Potash Corp. of Saskatchewan Inc.
) posted lower profit in the first quarter of 2014 due to lower
realizations in all three nutrient segments. Profit for the
reported quarter slid roughly 39% year over year to $340 million
or 40 cents per share from $556 million or 63 cents per share a
The reported profit included 6 cents per share special dividend
from the company's investment in Israel Chemicals Ltd. (ICL) as
well as 4 cents per share non-cash impairment charge related to
its investment in Sinofert Holdings Ltd.
Barring one-time items, Potash Corp. posted earnings of 38
cents per share, exceeding the Zacks Consensus Estimate of 35
Revenues for the quarter fell roughly 20% year over year to
$1,680 million, but beat the Zacks Consensus Estimate of $1,548
Gross margin fell 35% to $565 million in the quarter from $867
million recorded in the comparable prior-year period.
The fertilizer company's shares rose as much as around 1.4% in
the trading session following the earnings announcement.
Sales volumes rose roughly 4.5% year over year to around 2.3
million tons in the reported quarter led by strong buyer
engagement. Sales volumes rose in North America as the company
leveraged its extensive warehousing and distribution capabilities
to meet strong demand. Sales volumes however fell offshore in the
reported quarter as delayed Chinese and Indian contracts and rail
constraints limited shipments. Average realized potash price was
$250 per ton, down 31.1% from the prior-year quarter.
Sales volume rose 6.7% to 1.6 million tons from 1.5 million tons
a year ago, benefiting from strong operating rates across all of
its nitrogen facilities and the benefit of a full quarter of
production at the company's Geismar ammonia plant. Average
realized prices for nitrogen products decreased 21.1% to $344 per
ton due to weaker market fundamentals.
Sales volume of 0.8 million tons was up 11.1% year over year.
Average realized phosphate price was down 11.8% year over year to
$484 per ton. Weaker fertilizer market conditions through the
second half of 2013 weighed on the company's first-quarter
Potash Corp. exited the first quarter with cash and cash
equivalents of $533 million, down 9.8% year over year. Long-term
debt rose roughly 7% year over year to $3,709 million.
Capital-related spending was $224 million during the reported
quarter compared with $496 million in the year-ago quarter as
spending related to Potash Corp's multi-year potash expansion
program neared completion. Potash Corp. repurchased 11.7 million
shares during the first quarter and completed around 60% of its
expected total repurchases under the program at the end of the
Potash Corp., which is among the prominent players in the
fertilizer industry along with
), increased its annual estimate for gross margin for potash to
$1.1-$1.3 billion and sales volumes to 8.3-8.7 million tons based
on slightly improved potash pricing and demand outlook.
For nitrogen, the company believes that typical seasonal
trends will result in slightly weaker margins through the second
half of 2014, although higher sales volumes expectations should
partly offset this impact. For full-year 2014, the company
expects total gross margin to remain historically high but lag
For phosphate, the company expects prices for all products to
be below those of 2013. Potash Corp. remains concerned by the
weaker weather conditions. The planned closure of a chemical
plant at the company's White Springs operation is expected to
result in slightly lower sales volumes in the second half of 2014
and keep its non-cash costs elevated.
The company raised its annual estimate of income from offshore
investments to a range of $230-$240 million to include the
special dividend received from ICL during the first quarter.
Potash Corp. also adjusted its full-year 2014 earnings
guidance to $1.50-$1.80 per share, which includes second-quarter
net income in the band of 40 cents to 45 cents per share.
Potash Corp. is a Zacks Rank #2 (Buy) stock.
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