October 24, 2013 / 10:58 AM / 4 years ago

UPDATE 3-Potash Corp slashes outlook as sales slump

(Adds CEO comments)

By Rod Nickel

Oct 24 (Reuters) - Potash Corp of Saskatchewan reported its weakest quarter in three years on Thursday and cut its full-year outlook more than expected amid slumping sales of the key fertilizer ingredient.

Last summer's breakup of rival Belarusian Potash Co (BPC) has roiled the potash market, leaving North America's Canpotex Ltd, owned by Potash Corp, Mosaic Co and Agrium Inc , as the last potash trading partnership with global clout.

Russia's Uralkali OAO quit its BPC export partnership with Belaruskali and said it would seek to maximize production, causing prices to fall.

Potash Corp Chief Executive Officer Bill Doyle said Uralkali's move was "the single dumbest thing" he has ever seen and has harmed the Russian miner's reputation. It has also damaged Potash Corp's performance as buyers delay purchases, gambling that prices will fall further.

"We know especially since the Uralkali announcement that (fertilizer buyers) have been hand to mouth worldwide" with their purchases, Doyle said on a call with analysts. "People have been absolutely very careful, risk-averse, because they're uncertain."

A spokeswoman for Uralkali declined to comment.

Shares of Saskatoon, Saskatchewan-based Potash Corp, the world's largest fertilizer supplier and biggest producer of the crop nutrient by capacity, dropped as much as 5.5 percent in New York before paring losses.

Potash cut its 2013 earnings estimate to a range of $2.00 to $2.20 per share, which would be its smallest full-year profit since 2010. It previously forecast $2.45 to $2.70.

The new outlook is well below the average Wall Street estimate of $2.33 per share, according to Thomson Reuters I/B/E/S.

"Until we get some sort of resolution (to the Russia-Belarus dispute), potash demand is going to remain weak in the near term," said analyst John Chu of AltaCorp Capital.

Potash Corp said it expected to ship 8.0 million to 8.4 million tonnes of potash in 2013, down from a July forecast of 8.5 million to 9.2 million tonnes. The company idled production at its Canadian potash mines longer than usual in the summer to whittle down a large stockpile, and said it would keep its operating level below that of the first half.

Globally, Potash Corp forecast demand for potash in 2013 would be 53 million to 54 million tonnes, down from its previous forecast of nearly 56 million tonnes.

The crucial U.S. autumn fertilizer season is just under way, and fertilizer demand is strong in some areas, the company said, but harvest delays may push some U.S. demand into next year.

Potash Corp said it expected Canpotex to make spot sales to China in the current quarter, with a new contract likely to be signed in early 2014. The sales had stopped after a first-half contract expired.

Doyle said the practice of making sales exclusively in China to Sinofert Holdings Ltd may end within one to two years as the country's fertilizer industry becomes more diverse.

Potash Corp said its net earnings for the third quarter fell to $356 million, or 41 cents per share, from $645 million, or 74 cents per share, a year earlier. Analysts on average expected 42 cents a share.

Sales dropped nearly 30 percent to $1.52 billion. Analysts' average estimate was $1.50 billion.

NUTRIENT PRICES TUMBLE

Potash Corp signaled the weak third quarter earlier this month, reducing its earnings estimate to 41 cents per share from a range of 45 cents to 60 cents.

The company's potash sales fell to 1.5 million tonnes in the quarter from 2.1 million tonnes a year earlier, while its average realized price dropped 28 percent to $307 per tonne.

Uncertainty in the potash market and declining grain prices weighed on prices of the two other crop nutrients Potash Corp sells, phosphate and nitrogen.

Sales of phosphate amounted to 900,000 tonnes in the third quarter, little changed from a year earlier. But Potash Corp's average realized price tumbled 13 percent to $467 per tonne. Demand from top importer India looks weak through the rest of the year, the company said.

Nitrogen sales increased 27 percent to 1.4 million tonnes, but Potash Corp's average realized price plunged 29 percent to $327 per tonne.

Potash Corp shares were down 1.3 percent to $86.05 in afternoon trading in New York.

Rivals Agrium and Mosaic, scheduled to report quarterly results on Nov. 5, have warned of a drop in potash sales. (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Lisa Von Ahn, Jeffrey Benkoe and John Wallace)

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