July 28, 2016 / 10:20 AM / 3 years ago

Potash Corp cuts dividend, profit forecast again; shares fall

(Reuters) - Potash Corp of Saskatchewan POT.TO POT.N, the world’s biggest fertilizer company by capacity, cut its full-year profit forecast and dividend for the second time this year on Thursday, and said that potash markets had bottomed out.

Potash Corp's head office in Saskatoon is pictured on November 3, 1010. REUTERS/David Stobbe

Prices for the fertilizer have fallen to their lowest level in a decade, weighed down by excessive mining capacity and soft export demand.

“We believe the uncertainty that weighed on potash market sentiment is now lifting and a recovery is beginning,” Chief Executive Jochen Tilk said in a statement.

Potash will cut its quarterly dividend to 10 cents per share from 25 cents. Its shares were down 7 percent in New York and Toronto, and the U.S.-listed stock touched a low of $15.84. The stock is down 42 percent in the past 12 months.

Potash Corp “could sit at the bottom here for another year,” said Bryden Teich, portfolio manager at Avenue Investment Management, which sold its Potash position in June.

“A year out, the fundamentals for the potash market still look murky,” he said.

The company, which shut down its New Brunswick mine this year, may idle others once it completes expansion by next year of its lowest-cost mine at Rocanville, Saskatchewan, Tilk told analysts.

“We’re looking at that in the context of what we see in 2017, what we think demand and supply is,” he said, adding no decision has been made.

Canpotex Ltd, the export company owned by Potash, Mosaic (MOS.N) and Agrium AGU.TO, is still negotiating a second-half supply contract with Chinese buyers, Potash said, unlike some rivals who have struck agreements.

Some of those deals are likely at a loss or thin margin, and Canpotex is taking a more cautious approach, Tilk said.

Canpotex has reached deals with Indian buyers for shipments during the next three months, Potash said.

Tilk said there is potential for record global demand in 2017 of 61 million to 64 million tonnes.

Potash cut its full-year profit forecast to a range of 40 to 55 cents per share, from 60 to 80 cents. The midpoint, 47-1/2 cents, would be its weakest profit in 12 years.

The company maintained its forecast for 2016 potash sales of 8.3 million to 8.8 million tonnes but expects that lower prices earlier in the year will weigh on results.

Potash’s second-quarter net earnings fell to $121 million or 14 cents per share from $417 million or 50 cents per share a year earlier.

Reporting by Rod Nickel in Winnipeg, Manitoba, and Arathy S Nair in Bengaluru; Editing by Jeffrey Hodgson and Matthew Lewis

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