* Focus will be on outlook for demand, volumes * Early 2009 market expected to remain soft * Rebound seen in latter part of year (In U.S. dollars unless noted)
By Scott Anderson
TORONTO, Jan 21 (Reuters) - Potash Corp of Saskatchewan Inc POT.TO is set to kick off the latest round of earnings from Canada’s top fertilizer producers on Thursday, but investors are likely to focus on its comments about demand and sales volumes ahead of the 2009 North American planting season.
With a number of forecasts already warning of a bleak outlook for 2009, investors will look past the basic earnings numbers to try to determine just how bad the outlook might be.
“(The) fourth-quarter (of 2008) is going to be slow because applications were slow,” said Terence Ortslan, at TSO and Associates in Montreal. “That trend will continue into the first quarter.”
“We are going to see good numbers again in the second quarter, but the fourth and the first quarter are going to be, given the market circumstances, lethargic.”
Fertilizer prices soared in early 2008 on peaking demand, tight inventories and record grain prices. But the global credit crunch and widening economic downturn have weighed on the agricultural sector, and grain and nutrient prices have fallen as farmers deferred fertilizer application.
TD Newcrest analyst Paul D’Amico, who expects Potash Corp to report fourth-quarter earnings of $2.29 a share, sees weak sales volume hitting the world’s biggest fertilizer producer.
“We concede a negative bias in our 2009 estimate as potash inventory has increased faster and more than we expected,” D’Amico said in a research note.
“Although we are encouraged by the significant global production cuts announced to date, the potential price traction is unlikely to fully offset the implicit lower sales volume profile.”
Potash Corp itself warned recently it expects a slow start to 2009, with demand for all three crop nutrients — potash, nitrogen and phosphate — remaining soft.
In December, the company said it expects 2009 potash volumes could be similar to or slightly above 2008 levels. At the time, it forecast that total potash volumes for 2008 would be below 9 million tonnes.
It also cut the midpoint of its 2008 earnings guidance by 10 percent in light of weaker sales volumes and lower prices for nitrogen and phosphate.
Despite the warning, it still expects the fourth-quarter results to be the third-best in its history.
Analysts expect Potash Corp to report earnings per share of $2.28, on average, before items.
Shares of Potash Corp were up 0.9 percent at C$87.02 on the Toronto Stock Exchange on Wednesday.
Similar problems are also seen hitting rival producer Agrium Inc AGU.TO.
The company said last week that it expects fourth-quarter writedowns of about $117 million due to falling prices.
Agrium, one of the world’s largest producers of nitrogen fertilizer said $96 million, or 41 cents per share, of the writedowns reflects the difference between the sales prices it now anticipates in 2009 and those its North American and South American retail units have contracted for prepayment.
It also said it will write down $21 million, or 9 cents per share, because of the impact of falling prices on its wholesale purchase for resale program.
“These adjustments are indicative of the unprecedented volatility in global economic and commodity markets and the decline in certain nutrient prices since early December 2008 when we issued updated guidance,” Agrium said in a release.
Analysts expect Agrium to report an average earnings per share of $1.10 when it releases its results in mid-February, according to Reuters Estimates.
Agrium shares were up 1.2 percent at C$39.17 in Toronto on Wednesday morning.
It is not until the latter part of 2009 that analysts expect fertilizer demand to bounce back, when North American farmers enter the 2010 planting season.
“You can defer demand up to a certain point, but demand is not going to evaporate entirely,” said Morningstar analyst Ben Johnson.
$1=$1.27 Canadian Additional reporting by Euan Rocha in New York; editing by Rob Wilson