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POT misses target but still optimistic - premarket flat

[Motownwing]

Potash Corp. of Saskatchewan Inc. reported an 11% drop in third-quarter earnings on Thursday as higher tax expense and weaker performance from its equity investments offset higher potash and nitrogen sales volumes.
The world’s biggest fertilizer company said it earned US$317-million, or US38¢ a share. That was below the consensus analyst estimate of US42¢, but was within the company’s prior guidance.
Despite the earnings miss, Saskatoon-based Potash Corp. saw plenty of reason for optimism in fertilizer markets. The company noted that global potash shipments reached an all-time high in the first nine months of 2014 amid rising prices, and that nitrogen and phosphate prices have also improved as demand has been strong.
 “We continue to see encouraging signs in each of our major [fertilizer] markets with a renewal of demand translating into higher sales volumes,” chief executive Jochen Tilk said in a statement.
“Furthermore, we experienced another quarter of improved potash pricing trends, which strengthened our earnings. Combined with internal efforts to optimize our operations, these positive developments mark important steps toward a stronger performance for our company.”
Potash Corp. sold two million tonnes of potash in the third quarter, which was 29% higher than the same quarter in 2013. However, that was the period in which Russian producer OAO Uralkali threw the potash market into disarray by vowing to max out production. Uralkali has since backed off those plans, but they created large disruptions in the market in the short term.
While potash prices have rebounded slightly since Uralkali’s infamous announcement, they still have a way to go to get back to where they were. Potash Corp. said its average realized price in the latest quarter was US$281 a tonne, compared to US$307 in the third quarter of 2013. Prices topped US$900 back at the market peak in 2008.
Mr. Tilk took over as CEO in July. He lacks the bombast of his predecessor Bill Doyle, but is known for his strong operational skills. That may be paying off already at Potash Corp., as the company noted that costs in its potash business have improved by US$28 per tonne year-over-year. While the company said it achieved operational efficiencies, it also benefited from higher production and a weaker Canadian dollar.
Going forward, Potash Corp. expects global potash sales will be in a range of 58 million to 60 million tonnes in 2014, which is above its prior guidance. Recent weakness in crop prices is expected to have an impact on output, but the company maintained that potash is affordable for farmers and demand should be healthy in the fourth quarter.