PotashCorp reported an 80 percent drop in net income for the third quarter ending Sept. 30, 2009, to $248.8 million ($.82 per diluted share) on sales of $1.1 billion, compared to the year-ago $1.24 billion ($3.93 per share) and $3.06 billion, respectively. Nine-month net income was $744.2 million ($2.45 per share) on sales of $2.88 billion, versus the year-ago $2.71 billion ($8.45 per share) and $7.57 billion.
The company said the continuing caution among fertilizer buyers around the world has affected sales volumes and prices for all three nutrients. However, it noted that despite the lower volumes, potash generated 73 percent of the company’s total third-quarter gross margin of $346.2 million.
“This quarter was a reminder of the contrast between long-term fundamentals and short-term uncertainties,” said Bill Doyle, PotashCorp president and CEO. “Even though the science of food production and fundamentals of global development dictate that more fertilizer, especially potash, is needed around the world, the impact of the global financial crisis remained a difficult hurdle in the third quarter. The uncertainty among fertilizer buyers has lasted far longer than we anticipated, but cannot continue indefinitely. Our focus is on preparing for the demand rebound that we believe will inevitably follow. We will be ready to serve our customers and deliver returns for our investors.”
Doyle told analysts there are three factors that will lift the industry out of its current malaise ?Çô crop prices, logistics concerns, and China. He said the U.S. harvest is the slowest since 1985. This has slowed fertilizer buying, but he was hopeful that recent boosts in corn prices would help to thaw the supply channel and get product moving.
Unless movement starts soon, he foresees logistics problems in 2010. He said he never expected too much out of the fall season due to the expected late season, but this will put more pressure on transportation for spring application.
Another major factor is China, and he said their crop yields are beginning to suffer. He expects China to come into the market for some 8-9 million mt of potash for 2010, and to do so by the end of 2009. Doyle estimates Chinese inventories at between 2-3 million mt, and he says they will start buying when it drops to 2 million mt.
That said, Doyle said that with respect to China he has fallen on his face regarding forecasting. “… we get our information from our partner Sinofert, and I told our partner that he’s helped me to look like a jerk the whole year long. And he said, well, he’s had a very difficult time forecasting as well. And I would tell you around the world – in Brazil, we’ve got people that are long-time in this business, that have tremendous expertise, who all say to me ‘you know, I’ve never seen anything like this before.’ Well, it’s true. And so the Chinese contract, we’re going to wait for it to finish.”
Overall, Doyle expects global trade in potash to return to more normal levels at 50 million mt in 2010, versus the expected 30 million mt in 2009.
Dave Delaney, president of PCS Sales, told analysts that the company expects 2009-2010 U.S. nitrogen consumption to be up 5-10 percent, phosphate 20-25 percent, and potash 25-30 percent.
Third-quarter potash gross margins were $251.4 million on sales of $423.4 million, versus the year-ago $909.7 million and $1.14 billion, respectively. Third-quarter sales volumes were 1 million mt, down from the year-ago 1.855 million mt. North American sales dropped to 266,000 mt from 530,000 mt, while Offshore sales were down to 748,000 mt from 1.325 million mt. The average North American price was $417.38/mt, down from the year-ago $561.70, while the Offshore price was $379.24/mt, down from $601.34/mt.
Nine-month potash margins were $524.2 million on sales of $903.3 million, versus the year-ago $2.3 billion and $3.13 billion.
Third-quarter phosphate gross margins were $44.2 million on sales of $357.4 million, compared to the year-ago $507.2 million and $1.08 billion. Overall, phosphate volumes were 882,00 mt, down from 969,000 mt, with the average price falling to $356.24/mt from $1,069.38/mt. Solid phosphate fertilizer sales were 334,000 mt, down from 352,000 mt, with the price falling to $267.71/mt from the year-ago $1,084.98/mt. Liquid phosphate fertilizer volumes were 255,000 mt, down from 271,000 mt, with prices falling to $267.58/mt from $1,238.35/mt.
Nine-month phosphate gross margins were $73.5 million on sales of $1.01 billion, versus the year-ago $1 billion and $2.37 billion.
Third-quarter nitrogen gross margins were $50.6 million on sales of $318.3 million, versus the year-ago $324.1 million and $838.9 million. Total nitrogen volumes sold were about level with the year-ago quarter, at 1.37 million mt versus 1.39 million mt. However, the average price was down to $203.73/mt from the year-ago $546.17/mt.
Nine-month nitrogen gross margins were $148.7 million on sales of $962.3 million, versus the year-ago $719.5 million and $2.06 billion.