December 18, 2008 / 10:49 PM / 9 years ago

UPDATE 2-Potash Corp cuts profit outlook, cites weak economy

(Adds details, background; in U.S. dollars unless noted)

CALGARY, Alberta, Dec 18 (Reuters) - Potash Corp of Saskatchewan Inc (POT.TO), the world’s biggest fertilizer company, cut its outlook for full-year earnings by 10 percent on Thursday, blaming the weak world economy.

The company, a major producer of the crop nutrients potash, nitrogen and phosphate, said it now expects 2008 earnings per share of $10.75, down from its previous forecast of about $12.

It said the move was driven by weak fourth-quarter sales in all three nutrients, as well as lower nitrogen and phosphate prices and margins.

Industry conditions are expected to improve sometime in the second quarter of 2009, however, as food production and fertilizer application cannot be delayed for indefinite periods, Chief Executive Bill Doyle said.

“The global food crisis captured the world’s focus early in 2008, but attention and capital is currently being diverted to economic issues,” Doyle said in a statement. “That does not mean the food crisis has been resolved. In reality, it could become more severe, increasing the need for and value of fertilizers, especially potash.”

This week, Merrill Lynch issued a report saying fertilizer prices have fallen below break-even levels for marginal producers, forcing cuts in output.

That sets the stage for a rebound as farmers will still need crop nutrients for planting in the spring, it said.

Despite the slowdown, Potash Corp’s fourth-quarter earnings should be the third-highest quarterly showing in its history, the company said.

It said potash sales for 2008 will be less than 9 million tonnes, with a gross margin more than triple that of 2007.

The company recently announced a two-million-tonne production cut, starting in January.

Shares of Potash Corp fell C$4.81, or 5 percent, to C$90 on the Toronto Stock Exchange on Thursday. In New York, the stock sank $5.88, or 7 percent, to $74.22. It released its revised earnings forecast after the market closed

$1=$1.20 Canadian Reporting by Jeffrey Jones; editing by Peter Galloway and Gunna Dickson

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