PotashCorp 1Q earnings hit another record – $566 M

Potash Corp. of Saskatchewan Inc. reported record first-quarter earnings of $566 million ($1.74 per diluted share) on sales of $1.89 billion, compared to the year-ago $198 million ($.62 per share) and $1.15 billion, respectively. The earnings were 181 percent higher than the year-ago figure and 50 percent higher than the previous record in fourth quarter 2007.

“Another record quarter for our company reflects the ongoing growth in global demand for food and the fertilizers that are essential to maximizing crop production,” said Bill Doyle, PotashCorp president and CEO. “This is especially true of potash, where we have unmatched assets that continue to elevate our performance. In this environment, we are demonstrating the increasing value of our company ?Çô as an essential part of the solution to concerns about the world’s food supply.” The company noted that at quarter’s end, the North American potash producer’s inventories remained 37 percent below the previous five-year average.

The company said its Lanigan and Patience Lake projects will be the only major new sources of global potash production available in 2009. Even with them, the company said meeting demand will be a challenge. PotashCorp is investing $4.5 billion to take its current 10.2 million mt potash capacity to 15.7 million by 2012. It expects to develop another 1.5 million mt by 2015.

Furthermore, according to Doyle, the news about China and potash is not over. Doyle told analysts China will be short 3 million tons of potash by the end of the year. He said China’s problem was government involvement in buying ?Çô that the country should have been first in line to buy, not at the back of the line. He said he expects Brazil to eventually take 7.5 million mt this year, versus 2007’s 6.7 million mt.

Potash led the way for the company in both sales and gross margins during the quarter. Potash gross margins were $514.6 million on sales of $796.2 million, versus the year-ago $174.2 million and $380.5 million, respectively.

Nitrogen gross margins were $185.4 million on sales of $581.2 million, up from the year-ago $131.3 million and $419.6 million.

Phosphate gross margins were $156 million on sales of $513.2 million, up from the year-ago $64.2 million and $354.6 million.

The company is raising its full-year net income guidance from $6.25-$7.25 per share to $9.50-$10.50 per share. It expects second-quarter net income per share to be in the range of $2.20-$2.50.

Doyle stressed that biofuels consume only 5 percent of the world’s grains and should not be targeted as the reason for food inflation. Instead, he said the primary driver is the ever-increasing demand created by hundreds of millions of consumers choosing a more nutritious diet in nations with growing populations and wealth. Speaking to analysts, he noted the rice shortage that is in the news this week, saying that rice is not used for biofuels and it is in short supply.

Doyle noted that fertilizer remains a good investment for farmers around the world. He said a corn farmer in the U.S. earns $3 for every $1 spent on fertilizer; an Indian wheat farmer gets a $7.50 return on his $1, while an Indonesian palm oil farmer gets $9.00.

Potash Production

* Volumes in thousands mt.