October 27, 2011 / 10:19 AM / 7 years ago

UPDATE 4-Potash Corp profit soars on strong demand

* Revenue up 47 pct to $2.32 bln

* Sees 2011 earnings between $3.40 and $3.80 a share (Adds comments from conference call; in U.S. dollars unless noted)

By Euan Rocha

TORONTO, Oct 27 (Reuters) - Potash Corp POT.TO, the world’s top fertilizer maker, said on Thursday its quarterly profit more than doubled, as strong grain prices boosted demand for its crop nutrient products.

Despite widespread economic concerns during the quarter, the push to capitalize on strong crop prices continued to support demand for fertilizer around the globe, the company said.

Potash Corp said offshore demand for its namesake nutrient remained robust in the quarter, while Potash prices also rose, reflecting tight market conditions.

The Saskatoon, Saskatchewan-based company said net income was $826 million, or 94 cents a share, up from $343 million, or 38 cents a share, a year earlier.

Revenue rose 47 percent to $2.32 billion, on the back of strong demand and higher prices across its potash, phosphate and nitrogen businesses, the company said.

Gross profit reached $1.1 billion, double the $550 million generated a year earlier.

The company expects 2011 earnings of between $3.40 and $3.80 a share. Analysts, on average, have forecast earnings of $3.75, according to Thomson Reuters I/B/E/S.

Some investors may be disappointed that the company maintained its full-year guidance despite strong prices, Dahlman Rose analyst Charles Neivert said in a note to clients.

North American potash markets look “extraordinarily strong” for 2012, chief executive Bill Doyle said in a conference call.

“The big issue for everyone to understand is we’re going to have an extraordinarily tight market because of the constraint on the production side.”

The company is boosting potash-production capacity at several sites, but expansion at its Cory, Saskatchewan, mine is moving more slowly than expected, said Stephen Dowdle, who heads sales for the company.

Warm autumn weather has also hampered production at the company’s Patience Lake, Saskatchewan, operation, said Garth Moore, president of the company’s potash mining operations.

Potash Corp’s U.S.-listed shares were up 3 percent at $51.05 Thursday afternoon, while its Toronto-listed shares gained 1.8 percent at C$50.65.


Potash Corp said that although fertilizer dealers around the world were acting prudently to minimize their risks and inventories, robust demand continued to pressure global potash supplies.

“We believe most producers have been operating at or near their full capabilities in an attempt to keep pace,” the company said.

Potash Corp also tried to allay investor concerns about the pullback and heightened volatility in grain prices, arguing that low global grain inventories will continue to support high crop prices in the near-term.

The Chicago futures price for corn, a fertilizer-intensive crop, has retreated from its June peak, but remains about 12 percent higher than a year ago, giving farmers more incentive to apply crop nutrients.

“Six-dollar corn is nirvana for me,” Doyle said, when asked if farmers might balk at high fertilizer prices with corn easing off highs. “(Farmers) just lick their chops at $6 corn. I don’t see any farmer backing off from fertilizer.”

The company expects global potash shipments to be approximately 57 million tonnes in 2011, with shipments ranging between 58 million and 60 million tonnes in 2012. It had earlier forecast 2011 potash shipments of between 55 million and 60 million tonnes.

Price negotiations between Canpotex, the offshore potash sales agency for Potash Corp, Mosaic Co (MOS.N) and Agrium Inc AGU.TO, and key buyer China look to begin this month, with higher prices expected for the first half of 2012, Dowdle said.

Potash Corp trimmed its 2011 gross profit target from its potash business due to slightly lower than projected shipments. But the company raised its gross profit expectations from its phosphate and nitrogen businesses by an equivalent amount, offsetting the slight disappointment on the potash side.

$1=$0.99 Canadian Reporting by Euan Rocha in Toronto and Rod Nickel in Winnipeg; editing by Rob Wilson

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