July 24, 2008 / 11:06 AM / 10 years ago

Potash Corp boosts outlook as profit soars

WINNIPEG, Manitoba (Reuters) - Potash Corp of Saskatchewan boosted its 2008 forecast on Thursday after it said it more than tripled its second-quarter earnings as record grain markets spurred demand for fertilizer.

Chief Executive Bill Doyle said record potash prices have not peaked and demand has not abated, even though benchmark U.S. corn futures prices have plunged 25 percent in the past month.

“We don’t see any signs of demand destruction for potash,” Doyle told analysts on a conference call.

“We have the opposite problem, which is we have so much demand it is exceeding the current supply, and that looks to continue” through 2009, he said.

The world’s largest fertilizer company said it earned $905.1 million, or $2.82 a share, for the quarter ended June 30, up from $285.7 million, or 88 cents a share, a year ago.

Analysts polled by Reuters Estimates had expected a profit of $2.61 a share. Potash Corp had forecast earnings of $2.20 to $2.50 a share in April.

The company’s stock jumped as much as 4 percent to C$211, on the Toronto Stock Exchange on Thursday, but later retreated to C$198.80, down C$3.43, late in the session.

Potash Corp also raised its full-year forecast to $12 to $13 per share, from its April estimate of $9.50 to $10.50, in light of recent price hikes. It expects to earn $3.25 to $3.75 a share in the third quarter.

Sales for the Saskatoon, Saskatchewan-based company jumped 94 percent to $2.62 billion, from $1.35 billion a year ago.

Grain prices have soared to record heights because of growing demand for meat in developing countries combined with the production of ethanol from corn and other food grains. Tight grain stocks have led to food shortages around the world.

“We are literally hanging on each harvest,” Doyle said.

Backed by record farm income, farmers are willing to pay high prices, he said. Potash miners would need to produce at least another 3 million tonnes a year to meet current demand.

If China, India and Brazil applied potash at recommended rates, miners would need to produce another 25 million tonnes a year, Doyle said.

Potash Corp expects to mine 10.2 million tonnes of potash this year, and has announced expansions to raise capacity to 18 million tonnes by 2012.

About 500 workers at three of its mines could strike or be locked out as early as Friday because of a contract dispute, but Doyle said a work stoppage would not hurt the company.

He said he hoped the United Steelworkers union would negotiate a deal based on Potash Corp’s final offer, which he said would make miners the best-paid in the potash industry.

“When the guys showed me our final offer, I told them I was glad I had my own teeth, because if they had been false teeth, they would have fallen out and hit the table,” Doyle said.

Doyle defended the company against a union leader’s assertions that it could share more of its wealth, and enjoyed generous tax breaks.

“We will not become a high-cost producer of potash,” he said, noting the company is Saskatchewan’s largest taxpayer.

“We don’t want to end up like one of the airlines or a Detroit automaker which lost their way and become uncompetitive,” Doyle said.

($1=$1.01 Canadian)

Reporting by Roberta Rampton; editing by Rob Wilson

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