Potash Corp. of Saskatchewan Inc. announced production cuts Oct. 29 as it reported lower third-quarter earnings. Third-quarter net income was $282 million ($0.34 per diluted share) on sales of $1.53 billion, down from the year-ago $317 million ($0.38 per share) and $1.64 billion, respectively.
“Broader emerging market concerns have weighed on customer sentiment, contributing to a weaker fertilizer environment in the second half of 2015," said PotashCorp President and CEO Jochen Tilk. "In response, we are moving forward the permanent closure date of our Penobsquis, New Brunswick mine and planning inventory shutdowns in December at three of our Saskatchewan mines (Allan, Cory and Lanigan). While we anticipate production in the fourth quarter to be reduced by nearly 500,000 mt, we do not expect employee layoffs."
"Despite challenges over recent months, we are seeing signs of a shift in focus by distributors and farmers to 2016," Tilk said. "We believe the need for increased global agricultural production – coupled with supportive crop prices – provides a compelling opportunity for farmers."
PotashCorp has revised full-year expectations for the potash business, lowering sales volume guidance to a range of 9.0-9.2 million mt and it now expects potash gross margin of $1.4-$1.5 billion, reflecting weaker volumes and pricing.
The company has lowered the top end of the previous combined nitrogen and phosphate gross margin guidance range and now estimates it will generate between $1.0-$1.1 billion. In nitrogen, it expects total gross margin below last year’s record as increased global supply is expected to keep prices for most products below 2014 levels. Additionally, weaker North American demand, reduced production due to mechanical challenges and an expansion-related turnaround at Lima are expected to keep sales volumes below last year’s levels. In phosphate, supportive market fundamentals and our higher-netback product mix are expected to support gross margin above 2014 levels.
PotashCorp has lowered the range for income from offshore equity investments to $165-$175 million due to a weaker-than-expected potash earnings environment and it has also slightly increased the estimate for selling and administrative expenses to a range of $245-$250 million.
Due to the continued strength of the US dollar, it has revised the full-year foreign exchange rate assumption to C$1.26 per US dollar.
As a result of the noted changes, it has revised full-year 2015 earnings guidance to $1.55-$1.65 per share.