June 25, 2009 / 10:42 PM / in 9 years

UPDATE 2-Potash Corp cuts quarterly outlook on weaker sales

* Sees second-quarter earnings around $0.70 per share

* Estimate down from earlier $1.10-$1.50 per share

* Shares fall 7.8 percent in post-market trade

(Recasts, changes dateline from CALGARY, adds details; In U.S. dollars unless noted)

TORONTO, June 25 (Reuters) - Potash Corp of Saskatchewan Inc POT.TO POT.N, the world’s biggest fertilizer producer, cut its second-quarter earnings targets on Thursday, due to substantially lower than expected potash sales volumes, sending shares down 7.8 percent in after-market trade.

The price of potash, a key crop nutrient, has remained stubbornly high even as demand has collapsed, as the world’s largest potash producers have cut about 40 percent of global capacity in a bid to maintain pricing.

But, farmers who have been stung by the credit crunch and lower grain prices have opted to defer fertilizer application in the hope that prices will decline.

The company said it expects to post second-quarter earnings per share of just 70 cents, down from the $1.10 to $1.50 per share it had earlier forecast.

“The change reflects substantially lower than forecasted potash sales volumes due to deferral of purchases by customers around the world and lower realized prices for phosphate fertilizers,” the company said in a statement.

Despite tight supply-side management, North American potash inventories have risen steadily in recent months to about 3.9 million tonnes, which is 99 percent higher than the five-year average.

The company said any necessary revisions to annual guidance will be addressed in its second-quarter news release, which is expected on July 23.

Late week, Potash Corp said it would cut 2009 potash production by an additional 800,000 tonnes, bringing cuts this calendar year to 4.7 million tonnes and total curtailments to 5.5 million tonnes since August 2008.

Fertilizer company shares peaked in mid 2008, as grain prices were at record levels and inventories remained tight. But stocks in the sector collapsed in the second half of 2008 as fertilizer demand evaporated in the face of the global economic slowdown.

Potash Corp shares in the United States fell over $7 to $86.20 in trade after the closing bell on Thursday. ($1=$1.16 Canadian) (Reporting by Euan Rocha in Toronto and Scott Haggett in Calgary; editing by Rob Wilson and Marguerita Choy)

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