Potash Corp. of Saskatchewan Inc.
) posted earnings of 56 cents per share in the second quarter of
2014, down 23% from 73 cents in a year ago. Earnings, however,
surpassed the Zacks Consensus Estimate of 44 cents per share.
Revenues for the quarter fell roughly 11.8% year over year to
$1,892 million, but beat the Zacks Consensus Estimate of $1,667
Gross margin fell 23.7% to $747 million in the quarter from $979
million recorded in the comparable prior-year period.
Potash Corp. raised its earnings expectations for 2014. The
fertilizer company's shares rose as much as around 2.6% following
the earnings announcement, reflecting better-than-expected results
and upward guidance revision.
Sales volume remained flat year over year and came in at 2.5
million tons in the reported quarter. Sales volumes in North
America rose 13% year over year due to continued strength. In North
America, demand at the farm level was very strong through the
spring planting season. Offshore sales volume of 1.6 million tons
was impacted by backlogs. Average realized potash price was $263
per ton, down considerably from $356 per ton in the prior-year
quarter due to price erosion during the second half of 2013.
Sales volume rose 13.3% to 1.7 million tons from 1.5 million tons a
year ago, benefiting from improved production levels across all
facilities. Higher sales volumes led to gross margin of $304
million, up 10.1% year over year, marking the second-highest
quarterly nitrogen gross margin in the company's history. Average
realized prices for nitrogen products decreased 4.1% to $393 per
ton due to weaker benchmark prices contributing to lower
realizations for ammonia fertilizer products.
Sales volume of 0.8 million tons was down 9% year over year. Issues
related to weather, mining conditions and mechanical challenges
created difficulties in sustaining the supply of ore feed to the
facilities resulting in reduced production. Average realized
phosphate price was down 1.5% year over year to $509 per ton.
Potash Corp. exited the second quarter with cash and cash
equivalents of $107 million, down 83% year over year. Long-term
debt rose roughly 25% year over year to $3,711 million.
Capital-related spending was $199 million during the reported
quarter compared with $354 million in the year-ago quarter as
spending related to Potash Corp's multi-year potash expansion
program neared completion. Potash Corp. repurchased 17.5 million
shares during the second quarter and completed its share buyback
program announced in Jul 2013.
Potash Corp., which is among the prominent players in the
fertilizer industry along with Agrium (
), increased its annual gross margin estimate for potash for 2014
to $1.2-$1.4 billion (from $1.1-$1.3 billion) and annual sales
volumes to 8.9-9.2 million tons (from 8.3-8.7 million tons). The
company aims to achieve its 2014 target of reducing per-ton cash
costs by $15-$20 (from 2013's levels) although the third quarter
will reflect its normal seasonal increase as it will complete its
required maintenance downtime.
The company also raised its 2014 global shipment expectations to
56.5-58 million tons from its earlier view of 55-57 million tons on
the basis of record first-half demand and an improved second-half
For nitrogen, the company raised its gross margin expectation
for the rest of 2014. Sales volume is expected to outpace
prior-year levels and act as a continued tailwind through the
For phosphate, the company expects strong import demand from
India. Potash Corp. believes that the closure at Suwannee River in
the third quarter will keep its sales volumes at lower levels
through the remainder of the year while reduced accelerated
depreciation charges are anticipated to result in improved per-ton
cost of goods sold and increased margins.
The company revised its selling and administrative expenses and
finance costs to a range of $235-$245 million and $175-$185
For the third-quarter of 2014, the company expects earnings to be
in the range of 35 cents to 45 cents per share and increased its
earnings guidance for 2014 to $1.70-$1.90 per share from
$1.50-$1.80 per share expected earlier.
Potash Corp. is a Zacks Rank #3 (Hold) stock.
Some other stocks worth considering in the fertilizer industry
include Yara International ASA (
) and Chemical & Mining Co. of Chile Inc. (
). While Yara International sports a Zacks Rank #1 (Strong Buy),
Chemical & Mining holds a Zacks Rank #2 (Buy).
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