PotashCorp reports all-time record quarter; next five years will be best in history, says Doyle

Potash Corp. of Saskatchewan Inc. reported its best quarterly earnings in the history of the company. Second-quarter earnings were $285.7 million ($.88 per diluted share) on sales of $1.35 billion, compared to the year-ago $175.1 million ($.55 per share) and $928.7 million. All three major nutrients saw stronger prices and increased volumes. Potash volumes were up significantly, especially since the year-ago period reflected delayed purchases by major offshore buyers.

“The fundamentals that drive our business have aligned for the foreseeable future, and we are well positioned to capitalize on the growing global need for all three primary nutrients,” said PotashCorp President and CEO Bill Doyle. “Fertilizer applications have increased as farmers around the world strive to keep pace with the rising demand for crops. Our world-class assets focused long-term strategies, especially our Potash First approach, have positioned us for strong performance in these conditions as we demonstrated again this quarter.”

Based on its performance, which surpassed expectations in all three nutrients, PotashCorp increased its range for full-year net income from $2.50-$2.83 per share to $3.00-$3.25 per diluted share. It expects the third quarter to come in at $.70-.$.80.

Doyle was in effect singing an old Carpenters’ tune. “We are only just beginning to realize the benefits of our leverage in potash, the foundation of our business. With greater volumes, higher prices and lower unit costs, we are delivering record returns and increased value to our shareholders. As we look ahead, we expect the next five years to be the greatest in our history.” Doyle told analysts that PotashCorp has not peaked. He said that the U.S. will not be growing below 90 million acres of corn anytime soon, noting the near 93 million acres planted this year.

As for potash, he said it is on allocation around the world, with major buyers paying much higher prices. He said China is expected to come to the negotiating table early this year and predicted they would see a significant increase. He noted that they are currently paying approximately $225/mt DEL, whereas countries such as Indonesia, Malaysia, and Vietnam are paying $300/mt DEL.

Phosphate delivered its highest gross margin in company history, more than tripling year-ago numbers. Solid phosphates finally got their place in the sun, generating some $51.4 million during the quarter while just breaking even for the year-ago quarter. The company predicted increased phosphate prices, with higher price ideas for phosphate rock putting pressure on those who have to buy their rock from other sources. PotashCorp is in that category for Geismar, but noted that it has long term contracts. It expects to pay up as those come up for renewal. The company said some 17 percent of global P205 is made from purchased rock.

Nitrogen also saw a record $144.2 million gross profit. Ammonia sales volumes were up 30 percent quarter over quarter, as more product was available from Trinidad No. 1 due to a turnaround and debottleneck. Urea sales were off, but only because more customers bought product in the first quarter. Nitrogen solutions volumes were up 174 percent, with the company capitalizing on its Geismar facility.

In addition, offshore investments in Chile, Jordan, Israel, and China contributed $81.5 million to the other income line for the first six months, more than doubling the year-ago figure.

PotashCorp-wide, six-month net income was $483.7 million ($1.50 per share) on sales of $2.5 billion, up from the year-ago $300.6 million ($.95 per share) and $1.79 billion, respectively.