Edited from: “PotashCorp triples earnings in fifth consecutive record year”, 22 January 2009 and company website
PotashCorp states that its strategy is committed to seeking earnings growth and to minimise volatility by focusing its capital, internally and through investments, to build on its potash assets and meet the growing global demand for potash. By investing in potash capacity while producing to meet market demand, the company says that it creates the opportunity for significant growth while limiting the downside risk.
“We complement our potash operations with focused nitrogen and phosphate businesses that emphasise the production of high-margin products with stable and sustainable earnings potential”, says president and chief executive officer, Bill Doyle.
The PotashCorp strategy is based on the need to “remain the leader and preferred supplier of potash, nitrogen and phosphate products worldwide”. The company states that on its real focus is about how it can move forward. Its life-giving products continue to grow in importance as a larger percentage of the world’s population has greater wealth and wants more nutritious food.
On the back of what the company states as being a “global economic crisis leading to slower demand for all three nutrients (potash, nitrogen, phosphate)” in 2008. Its potash operations drove 2008 fourth-quarter gross margin to $873m, 63% above the $535m generated in the same period last year.
"The unprecedented global economic challenges of the 2008 fourth quarter were a sharp contrast to the positive operating environment of the first three quarters of 2008", says Doyle.
“Our success over the course of the year demonstrated the resilience and adaptability of our company, as well as the effectiveness of our strategies in rapidly changing conditions. Potash, our core nutrient, holds unique advantages that enable us to deliver strong performance, even in a very difficult economic climate", Doyle continues.
In addition, the company says that the economic crisis affected nearly every industry including global agriculture. The company says that even after record harvests drew large volumes of nutrients from soils - fertilizer distributors and farmers suspended purchases in the “face of the uncertainty of world markets”.
“We believe this was largely a psychological barrier, as the economics of food production and fertilizer use remain very attractive” says Doyle .
However, restricted access to credit due to the timing of the global financial crisis created more than a psychological barrier for farmers in South America, reducing fertilizer application rates during their primary planting season. The company says this could have “significant implications for crop production in this key exporting region”.
Outlook
The company states that the duration and depth of the global economic crisis is impossible to predict, with governments, industries and individuals trying to understand and react to the current environment.
"Our long-held strategies, especially in potash, have been tested through periods of demand fluctuation in the past and have proven effective in leading to long-term sustainable growth" says Doyle.
“With our focus on potash, the nutrient with the strongest fundamentals, we anticipate even greater opportunities ahead and will continue to build capacity to meet future growth in demand", Doyle concludes.
In potash, growth in demand has exceeded increases in new supply, consuming all available potash production in recent years and leaving major markets short and on allocation through much of 2007 and 2008. While nitrogen and phosphate prices have fallen precipitously, the long-term underlying fundamentals for potash remain strong. The world’s ability to depend on continued brown field expansions – additions of new capacity by debottlenecking or expanding existing sites – for significant new production is limited.
“This challenge underscores the importance and value of our Potash First strategy, as we believe the 6.2m tonnes/year of brownfield operational capacity we are adding over the next four years is even more valuable today than when we announced the projects”, says Doyle.
The company expect 2009 gross margin for potash to be in the range of $4.5bn to $5.5bn, with total shipments flat to slightly below 2008 levels. With sales expected to be more heavily weighted to the last three quarters of the year, the company is curtailing production from its 2009 operational capability early in the year by more than 2m tonnes/year.
In nitrogen, ammonia demand is expected to remain soft due to economic conditions, with industrial demand likely to be slow at least through the first half of 2009. However, with substantial capacity offline and questions about natural gas reliability in some key producing regions, conditions could improve more quickly.
We expect capital expenditures, excluding capitalized interest, to approximate $1.8bn in 2009, of which $250m will be sustaining capital. Depreciation and amortisation expense is expected to be 8% higher than 2008 levels.
Please see Canada’s PotashCorp sees fertilizer rebound in early 2010 on ICIS news.
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See the article and analysis of the ICIS Top 100 on ICIS news.
Financial highlights: Potash Corp, year ended 31 December
|
|
2008 |
2007 |
2006 |
2005 |
2004 |
|
Sales ($ m) |
9,446.5 |
5,234 |
3,767 |
3,847 |
3,244 |
|
Operating Profit ($ m) |
4,635 |
1,589 |
876 |
893 |
514 |
|
Net Profit ($ m) |
3,495 |
1,104 |
632 |
543 |
299 |
|
Total Assets ($ m) |
10,249 |
9,717 |
6,217 |
5,358 |
5,127 |
|
Diluted earnings per share ($) |
11.01 |
3.40 |
1.98 |
1.63 |
0.90 |
|
Number of Employees |
5,301 |
5,003 |
4,871 |
4,879 |
4,906 |
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Potash Corporation of Saskatchewan
Company Structure
PotashCorp claims to be the world's ‘largest fertilizer enterprise’, by capacity, producing the three primary plant nutrients (potash, phosphate and nitrogen). Potash Corporation of Saskatchewan was formed by the Saskatchewan government in 1975 and, over a period of three years, acquired about 40% of Canada's potash output. In 1989, it became a publicly traded corporation independent of the Saskatchewan government. Today, the government no longer has any ownership in the company. PotashCorp is listed on the Toronto Stock Exchange and the New York Stock Exchange. All outstanding shares are available to trade each day under the stock symbol POT.
More about Potash Corporation of Saskatchewan Structure
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