25 October 2012 21:41 [Source: ICIS news]
HOUSTON (ICIS)--An expected increase in sales of potash to China and India in 2013 will improve future results, Canada-based fertilizer producer PotashCorp said on Thursday.
"Delays in closing new potash contracts with buyers in China and India in the third quarter more than offset strong demand from Latin America [especially Brazil] and resulted in a decrease in third-quarter shipments from North American producers to 1.9m tonnes, 25% below the same period last year," said PotashCorp chief executive Bill Doyle.
“While Chinese and Indian customers have not engaged consistently, their need for improved soil fertility to increase food production has not subsided," Doyle said during a third-quarter earnings conference call.
PotashCorp reported third-quarter net income fell 22% year on year to $645m (€497m) following a decline in sales.
Sales for the three months ended 30 September fell 7.7% year on year to $2.14bn.
PotashCorp has reported a year-on-year-drop in earnings for the past three quarters. It has cut its earnings forecast for 2012 as a result of contract delays with emerging market buyers.
"Potash demand in China is currently being met from internal production, inventory withdrawals and tonnage via rail, but additional requirements are anticipated," Doyle said.
"We believe reduced Chinese inventory levels by year-end could lead to increased requirements in 2013," said Doyle.
"India faces significant challenges in improving, or even maintaining, current crop production levels given existing fertility practices, and the need to address this situation – along with mounting internal pressure on the government from its local fertilizer industry – fuels our confidence that policies will ultimately be modified and demand will improve," Doyle said.
"We believe an increase in demand will begin to unfold in 2013, although the extent to which that happens remains uncertain at this time," he added.
Doyle said that in the US and Brazil, farmers are responding to good farm economics and are driving strong demand for all fertilizers.
PotashCorp said US dealer inventories for nitrogen, phosphorus and potassium fertilizers were depleted in the spring, resulting in strong demand to position tonnes for the fall.
"The mood in the market is quite positive and with an early harvest and a long application period, demand in the fourth quarter is strong," Doyle said.
Despite Doyle’s comments for 2013, PotashCorp has reported 2012 earnings drops for the first, second and third quarters.
The fertilizer producer has announced that earnings guidance for full-year 2012 would fall below the low end of the $2.80-3.20 per share range forecast in July, as a result of lower than expected sales volumes, due to delays related to new contracts with buyers in China and India.
PotashCorp said last week it would shut down its Rocanville and Lanigan mines in Saskatchewan for eight weeks because of weak global demand.
PotashCorp said it expects natural gas curtailments will continue in 2013, with gas deliveries returning to normal in 2014.
($1 = €0.77)
Additional reporting by John Brown and Stefan Baumgarten
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