PotashCorp Q4 net income up 34% to $683m despite demand slowdown

26 January 2012 12:10  [Source: ICIS news]

LONDON (ICIS)--Potash Corporation of Saskatchewan’s (PotashCorp) fourth-quarter net income grew by 34% year on year to $683m (€519m), despite a slowdown in global fertilizer demand, the Canadian producer said on Thursday.

Sales increased by 2.9% year on year to $1.87bn, while the company’s gross margin for the quarter grew by 7.7% to $890m.

PotashCorp said its offshore investments in Arab Potash Company (APC) in Jordan, Israel Chemicals (ICL) in Israel and Sociedad Quimica y Minera de Chile (SQM) in Chile added $116m to fourth-quarter earnings.

“The drag of global economic concerns shook the confidence of fertilizer buyers and caused a greater decline in fourth-quarter demand than we had anticipated,” said PotashCorp president and CEO Bill Doyle.

“However, we believe these short-term challenges do not change the more powerful drivers of our business. The return on fertilizer investment continues to be attractive to farmers worldwide and is expected to result in greater demand in the quarters ahead,” he added.

The company said that although there is a typical seasonal slowdown in global fertilizer demand during the fourth quarter, near-term macroeconomic uncertainty exacerbated the situation and buyers of phosphate and nitrogen fertilizers waited to assess market conditions ahead of the upcoming planting season as prices declined significantly late in the quarter from previously established annual highs.

Net income for the full year ending on 31 December 2011 rose to $3.08bn from $1.78bn in 2010, as sales grew by 33% year on year to $8.72bn.

Looking ahead, PotashCorp was encouraged by the long-term growth prospects for its business.

“We view the current year as the reverse of 2011, which started quickly but ended with weakened demand. Restocking of distributor inventories ahead of major application seasons has yet to begin in earnest, but is expected to accelerate as buyers move more aggressively to secure product to meet farmers’ demands,” it added.

Based on current conditions, the company estimates its 2012 potash segment gross margin to be approximately $2.9bn–3.3bn, while total shipments for the year are expected to be in the range of 9.2m–10m tonnes.

PotashCorp also anticipates first-quarter volumes for its phosphate and nitrogen business to rise from the final quarter of 2011 and full-year demand is expected to remain at or higher than 2011 totals.

“In this environment, we forecast our combined phosphate and nitrogen gross margin for 2012 to be in the range of $1.3bn–1.6bn,” it added.

($1 = €0.76)

By: Franco Capaldo
+44 (0)20 8652 3214

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