Potash Corp sees better conditions ahead

SASKATOON — A stabilizing market for one of Canada’s biggest mineral exports has boosted Potash Corp of Saskatchewan Inc.’s (TSX:POT) outlook for the year ahead.

The Saskatoon-based fertilizer producer said on Thursday it expects to earn between 45 and 65 cents per share this year, about 25 per cent better than it estimated in January.

The miner’s stock was higher following the news, rising 2 percent to $23.16 in Toronto.

“With strong potash demand in all markets, the positive momentum that emerged in the second half of 2016 carried into the first quarter,” chief executive Jochen Tilk said on an earnings call.

The company, which reports its results in U.S. dollars, says its first-quarter revenue fell eight per cent to US$1.11 billion, but that was offset by higher margins for potash.

The improving market for the fertilizer comes after years of declining prices, brought on in part by the break-up of a major supply cartel in Eastern Europe. That event helped push the spot cost per tonne from around US$500 in 2012 to US$166 for PotashCorp in the last quarter.

The first quarter price is lower than the US$178 PotashCorp saw in the same quarter last year, but Edward Jones analyst Daniel Sherman said in a note that prices look to have bottomed in 2016.

“Based on industry trends, we believe that pricing is improving and that the supply-demand balance in potash should support pricing in the first half of 2017,” he said.

PotashCorp has also benefited from lower expenses after shuttering its higher-cost New Brunswick mine last year, and increasing production from its lower-cost Rocanville, Sask., mine where it’s wrapping up a major expansion.

The lower costs helped push first quarter net income to $149 million in the first quarter, equal to 18 cents per share — above analyst estimates compiled by Thomson Reuters — double the $75 million or nine cents per share in the first quarter of 2016.

PotashCorp maintained its 2017 demand outlook of 61-64 million tonnes for potash, up from the 60 million tonnes shipped last year.

Conditions remain difficult for PotashCorp’s two other types of crop nutrients, with first-quarter sales volumes, prices and margins weaker for both nitrogen and phosphate fertilizers.

Canada exported $6.9 billion worth of potash and potassium compounds in 2015 to make it the fifth most valuable mineral export.


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