Potash Misses 1Q Estimates - Analyst Blog


Potash Corporation of Saskatchewan Inc . ( POT ) earned 56 cents per share in the first quarter of 2012, down from 84 cents a year ago, missing the Zacks Consensus Estimate of 65 cents. The results were impacted by lower sales of potash and lower production volumes.

Sales in the quarter came in at $1,746 million, down 20.8% year over year, also missing the Zacks Consensus Estimate of $1,829 million.

The company faced the same challenging conditions with fertilizer buyers around the world moving cautiously, choosing to defer purchases rather than positioning inventory. This has led to an increase in demand for potash and phosphate towards the end of the quarter, much later than what the company expected.

Segment Review

Potash: Sales volumes of 1.2 million tons in the quarter dropped significantly from 2.8 million tons in the year ago quarter. This resulted in gross margins coming down by 56% year over year to $327 million in the quarter . Average realized potash price was $435 per ton, up 19% from the prior-year quarter.

Phosphate: Sales volumes increased by 4.1% over the prior-year quarter to 0.9 million tons. Weak sales in North America were offset by higher offshore sales coupled with strong feed and industrial volumes. Gross margins inched up 1.3% to $152 million, driven by Potash's diverse product offerings. Average realized phosphate price was $607 per ton, up 9% year over year.

Nitrogen: Sales volumes for the segment decreased 3.7% to 1.3 million tonnes on account of reduced production at Geismar. Gross margin increased 7.9% to $219 million in the reported quarter. Average realized prices for nitrogen products rose 4% to $383 per ton, led by huge demand for urea, nitrogen solutions, nitric acid and ammonium nitrate, and limited supply also increased their prices further.


Cash and cash equivalent amounted to $417 million as of March 31, 2012, versus $430 million at the end of December 31, 2011. Long-term debt stood at $3,457 million as of March 31, 2012 compared with $3,705 million as of December 31, 2011.


The company expects 2012 earnings to be in the range of $3.20 to $3.60 per share, down from its previous forecast of $3.40 to $4.00. Potash Corp. expects second-quarter 2012 earnings to be in the range of 90 cents to $1.10 a share.

Potash Corp expects total global potash demand to be in the range of 53 million to 56 million in 2012. The company anticipates 2012 gross profits from its key potash business to be in the range of $2.6 billion to $2.9 billion.

Potash Corp expects sales volumes to be in the range of 8.8 million to 9.2 million tons for 2012. 

The company has reaffirmed its earlier expectations of selling and administrative expenses in the range of $225-$245 million. It expects finance costs in the range of $100-$120 million and capital expenditures excluding capitalized interest to be approximately $2.1 billion in 2012.

Potash Corp. which competes with BASF ( BASFY ) and Mosaic Co . ( MOS ) currently retains a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating. Currently, we have a long-term (more than 6 months) Neutral recommendation on the stock.

BASF SE ( BASFY ): Free Stock Analysis Report
MOSAIC CO/THE ( MOS ): Free Stock Analysis Report

POTASH SASK ( POT ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BASFY , MOS , POT



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