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Last Update: 31-Jan-13 08:27 ET
Potash shares fall 3% following worse than expected earnings
Potash (POT $41.75 -1.27) reported fourth quarter earnings of $0.52 per share, excluding non-recurring items, $0.06 worse than the Capital IQ consensus of $0.58, while revenues fell 12.0% year/year to $1.64 billion versus the $1.73 bln consensus. The company issued downside guidance for the first quarter with EPS of $0.50-0.65 versus the $0.68 consensus. The company issued in-line guidance for FY13, sees EPS of $2.75-3.25 vs. $3.20 Capital IQ Consensus Estimate. "Agriculture is inherently an unpredictable business - from variability in weather and growing conditions to government policy changes that can affect the decisions of farmers. This reality returned to the forefront in 2012, as crop production challenges pushed prices for corn and soybeans to record highs. These rising prices created an expectation that a surge in fertilizer demand - especially for phosphate and potash - was imminent, but this failed to consider that our business is tied to growing seasons and does not necessarily move in lockstep with the rise and fall of commodity prices. As we enter 2013, farmers in many parts of the world are only now preparing for their opportunity to help meet the global need for grains and capitalize on higher crop prices. Given the importance of crop nutrients to yields and the affordability of fertilizer as a percentage of crop revenue, we believe demand is poised for a rebound... In this environment, we estimate our 2013 potash segment gross margin will be in the range of $1.9-$2.4 billion, with shipments forecast between 8.5 million and 9.2 million tonnes. While strengthened global demand is expected to translate into improved sales volumes, our gross margin guidance reflects lower prices in spot and contract markets compared to 2012 levels. We forecast 2013 operational capability of 12.4 million tonnes before the impact of market-related downtime... In phosphate, the expectation of strong demand for fertilizer products in the North American market is likely to be offset by the continued depression in Indian requirements and result in weaker fertilizer margins than we captured in 2012. Feed and industrial demand is forecast to remain relatively strong and margins are anticipated to be near those generated last year... In this environment, we forecast our combined phosphate and nitrogen gross margin for 2013 to be in the range of $1.5 billion to $1.7 billion."
