals with the exception of 2008. Gross margin in the third quarter reached $563.3 million and for the first nine months totaled $1.9 billion.

Earnings before interest, taxes, depreciation and amortization, or EBITDA, totaled $635.6 million in the third quarter, while cash flow prior to working capital changes tallied $399.6 million, both higher than in the same periods in 2009.

In the key North American potash market, quarterly sales volume of 0.7 million tonnes was almost three times higher than in the year-ago quarter.

Looking ahead the company forecasts net income for 2010 will reach $5.75-$6.00 per share.

The company also anticipates that “restocking of the distribution chain” will get underway next year and is forecasting that global potash demand will range between 55 million tonnes and 60 million tonnes in 2011.

The company says earnings in 2011 should fall in the $8.00-$8.75 per share range.

While global crop production this year is expected to reach the third-highest level on record, grain stocks are falling, making fertilizers more important than ever, Potash Corp. stated in its earnings release.

“With more than 50% of global brownfield expansion capacity under development we believe we have a unique opportunity in the coming years to capture a significant share of new growth in demand for potash,” the company explained, noting that global potash production capabilities are “limited” and “bringing a Greenfield mine into production is a seven- to 10-year proposition.”

According to UBS Investment Research, the company holds potash reserves that are sufficient for more than 100 years of production. Potash Corp. is also the third-largest phosphate producer in the world, with reserves that should last for more than fifty years.

UBS has a 12-month target price on the stock of US$170.00 per share, unchanged by the company’s financial results. At press-time in New York Potash Corp. was trading at US$143.49.

In Toronto Potash Corp. was trading at $147.77 per share.