WINNIPEG, Manitoba (Reuters) - Potash Corp of Saskatchewan (POT.TO) nearly tripled its first-quarter profits and ratcheted up its outlook for the rest of the year because of soaring demand and record prices for fertilizer, the company said on Thursday.
Potash, the world's largest fertilizer company, said it earned $566 million, or $1.74 a share, for the quarter ended March 31, up from $198 million, or 62 cents a share, a year earlier.
Analysts, on average, were expecting $1.50 a share according to Reuters Estimates. In January, Potash had forecast first-quarter profit of $1.30 to $1.60 a share.
"Spectacular numbers, obviously they beat the street, but I don't think anybody is necessarily surprised given the fundamentals," said Morningstar analyst Ben Johnson.
Potash Corp and its peers have found it difficult to keep up with fertilizer demand as farmers try to maximize yields to cash in on record crop prices that have fueled concerns about food inflation around the world.
"It took nearly a decade to empty the global grain cupboard and we can't refill it overnight," said Chief Executive Bill Doyle in a release.
Sales in the quarter were $1.89 billion, up 64 percent from $1.15 billion a year earlier.
The company forecast second-quarter earnings of $2.20 to $2.50 a share and increased its full-year forecast to $9.50 to $10.50 per share from its January forecast of $6.25 to $7.25 a share.
Potash stock has tripled during the past year, making it one of the top three companies by market capitalization on the Toronto Stock Exchange.
Potash shares opened higher before plunging as much as C$12.81, or 6 percent, on the Toronto Stock Exchange.
The stock was down C$10.50 at C$196 on Thursday morning.
"Momentum players wanted a big Q2 surprise, but didn't get it," said an analyst who spoke on condition of anonymity.
Charts show potash shares have been overbought, said Joe Ismail, a technical analyst at Maison Placements Canada.
"There is a euphoric enthusiasm about Potash in general. There could be a bit of a stampede for the exits when investors start to bail out," Ismail said before the market opened.
Potash and other major producers inked a deal last week with China, the world's largest importer, to supply potash at more than triple last year's contract price.
The company reported record margins and strong outlooks not only for potash, its mainstay, but also for phosphates and nitrogen.
The positive outlook for the other nutrients should augur well for other fertilizer producers, said J.P. Morgan analyst David Silver in a research note, citing Mosaic Co (MOS.N), CF Industries Inc (CF.N) and Agrium Inc (AGU.TO).
But the shares of all fertilizer producers were lower early on Thursday.
(Additional reporting by Scott Anderson and Jonathan Spicer in Toronto and Euan Rocha in New York)
Reporting by Roberta Rampton, editing by Peter Galloway