HOUSTON (ICIS)--The chairman of PotashCorp defended the company's job cuts in a letter released on Friday, following a request by Saskatchewan Premier Brad Wall to review its dividend policy in light of those cuts.
Earlier, PotashCorp announced that it would be reducing its workforce in Canada, the US and Trinidad by 18% due to the current decline for fertilizers, most notably potash and phosphates.
PotashCorp said the downward situation had forced them to enact substantial cuts to its operating costs.
Responding to the government’s request, PotashCorp board chairman Dallas Howe said employees were not sacrificed for the benefit of shareholders and that the company regrets having to make such a decision.
He said as the demand situation has dwindled, it has become evident that the additional capacity planned for the future and the employees required to sustain that growth are not justified at this point.
“This decision reflects the near-term challenges that the global potash market is currently facing. Despite confidence in the long-term drivers of our business – an expanding global population and a shift to more nutrient rich diets in developing countries – potash demand has been less robust than expected,” wrote Howe.
“On an emotional level, terminating the employment of these motivated and industrious people has been difficult and painful. These are loyal employees who have played no part in the macroeconomic or international political factors that led to the sluggish global demand environment.”
In Saskatchewan, home to almost half of the world’s known reserves of potash, PotashCorp is planning on drawing down its employee numbers by approximately 440 people.
In regards to the premier's comments about PotashCorp's dividend policy, Howe said, "We take seriously your request that the board revisit the company's dividend policy with a view to considering whether the layoffs could be mitigated."
Howe said PotashCorp is committed, though, to maintain a policy of regularly returning cash to investors.
“The number of employees who will be impact is not connected in any way to the amount of the company’s dividend. If we reduced our dividend to zero, we still need to rightsize our operations in order to protect the long-term sustainability of our company, and all of the remaining jobs,” Howe wrote.
“If the board felt that the dividend should be adjusted downward or eliminated altogether, it would do so. However, even the total elimination of the dividend would have no influence on how many employees it takes to efficiently run our operations.”
Howe said shareholders have felt the burden of the market turmoil with PotashCorp stock value having plunged. He said the 52-week high share price was $45.13, but in recent weeks has been as low as $29.67.“These shareholders rely both on the value of the shares and on the stability of our dividends. This depreciation in share value is a real and material sacrifice for them. Our shareholders clearly have shared in the pain even if we have not added to the pain by also denying them their dividends,” Howe wrote.