SASKATOON – Potash Corp. of Saskatchewan Inc. earned US$340 million in the first quarter, down from the same time last year, but better than it expected at the beginning of 2014, the fertilizer producer said Thursday.
The company said potash prices trended higher in key markets as the quarter progressed, but a sharp decline during the second half of 2013 weighed on the results.
As a result, the first-quarter average potash price of $250 per tonne was well below the $363 per tonne of the same period last year.
“After an especially challenging environment in the second half of 2013, greater demand and stability emerged early in the year,” PotashCorp president and chief executive Bill Doyle said in a statement Thursday.
“We saw strong customer engagement ahead of the spring planting season, particularly in potash. Despite weather-related issues that impacted our results, especially in phosphate, we were able to deliver earnings above our quarterly guidance range.”
PotashCorp reported Thursday its first-quarter earnings amounted to 40 cents per share compared with 63 cents per share, or US$556 million, in the same period last year. The company’s guidance in January had been for a profit between 30 and 35 cents per share for the quarter.
Sales for the quarter totalled US$1.68 billion, down from $2.10 billion in the first quarter of 2013.
Shares in the company were up 38 cents at C$38.73 on the Toronto Stock Exchange.
The company, which keeps its books in U.S. dollars, said the first-quarter profit included a $69-million special dividend from its investment in Israel Chemicals Ltd. and a $38-million non-cash impairment charge related to an investment in Sinofert Holdings Ltd. (Sinofert).
PotashCorp also announced it has increased its annual estimate for potash profit margins and sales volumes due to slightly better pricing and demand. As a result, it expects between 40 and 45 cents per share of earnings in the second quarter ending June 30 and between $1.50 and $1.80 per share for the full year, up 10 cents at the lower end.
Potash production reached 2.4 million tonnes, exceeding the 2.0 million tonnes produced in 2013’s first quarter.
The company says North American demand for potash was robust as fertilizer distributors worked to position product ahead of spring planting. But even as shipments from domestic producers climbed 48 per cent over the same period last year, ongoing rail constraints worsened by a hard winter and a record grain harvest, kept dealer supplies tight.
The company says while it is beginning to rail deliveries improve, which helps address a backlog of orders, demand for its products is expected to keep pressure on North American carriers. PotashCorp says it will continue to work closely with its transportation partners to minimize disruptions.
PotashCorp announced earlier this month that Jochen Tilk, former CEO of Inmet Mining, will succeed Doyle on July 1 — which marks the beginning of the company’s third quarter. Doyle will stay on as an adviser until next year.
Like other commodities producers, PotashCorp has been dealing with a lacklustre global economy that has pushed down prices for many of Canada’s natural resources since their post-recession highs.
The situation for potash, a major crop nutrient used to improve harvests, was further compounded by uncertainty caused by the collapse of a Russia-Belarus marketing cartel last August and lower customer demand amid China’s economic slowdown.
The company slashed its workforce by about 18 per cent in December, affecting 1,045 people — with the biggest cuts in its home province of Saskatchewan, as well as New Brunswick and Florida.
Note to readers: This is a corrected story. It clarifies that the company’s previous quarterly estimate was for the first quarter, not the second quarter.