July 28, 2011 / 10:19 AM / 6 years ago

UPDATE 4-Potash Corp profit jumps 75 pct; boosts outlook

* Q2 EPS 96 cents vs Street view 86 cents

* Sees Q3 EPS 80 cents to $1: Wall St view 86 cents

* Sees full-year EPS $3.40 to $3.80; Wall St view $3.51

* Shares up more than 2 pct in afternoon trading (Adds CEO comment, share rise; Figures in U.S. dollars, unless noted)

By Euan Rocha

TORONTO, July 28 (Reuters) - Potash Corp (POT.TO) (POT.N), the world’s largest fertilizer maker, reported a 75 percent jump in quarterly earnings, topping expectations, as surging grain prices lifted demand for its crop nutrient products.

Rising foodgrain demand from emerging economies and adverse weather are among factors that have pushed grain prices to record levels and driven farmers to grow crops in acres once viewed as marginal, boosting fertilizer prices.[ID:nN28210231]

“The strain on the world’s food supply is not a short-term issue,” Potash Corp’s Chief Executive Bill Doyle said on a conference call. “Even with farmers increasing planted acres, it will take exceptional yields to meet current demand, let alone provide any surplus.”

Potash Corp, which less than a year ago was the target of a hostile takeover bid from global mining giant BHP Billiton (BHP.AX), has vindicated its rejection of the offer. Its market capitalization is now above $51 billion, more than 30 percent higher than BHP’s $39 billion bid.

The company said higher prices for potash, phosphate and nitrogen-based crop nutrients more than doubled second-quarter gross margins to $1.2 billion. [ID:nN1E76R08V]

“The numbers look very good and are much stronger than expected,” said Gleacher & Co analyst Edlain Rodriguez. “The big difference is the potash price, which was much higher than what I expected.”

Second-quarter net income rose to $840 million, or 96 cents a share, from $480 million, or 53 cents a share, a year earlier, the Saskatoon, Saskatchewan-based company said.

Revenue rose more than 60 percent to $2.33 billion, driven primarily by a higher nutrient prices.

Analysts on average had forecast earnings of 86 cents a share on revenue of $1.99 billion, according to Thomson Reuters I/B/E/S.

Potash Corp’s shares rose more than 2 percent despite a pullback in grain prices on Thursday.

STRONG OUTLOOK

Potash Corp said tightening market conditions were pushing potash prices higher in most major markets, including China, which signed new supply commitments late in the second quarter. [ID:nN1E75S0MJ]

Industry data indicates that at the end of June, North American potash inventory levels at the producer level were 26 percent below the average of the last five years.

“While we believe we’re entering a period of unprecedented opportunity, the strength of our business has at times been overshadowed by a number of macroeconomic issues,” said Doyle, highlighting U.S. and European economic woes as factors.

“In our view these are very important issues, but not ones that are likely to alter global population trends and the underlying pressures on global food production,” he said.

The company said it now expects third-quarter earnings of between 80 cents and $1 a share. Analysts on average had forecast 86 cents, according to Thomson Reuters I/B/E/S.

Potash Corp raised its full-year earnings forecast to a range of $3.40 to $3.80 a share, from $3 to $3.40. Wall Street is expecting about $3.51.

“The outlook seems to be strong with the third-quarter roughly in line with consensus,” said Rodriguez.

Potash Corp’s New York-listed shares were up $1.22 at $60.40 in afternoon trading, while its Toronto-listed shares were up C$1.13 at C$57.16. ($1= $0.95 Canadian) (Reporting by Euan Rocha; editing by Janet Guttsman)

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