After a 33 percent drop in first-quarter net income due to a lull in potash sales, Potash Corp. of Saskatchewan Inc. President and CEO Bill Doyle said buyers are now fully engaged. “Despite a just-in-time buying pattern that slowed demand in recent months, fertilizer buyers are now fully engaged and demand for our products, especially potash, is expected to improve as the year progresses.” The company said that while the initial focus for many buyers was to acquire nitrogen, that the purchasing of potash and phosphates accelerated as the industry moved into the second quarter.
Net income for the first quarter ending March 31, 2012, was $491 million ($.56 per diluted share), compared to the year-ago $732 million ($.84 per share). The company cited lower potash sales and production volumes, which resulted in higher costs. Company-wide sales dropped to $1.75 billion from the year-ago $2.2 billion.
Potash sales volumes were off some 55 percent to 1.25 million mt during the quarter, versus the year-ago 2.79 million mt. The drop was seen in all markets, and significant relief did not appear until toward the end of the quarter, when Canpotex inked a new deal with China. PotashCorp first-quarter offshore sales tons were 849,000 mt, down from the year-ago 1.7 million mt, while North American tons were 400,000 mt, down from 1.1 million mt.
Despite the decline in tons, PotashCorp average realized sales prices saw no decline, only increases from the year-ago level. The average potash price for the quarter was $435/mt, up from the year-ago $366/mt. The offshore price was $406/mt, up from $327/mt, while the North American price was $497/mt, up from $427/mt. The company had some 29 inventory-related downtime weeks at its Lanigan, Rocanville, and Allan, Sask., facilities during the quarter. The company opted not to lay off workers. Cost per ton moved up to $175/mt from $100/mt. Gross margin per ton was off slightly, to $260/mt from $266/mt.
First-quarter potash margins were off 42.5 percent, to $327 million on sales of $583 million from the year-ago $743 million on sales of $1.11 billion.
For phosphates, international sales and a diversified portfolio helped offset a weaker North American fertilizer market. Gross margins moved up slightly, to $152 million on sales of $613 million from the year-ago $150 million on sales of $549 million. Sales volumes of 930,000 mt were up from 893,000 mt. Fertilizer volumes were 637,000 mt, up from 604,000 mt, while feed/industrial volumes were 293,000 mt, up from 289,000 mt. The averaged realized phosphate price climbed to $607/mt, up 9 percent from the year-ago $559/mt. The average fertilizer price was $570/mt, up from $542/mt, while the average feed/industrial price was $686/mt, up from $594/mt. Cost per ton sold moved up to $447/mt from $395/mt. Gross margin per ton was off slightly, to $160/mt from $164/mt.
Nitrogen margins climbed to a first-quarter record of $219 million on sales of $550 million, compared to the year-ago $203 million on sales of $546 million. Sales volumes of 1.3 million mt were slightly below the year-ago 1.34 million mt, largely the result of reduced production at Geismar, La. The average realized nitrogen price was $383/mt, up 4 percent from the year-ago $368/mt. The company noted that strong demand for urea, UAN, nitric acid, and ammonium nitrate combined with limited supply to push up prices. Urea volumes and prices were both up, at 334,000 mt and $462/mt, versus the year-ago 331,000 mt and $416/mt. While ammonia volumes were up slightly to 516,000 mt from 514,000 mt, prices dipped to $447/mt from $474/mt. Other nitrogens – UAN, nitric acid, and ammonium nitrate – had a combined drop in volumes to 440,000 mt from 495,000 mt, but recorded a combined price increase, to $249/mt from $226/mt. Cost per ton was level with the year-ago figure at $223/mt.
Gross margin per ton was up, at $16