November 4, 2016 / 3:22 PM / a year ago

Moody's downgrades Potash Corp as fertilizer slump lingers

WINNIPEG, Manitoba, Nov 4 (Reuters) - Moody’s Investor Service on Friday downgraded the credit rating of Potash Corp of Saskatchewan , due to concerns of a longer-than-expected fertilizer slump, ahead of the company’s planned merger with rival Agrium Inc.

Moody’s downgraded Potash’s rating to Baa1 from A3, saying its credit metrics are likely to weaken as a result of lower fertilizer prices and the potential for increased market volatility as new fertilizer capacity comes onstream within two years.

“Although management has taken significant steps to retain the A3 rating, market conditions will make it extremely difficult for the company to generate credit metrics that would support the A3 rating over the next two years,” John Rogers, Moody’s senior vice president, said in a statement.

Crop nutrient producers have been struggling with falling prices and profits, as supplies are ample and farm incomes are strained by lower crop values.

Potash could not immediately be reached for comment.

On Thursday, Potash and Agrium shareholders voted in favor of a merger, which still requires regulatory approval. Potash last month lowered its profit outlook for the year and posted its second smallest quarterly profit per share in nearly 12 years, according to Thomson Reuters data. (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Jonathan Oatis)

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