PotashCorp reports lower Q3 income on higher taxes, disappointing offshore investments
TORONTO (miningweekly.com) – The world’s largest fertiliser company PotashCorp of Saskatchewan on Thursday reported lower third-quarter earnings for the three months ended September 30, as increased taxes and a disappointing performance from its offshore investments weighed on results.
The Saskatoon, Saskatchewan-based miner reported earnings of $317-million, or $0.38 a share, 11% lower when compared with earnings of $356-million, or $0.41 a share, a year earlier.
PotashCorp reported that sales rose 8% year-on-year to $1.64-billion, up from $1.52-billion in the same period last year, with “all key markets engaged”.
Analysts had on average expected earnings of $0.42 a share on revenue of $1.53-billion.
The global potash market showed signs of recovery from a slide in prices, owing to recent years of soft demand, soft grain prices, growing supplies and a period of market uncertainty following last year's breakup of rival Belarusian Potash.
Unlike 2013, when global potash demand stalled owing to market uncertainty, this year’s third quarter saw increased buying, with greater demand in Asian and Latin American markets, leading to higher shipments from North American producers.
Crop-nutrient purchasing activity in North America remained healthy as dealers worked to position product in advance of anticipated fall requirements.
Global potash shipments through the first nine months of 2014 were at all-time highs and during the third quarter, typical maintenance downtime further tightened market fundamentals and resulted in prices moving higher in all major spot markets.
In nitrogen, strong global demand and supply constraints in key exporting countries led to higher prices for ammonia. Improved fundamentals contributed to higher prices for urea and related products compared with the prior year, despite greater supply availability in urea causing prices to show signs of seasonal softness at the end of the period.
Phosphate prices for the third quarter were stronger when compared with the previous year, given healthier demand and the influence of higher input and production costs.
However, despite improving markets, PotashCorp narrowed its full-year profit forecast to between $1.75 and $1.85 a share, from the previous range of $1.70 to $1.90 a share.
The company also revised downward its expected income from offshore investments in Israel, Chile and Jordan to $205-million to $215-million, saying tax changes in Chile and Israel would impact on earnings and dividend distributions.
The Chilean tax change was also expected to impact on the company’s yearly effective tax rate, which was now expected to be in the range of 27% to 29%.
PotashCorp had also raised its expected potash sales volume for the full year to between 9-million tonnes and 9.2-million tonnes.
“The potash market has exhibited strong growth this year, challenging global supply and logistics. We are working to ensure we have the flexibility to respond to potash demand in 2015 – which we expect to be another strong year,” PotashCorp president and CEO Jochen Tilk said.
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