November 12, 2009 / 1:54 PM / in 8 years

UPDATE 2-Migao cuts 2010 revenue view on lower prices

* Q2 EPS C$0.20 vs C$0.31 last year

* Sales fall 13 pct

* Sees FY 2010 rev of C$230-C$260 mln

* Shares up 1.5 pct (Recasts, adds analyst comments, conf call details) By Isheeta Sanghi

BANGALORE, Nov 12 (Reuters) - Specialty potash fertilizer producer Migao Corp MGO.TO posted a 26 percent drop in second-quarter profit and cut its fiscal 2010 revenue outlook as it sees lower prices continuing to weigh.

Fertilizer companies posted record results a year ago, but the credit crunch, coupled with a collapse in commodity prices and a slump in fertilizer demand, has led to a drastic change in conditions for the industry over the past year.

“(Potash prices) may continue to fall for a little bit, but at some point (prices) are going to bottom out and we’re pretty close to that point,” said an industry analyst, who declined to be identified.

Potash, nitrogen and phosphate are the three main macro nutrients used by farmers across the globe.

China-based Migao sees fiscal 2010 revenue between C$230 million and C$260 million, a company executive said on a conference call with analysts.

In August, the company forecast revenue of C$290 million to C$320 million.

The cut in revenue forecast reflected “prevailing and estimated raw material prices, foreign exchange, and market prices for our finished goods,” the company said.

“Their business is okay on the volume front, it’s just the prices that are hurting them,” the industry analyst said.

Migao’s customers are fairly insensitive to fertilizer prices, the analyst said, adding that customers like tobacco farmers have high-margin businesses, so they will continue to buy fertilizer.

The company said average inventory cost of raw potash for the quarter was $476 a ton, a decrease of nearly $100 a ton from prior-year levels.

Analysts on average expected revenue of C$247.9 million for fiscal 2010, according to Thomson Reuters I/B/E/S.

Q2 profit falls

For the quarter ended Sept. 30, net profit was C$9.6 million, or 20 Canadian cents a share, compared with C$12.9 million, or 31 Canadian cents a share, a year earlier.

Lower selling prices as a result of reduced input costs, weighted heavily towards potassium chloride, impacted results, the company said in a statement.

Sales fell to C$67.7 million from C$78.2 million a year ago.

Analysts expected earnings of 18 Canadian cents a share, excluding items, on revenue of C$53 million.

Shares of the company were up 10 Canadian cents at C$6.75 in midday trade Thursday on the Toronto Stock Exchange. (Editing by Ratul Ray Chaudhuri and Deepak Kannan)

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