Flagging sales sting Potash, nitrogen boosts Agrium

Mon Oct 22, 2012 2:20pm EDT
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By Rod Nickel

WINNIPEG, Manitoba (Reuters) - Canadian fertilizer companies Potash Corporation of Saskatchewan Inc and Agrium Inc appear likely to tell significantly different stories when they release third-quarter earnings.

Potash Corp's (POT.TO: Quote) (POT.N: Quote) profits look to fall sharply from last year as a standoff with China and India hampers sales.

Agrium (AGU.TO: Quote) (AGU.N: Quote), meanwhile, will benefit from its greater exposure to nitrogen, a soil nutrient farmers apply annually that is enjoying rich margins due to low costs of the key ingredient, natural gas.

Potash Corp flagged its concerns last week about sales to the world's two biggest potash consumers, cutting its full year 2012 guidance and pegging third-quarter earnings per share at the low end of the 70- to 90-cent range it had previously offered.

"They've just got a volume issue right now, which you might argue is a price issue," said Charles Neivert, analyst at Dahlman Rose & Co. "Either way, they're just not selling any product and India and China are out of the market."

New deals were originally expected by late summer. But they are now are not seen until December or early 2013. North American supplies have piled up to 39 percent over the five-year average as of September.

Potash Corp, the world's biggest producer of its namesake nutrient, will report third-quarter earnings on October 25, followed by Agrium on November 7. The two companies, along with Mosaic Co (MOS.N: Quote) sell their Saskatchewan-produced potash offshore through the marketing agency Canpotex.

Signing contracts with China and India will not solve all problems. Potash prices are currently skewed higher because those lowest-cost buyers aren't in the market, Neivert said.   Continued...