January 27, 2011 / 1:17 AM / 6 years ago

Potash rides wave of demand as food prices surge

3 Min Read

TORONTO (Reuters) - Potash Corp, the Anglo-American mining giant whose hostile takeover bid was blocked by the Canadian government in November.

The stock-price gain, which Doyle had predicted during the takeover battle, reflects the bullish outlook for agricultural inputs in general and fertilizers in particular.

Shares of the company, which rose 6 percent early on Thursday, pared gains later in the session. The stock closed up 3.3 percent at $174.14 in New York and up 2.9 percent at C$172.26 in Toronto.

Some analysts and investors have cautioned that the stock might be slightly overvalued at this time.

"It's hard to justify the current price," said Schwartz. "The only way to justify the current price is if you believe in the long-term fundamentals of potash."

The 3-for-1 split announced late Wednesday effectively cuts the price of an individual Potash Corp share after a 70 percent increase over the past year. The move will help improve trading liquidity and encourage more retail investors to invest in the company, analysts say.

Quarterly Results

Potash Corp's fourth-quarter net income rose to $482.3 million, or $1.61 a share, from $239.2 million, or 79 cents, a year earlier. The company said costs related to the takeover battle with BHP reduced profit by 16 cents a share.

Revenue rose 65 percent to $1.81 billion on the back of higher prices for its nitrogen, phosphate and potash products.

Analysts, on average, had forecast earnings of $1.65 a share, on revenue of $1.62 billion, according to Thomson Reuters I/B/E/S.

Gleacher & Co analyst Edlain Rodriguez said growth will now depend upon Potash Corp's ability to keep raising prices for its namesake crop nutrient, which comes from underground mines, mainly in its home province of Saskatchewan in Western Canada.

The company raised its 2011 earnings forecast to a range of $8.40 to $9.60 a share. In October, it forecast full-year 2011 earnings of $8 to $8.75 a share. The Wall Street consensus for 2011 earnings is currently at $8.89 a share.

Potash Corp also forecast first-quarter earnings of $2.10 to $2.70 a share. Analysts have been looking for earnings of $2.24 a share in the quarter.

After adjusting for the stock split, the company expects first-quarter earnings of 70 cents to 90 cents a share, with full-year 2011 earnings of between $2.80 and $3.20 a share.

The company has earmarked $2.0 billion for capital expenditures in 2011, with $1.4 billion going to potash expansion projects.

Potash Corp now expects 2011 potash shipments of 9.5 million to 10 million tonnes. It had earlier forecast sales shipments of 9.3 million tonnes.

The dividend will increase to 21 cents from 10 cents a share on a pre-split basis. On a post-split basis, the payout will equal 7 cents a share.

The company will pay out the stock split to shareholders in the form of a stock dividend, with each receiving two additional shares for each one owned on the record date of February 16. The plan is subject to regulatory approval.

Editing by Frank McGurty

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