Potash Corp. cuts profit hopes as earnings slide
Potash Corporation of Saskatchewan Inc. (NYSE & TSX:POT) reported a sharp drop in second-quarter earnings on Thursday as well as lower than anticipated profits.
Earnings for the Canadian fertilizer producer in the quarter fell to $522 million, or 60 cents per share, down from $840 million, or 96 cents per share in the same period last year.
In a statement, Potash Corp president and chief executive Bill Doyle said that while the results reflect strong underlying performance, earnings were impacted by a $341-million impairment recorded on the company’s investment in China’s Sinofert Holdings Ltd.
Increased demand for potash, including what the company calls unprecedented offshore sales, resulted in gross margin of $1.2 billion for the quarter, the third-best quarterly total in company history.
“Although certain notable items reduced our reported earnings, the second quarter highlighted the underlying strength of our business,” said Doyle. “The acceleration in potash demand that took hold at the end of the first quarter allowed us to deploy our capacity, delivering strong results and creating value for our shareholders.”
Resource companies worldwide have become edgy as growth in major buyers China and India slows down, accelerating international demand for commodities.
In March, India – the number one importer of potash at 6 million tonnes- announced it was cutting state subsidies for potash and phosphate-based fertilizer by a fifth.
And in May, comments by BHP Billiton’s chief executive officer, Marius Kloppers, didn’t inject optimism in the industry either. He suggested the company could postpone major spending plans and delay the construction of Jansen potash mine in Saskatchewan, Canada.
Potash Corp. is having a conference call to discuss the second-quarter financial report at 1:00 pm ET.