PotashCorp records record 3Q; Canpotex shipments up 46 percent

Potash Corp. of Saskatchewan Inc. announced record third quarter earnings for the quarter ending Sept. 30, 2006 ?Çô $145.2 million ($1.37 per diluted share) on sales of $953.5 million, versus the year-ago $130.3 million ($1.17 per share) and $938 million. Nine-month net income is $445.8 million ($4.21 per share) on sales of $2.7 billion, versus the year-ago $425.8 million ($3.79 per share) and $2.9 billion, respectively.

“This quarter demonstrated that the need for potash and other fertilizers can be delayed, but not denied,” said PotashCorp President and CEO Bill Doyle. After potash price contracts with large buyers were finally settled in late July, they came into the market to snap up significant volumes in August and September. As a result, North American producer inventories shrank to only 1 percent over the five-year average by the end of the quarter. PotashCorp’s total offshore sales improved to 1.4 million mt from 1.1 million mt in the third quarter last year. Canpotex shipments were 2.4 million mt, up 46 percent from the year-ago amount.

PotashCorp did note that North American shipments were off 6 percent during the quarter due to a delayed fall season. Company gross margins were down at $245.8 million, below the year-ago $279.5 million, due to lower North American potash prices, higher offshore distribution costs, and lower nitrogen prices.

PotashCorp announced that it took a $6.3 million writedown on assets at its Geismar, La., facility, which resulted in phosphate gross margin falling to $29.8 million versus the year-ago $32.2 million. Specifically, the company said that in July it indefinitely suspended the production of super phosphoric acid and Poly-N phosphate products at Geismar due to higher input costs and lower product margins for those products at the facility compared to the company’s other facilities. No employee positions were terminated. The plants have not been restarted since that time, and there are no immediate plans to do so.

PotashCorp also announced that it has officially thrown in the towel on its long-idled Memphis ammonia and urea production. It said in September a decision was made to permanently discontinue production at the facility. The plant has been in indefinite shutdown mode since June 2003 due to high natural gas costs eroding nitrogen margins. There was no material financial statement impact in the quarter resulting from these changes.

PotashCorp is very upbeat for the 2006/07 fertilizer season, saying that in the U.S. alone it expects consumption to be up 10-15 percent for the three major nutrients. The company cites high grain prices, the lowest stocks-to-use ratio in history for wheat and coarse grains, and more corn use for ethanol. The company also expects Sinofert and Canpotex to wrap up further potash negotiations in late 2006 for a continued seamless supply. As for nitrogen, higher gas costs in Europe have made them a swing producer and opened up a new market there. Doyle said he is positive for ammonia for at least the next 12 months.

PotashCorp expects fourth quarter net income to be within the range of $1.50-$1.75, with net income for the full year at $5.70-$6.00 per share.

The NYSE reacted positively to the PotashCorp news, with shares moving up 4.3 percent on Oct. 25 to close at $120.22.