April 28, 2016 / 10:23 AM / 2 years ago

UPDATE 4-Potash Corp cuts 2016 profit forecast, dividend seen at risk

* Cuts 2016 EPS to 60-80 cents from 90 cents-$1.20/share

* Sees Q2 EPS 15-25 cents vs estimate of 27 cents

* Shares drop 3 percent (Adds CEO comments on dividend, phosphate, Europe)

By Rod Nickel and Arathy S Nair

April 28 (Reuters) - Canada’s Potash Corp of Saskatchewan , the world’s biggest fertilizer company by capacity, cut its full-year profit forecast on weak demand and lower prices on Thursday, raising concerns of another dividend cut.

The company in January cut its dividend by 34 percent to $1 on an annual basis as potash prices plunged due to overcapacity and weak currencies in major consumers such as India and Brazil.

BMO analyst Joel Jackson said Potash may need to cut the dividend further as it represents 143 percent of its estimated profit this year.

U.S.-listed shares of Potash fell 3 percent to $17.61 after the company posted an 80 percent plunge in first-quarter profit.

Potash is monitoring its dividend level, but an adjustment would be premature until the company better understands when the market will recover, Chief Executive Jochen Tilk told analysts on a conference call to discuss earnings.

Potash should weigh alternatives to cutting the dividend such as selling its stakes in other fertilizer companies, said Ryan Bushell, portfolio manager at Leon Frazer & Associates.

“Long-term, we’re not fans of companies that cut dividends to appease pressure,” he said. “We’re fans of companies that stick to their discipline.”

Potash owns stakes in China’s Sinofert Holdings Ltd , Israel Chemicals, Arab Potash Co PLC and Chile’s SQM, worth a combined $4 billion. The company’s cash flow may increase next year after it completes expansion of a Saskatchewan mine.

Given the pressure on equity markets, the timing is not ideal for Potash to divest those stakes, Tilk said.

The company is not actively looking to sell its phosphate business, Tilk said in an interview after the call.

Potash commands a price premium in Europe, but it is not a significant market for the company. It would not make sense to increase shipments there and simply push rivals to other areas, Tilk said.

“We want to be careful that we don’t bump out tonnes that show up in a different place and there would be nothing to gain. If we contemplate moving tonnes into Europe, it would be on a long-term plan.”

Despite bleak current conditions, Potash is “weathering the storm” well by cutting production, Bushell said.

The company cut its 2016 earnings forecast to a range of 60 to 80 cents per share from 90 cents to $1.20.

Analysts had expected 90 cents per share, according to Thomson Reuters I/B/E/S.

Net earnings fell to $75 million, or 9 cents per share in the quarter from $370 million, or 44 cents per share, a year earlier. (Reporting by Rod Nickel in Winnipeg, Manitoba and Arathy S Nair in Bengaluru; Editing by W Simon and Richard Chang)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below