February 18, 2009 / 7:58 PM / 9 years ago

UPDATE 2-Potash Corp sees large gross margin growth prospects

* Sees 2009 potash gross margin of $4.5 to $5.5 bln

* 2008 potash gross margin was $3.1 bln

* Shares close up 4.6 percent higher (Adds details from conference, background, byline)

By Euan Rocha

NEW YORK, Feb 18 (Reuters) - Potash Corp of Saskatchewan (POT.TO) (POT.N) expects gross margins to grow significantly in the years ahead, as the company continues to expand its potash production capacity, said Chief Executive Bill Doyle, on Wednesday.

“It is possible that when all our current projects are complete, raising our annual capacity to 18 million tonnes, our potash gross margin could climb to the neighborhood of $25 billion annually,” said Doyle, while speaking at the Morgan Stanley Basic Materials Conference in New York.

In 2008, the company posted a full-year potash gross margin of $3.1 billion. It expects potash gross margin could reach $4.5 billion to $5.5 billion in 2009, said Doyle.

Fertilizer prices soared in early 2008 on surging demand, tight inventories and record grain prices. But the global credit crunch and deepening economic downturn have weighed on the agricultural sector, and grain and nutrient prices have fallen as farmers have deferred fertilizer application.

However, the company anticipates an upswing in demand by the second quarter as farmers resume fertilizer applications.

Doyle expects fertilizer sales to pick-up momentum in April, with very strong demand in the latter half of 2009 and through the course of 2010.

Potash Corp shares closed 4.6 percent higher at $81.73 on the New York Stock Exchange.

CHINESE CONTRACT

Potash Corp, the world’s largest fertilizer maker, expects 2009 potash contract negotiations with China to conclude in April or May.

Doyle said he expects the Chinese to import at least 7 million tonnes of potash in 2009, up from 5.1 million tonnes last year.

“China consumed in 2008, 3.5 to 4 million tonnes less potash than it consumed in 2007 and yet they had a record crop. So they mined the soil (reserves) in 2008 ... they (now) have to apply more potash in 2009,” said Doyle.

The United States led the world into the current economic crisis, but China and other Asian economies are going to lead the world out of this mess, said Doyle.

“The stimulus packages that have just been passed, both in China and the United States are very similar in size, but the Chinese stimulus package is laser focused at the consumer. Whereas, our financial package is a grab-bag of everything they couldn’t get passed in the last Congress,” said Doyle. (Reporting by Euan Rocha; Editing by Bernard Orr)

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