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Port of Tauranga Ltd T.POT


Primary Symbol: PTAUF

Port of Tauranga Limited is a New Zealand-based company that carries out business through the provision of wharf facilities, land, and buildings, for the storage and transit of import and export cargo, berthage, cranes, tugs, and pilot services for customers. It operates in three segments: Port operations, Property services, and Terminal services. The Port operations segment consists of providing and managing port services, and cargo handling facilities through the Port of Tauranga, MetroPort, and Timaru Container Terminal. The Property services segment consist of consists of managing and maintaining the Port’s property assets. The Terminal services segment consists of the contracted terminal operations, general container marshalling and ancillary services of Quality Marshalling (Mount Maunganui) Limited (Quality Marshalling). It provides customers with supply chains through investment in regional feeder ports and inland freight hubs.


OTCPK:PTAUF - Post by User

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Post by scissors14on Oct 30, 2012 3:07pm
324 Views
Post# 20540740

Solid Long-Term Fundamentals Remain Intact At Pota

Solid Long-Term Fundamentals Remain Intact At Pota

Solid Long-Term Fundamentals Remain Intact At Potash

https://seekingalpha.com/article/961971-solid-long-term-fundamentals-remain-intact-at-potash?source=email_rt_article_readmore&ifp=0

Near-term headwinds persist at fertilizer giant Potash (POT), which reported a mixed bag in its third quarter results Thursday morning. The Canadian firm saw revenue fall 8% year-over-year to $2.1 billion, slightly better than consensus expectations. Earnings per share slid 22% year-over-year to $0.74, which was worse than consensus estimates.

Potash (the product) sales tumbled 10% year-over-year to $887 million, the result of declining prices and slumping orders from India and China. Total tonnage sales in North America increased 25% year-over-year to 1.0 million tons, as farmers have continued to invest in fertilizer to compensate for lower yields resulting from poor growing conditions in the US. Sales in Latin America also remained brisk, growing year-over-year driven by strength in Brazil and the anticipation of record corn plantings. The company warns that both regions will likely shift shipment timing in order to avoid distribution congestion, which will result in a smoothing of revenue. We doubt it will negatively impact overall results, though it could alter short-term financial performance.

Disagreements with China and India with respect to new supply contracts continue to weigh on the firm's performance in Asia. Tonnage in both regions fell year-over-year, and the short-term picture remains particularly vague in India. China simply wants to pay lower prices for potash, even though demand for potash in the growing nation continues to surge. The country has been relying on inventories, rail-bound delivery, and domestic production to meet these needs, but the firm believes additional supply will be needed-the only question is when. Management also gave excellent granularity with respect to the situation in China, where government subsidies incentivize nitrogen consumption in lieu of potash. The company seems less optimistic that the situation will turn positive in the near-term, though it expects private sector pressures to eventually force the government's hand.

Overall, the potash segment saw profitability fall substantially, as gross margins per metric ton fell 17% year-over-year to $269. With prices down 5% and input costs rising, it appears as though profitability growth will remain challenged.

Nitrogen sales remained relatively strong, increasing 3% year-over-year to $589 million. However gross profit fell 5% to $251 million as a result of higher natural gas and ammonia prices. Nitrogen demand remains relatively stable, and management hinted that we should see nice gross margin upside in the first quarter of 2013, which we think is achievable given the tremendous decline we've seen in the price of natural gas through 2012.

Looking ahead, the firm reduced its full-year earnings outlook to $2.40-$2.60 from its previous range of $2.80-$3.20. Potash gross profits look to be much lower than previously forecasted, coming in at $2.1 billion to $2.3 billion compared to the previous estimates of $2.6 billion to $2.8 billion. This estimate reflects reduced tonnage as a result of supply-agreement "timing" with China and India, which remain significant headwinds in the near-term. We suspect these issues to subside in the long-term, as the economics of agriculture dictate continued demand for potash. Phosphate and nitrogen profit expectations were reduced to the range of $1.3 billion to $1.5 billion from the firm's previous guidance of $1.4 billion to $1.6 billion.

Overall, we thought the quarter was decent, but certainly not great given the lack of agreement between the major North American fertilizer suppliers and the two developing Asian nations. Still, we think shares are fairly valued at current levels (click here to learn about our valuation process), as commodity producers like Potash require wide margins of safety: The Importance of Using a Margin of Safety. We like the long-term fundamentals of global agriculture, but not enough to get excited at current levels.

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