Potash Corp. of Saskatchewan Inc. said Jan. 26 that its earnings for the year ending Dec. 31, 2011, were the second highest in history. Net income was $3.08 billion ($3.51 per diluted share) on sales of $8.71 billion, up from the prior year’s $1.77 billion ($1.95 per share) on sales of $6.53 billion.
Fourth-quarter net income was up at $683 million ($.78 per share) on sales of $1.86 billion, compared to the year-ago $508 million ($.56 per share) on sales of $1.81 billion.
However, volumes for all major fertilizer products were off in the fourth quarter, with potash gross margins falling from the year-ago period. They were offset by better margins for nitrogen and phosphates.
Fourth-quarter potash gross margins were $486 million on sales of $718 million, down from the year-ago $536 million on sales of $831 million. With dealers limiting purchases, fourth-quarter potash sales volumes of 1.58 million mt fell well short of the 2.38 million mt in the year-ago quarter. Actual sales into North America were down 47.5 percent, to 422,000 mt from 804,000 mt. Offshore sales were off 26 percent, to 1.16 million mt from 1.57 million mt. The overall average potash price was up, at $431/mt from the year-ago $323/mt. The North American average was $514/mt versus $384/mt, while the Offshore average was $401/mt versus $292/mt.
Fourth-quarter phosphate margins were up at $163 million on sales of $606 million, compared to the year-ago $137 million on sales of $521 million. Overall, phosphate tons sold dropped during the quarter, to 890,000 mt from the year-ago 965,000 mt. Average prices were up, at $631/mt from $495/mt.
Fourth-quarter nitrogen margins were $241 million on sales of $541 million, up from the year-ago $153 million on sales of $461 million. The company said UAN volumes at Geismar, La., were impacted by limited availability of carbon dioxide necessary for production, an issue that will be rectified once the idled ammonia plant at Geismar returns to production in the third quarter of 2012. The company also said a 70,000 mt ammonia expansion at Augusta, Ga., starts up this fall, and the company is looking at further debottlenecks at Lima, Ohio, as well as continuing to look at Augusta.
While U.S. gas prices have been on the wane, PotashCorp noted that its gas costs were up 13 percent during the quarter over the year-ago period. This was due to rising prices in Trinidad, where prices are indexed to Tampa ammonia prices. PotashCorp told analysts that the gas contract at its Trinidad Number 3 ammonia plant expired last May with supplies continuing, but that the terms are under negotiation. The company said it is obvious that the gas supplier is going to have to recognize what is going on in North America regarding gas prices in future negotiations. Number 3 is the company’s smallest plant in Trinidad, representing about 16 percent of its gas use.
Fourth-quarter nitrogen tons sold were down at 1.08 million mt from the year-ago 1.28 million mt. The average price per ton was up at $461/mt from $325/st.
“The drag of global economic concerns shook the confidence of fertilizer buyers and caused a greater decline in fourth-quarter demand than we had anticipated,” said PotashCorp President and CEO Bill Doyle. “However, we believe these short-term challenges do not change the more powerful drivers of our business. The return on fertilizer investment continues to be attractive to farmers world-wide and is expected to result in greater demand in the quarters ahead.”
The company noted that fertilizer buyers are typically more aggressive when product is needed and prices are rising, as evidenced through much of 2011. It said they pause in periods of market uncertainty and limited immediate demand, which is what occurred in the fourth quarter.
In North America, PotashCorp believes first-quarter potash volumes will