UpdatePotashCorp sees turnaround despite 69% drop in Q4 income

28 January 2010 15:08  [Source: ICIS news]

(adds updates throughout)

HOUSTON (ICIS news)--Despite suffering a 69% year-on-year fall in fourth-quarter net income due to the impact of the global economic downturn, Potash Corporation of Saskatchewan (PotashCorp) said on Thursday that it believes the quarter marked a turnaround in the global fertilizer industry.

PotashCorp, the world’s largest fertilizer maker, experienced a 41.7% drop in sales to $1.09bn (€773.9m), from $1.87bn in the fourth quarter of 2008, and watched net income fall 69.1% to $243.6m from $788.0m in the same period of the previous year.

"The fertilizer industry, like many other businesses, felt the impact of the global economic downturn in 2009," said PotashCorp president and chief executive Bill Doyle.

"While our earnings were well below our company's potential, we remain committed - as we have been for decades - to strategies that protect the long-term value of our assets,” Doyle said.

“These include the continued expansion of our potash capacity and matching production to market demand,” he added. “Our approach comes from enduring confidence that the world needs more food for its growing population, and we must be prepared to respond.”

The Canadian company said the fourth quarter of 2009 reflected the beginning of the recovery in fertilizers.

Strong crop margins - the result of improving commodity prices and lower input costs - appeared to refocus farmers and fertilizer dealers on the need to address nutrient shortfalls in the soils and distribution chain created by nearly 18 months of limited fertilizer purchasing.

“This was most apparent in North America as farmers, although limited by a shortened fertilizer application window resulting from a delayed harvest, began returning to more normal application rates,” Doyle said.

Potash gross margin of $206.2m for the fourth quarter and $730.4m for the full year was significantly below the $744.8m and record $3.1bn earned in the same periods of 2008, reflecting lower prices and an unprecedented decline in sales volumes, Doyle said.

Fourth-quarter sales of 1.1m tonnes represented more than one-third of the 2009 total of 3m tonnes, or 23% lower on a quarter-over-quarter basis. However, that reflected an improvement over the 65% decline experienced for the full year.

The company said it shipped 500,000 tonnes of potash to North American customers, a 30% increase over the same period last year, and 600,000 tonnes to offshore markets, which was 42% below fourth-quarter 2008 levels.

Canpotex Limited (Canpotex), the offshore marketing company for Saskatchewan potash producers, sold 36 percent of its volumes to India, 21 percent to Southeast Asia and 9 percent to Brazil. The remaining volumes were sold to other regions.

PotashCorp’s phosphate gross margin of $30.3m in the fourth-quarter was 73% less than the $110.4m generated in the same quarter of 2008. For the year, phosphate contributed $103.8m in gross margin, down 91% from the record $1.1bn generated in 2008.

Nitrogen generated $43.1m of gross margin in the fourth quarter, more than double the $17.9m earned in the final quarter of 2008. For the year, however, gross margin of $191.8 million was well below the record $737.4 million generated in 2008.

PotashCorp’s Trinidad operation, which benefits from long-term, lower-cost natural gas contracts and proximity to the US market, generated $27.1m in fourth-quarter gross margin and $105.3m for all of 2009.

Total average realized nitrogen prices for the fourth quarter were 34% below the same quarter last year.

Nitrogen sales volumes were up 7% quarter-over-quarter, while full-year 2009 sales were essentially flat compared with 2008 levels.

($1 = €0.71)

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By: Frank Zaworski
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