Potash cuts profit outlook as China, India deals lag

Wed Oct 17, 2012 10:42am EDT
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(Reuters) - Potash Corp (POT.TO: Quote) (POT.N: Quote), the biggest global producer of its namesake crop nutrient, cut its full-year earnings forecast for the second time, citing delays in new contracts with buyers in China and India.

U.S.-listed shares of Potash Corp slipped in New York in early trading and were slightly lower in Toronto, recovering from a 4 percent premarket drop on the news. Shares of rivals Mosaic Co (MOS.N: Quote) and Agrium Inc (AGU.N: Quote) were little changed.

Indian fertilizer buyers are unlikely to agree to new potash contracts until December at the earliest, the head of Indian Farmers Fertiliser Co-operative (IFFCO), one of India's biggest fertilizer makers, said last week.

Potash Corp, Mosaic and Agrium Inc (AGU.TO: Quote) sell potash offshore through marketing agency Canpotex. They have been awaiting new contracts with buyers in China and India, two of Canpotex's biggest off-shore customers, since late summer.

"They set the potash price too high, the buyers can't afford it and there's demand destruction going on," said analyst Robert Winslow of National Bank Financial. "You can't have it both ways - high demand and high pricing, so they're paying the price for it."

Winslow has an "underperform" rating on Potash Corp and holds a Street-low price target on the U.S.-listed stock of $37.

It is the second time in three months that Potash has cut its full-year outlook. The company trimmed its earnings forecast in July largely to reflect the impact of an impairment charge.

On Wednesday, Saskatoon, Saskatchewan-based Potash Corp said full-year earnings would be less than $2.80 per share. In July, it forecast $2.80 to $3.20 per share.

Third-quarter profit is expected to be at the low end of a range of 70 cents to 90 cents per share, the company said. Analysts were expecting 83 cents per share.   Continued...