Potash Corp. of Saskatchewan (POT-T, POT-N) reported lower first quarter profits on the back of reduced potash sales and production volumes, revising its 2012 earnings guidance.
First quarter profit totalled US$491 million, down from US$732 million a year ago.
Earnings per share were 56¢, well below the consensus of 63¢, and last year’s record first-quarter earnings of 84¢ per share.
Canada’s largest fertilizer company points to the sluggish buying pace in the global markets for its poor results.
“Fertilizer buyers continued to move cautiously at the beginning of the year, especially with potash purchases, which impacted out performance during the quarter,” said PotashCorp’s president and CEO Bill Doyle, in a statement.
Potash sales amounted to 1.2 million tonnes, down from the 2.8 million tonnes sold a year ago.
This was the lowest potash sales volume since the fourth quarter of 2009, analyst Joel Jackson of BMO Capital Markets says in a note.
This resulted from a delay of purchase commitments in the major markets. For instance, China settled new supply contracts in late March, and India delayed some the shipments in its existing contracts until the second quarter of the year.
In North America, distributors deferred major buying ahead of the spring planting season, buying only 400,000 tonnes compared to the purchase of 1.1 million tonnes a year ago, says PotashCorp.
Whereas, offshore clients bought 849,000 tonnes compared to 1.7 million tonnes in the first quarter of 2011.
Slower sales led to reduced production. PotashCorp closed its Lanigan, Rocanville and Allan facilities for 29 inventory-related downtime weeks.
Total potash production for the first session totalled 1.6 million tonnes, compared to 2.6 million tonnes a year ago.
Average realized potash price was US$435 per tonne, up 19% from last year’s first quarter.
The slow down in the global market led the company to revise its 2012 earnings guidance to US$3.20-US$3.60 per share from US$3.40-US$4.00 per share, previously.
The revision is mainly caused by “lower expectations (about 600,000 tonnes) for potash shipments with a reduction in expectations from North America and India,” says Johnson of BMO.
While demand was poor for most of the first quarter, Doyle says he expects it to pick up, “supporting increased volumes through the remainder of the year.”
On the Q1 news, PotashCorp closed down 3% to $42.25 per share as 2.5 million shares changed hands.
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