July 29, 2010 / 10:31 AM / 9 years ago

UPDATE 4-Potash Corp profit climbs as sales volumes grow

* Q2 EPS $1.55 vs $0.61 a yr-ago; revs up nearly 70 pct

* Sees global industrywide potash demand up 10 pct in 2011

* Expects Q3 EPS of $0.80 to $1.20; Wall St EPS view $1.17

* Sees 2010 EPS of $5 to $5.50; Wall St EPS view $5.30 (Adds CEO comments, updates share price; figures in U.S. dollars unless noted)

By Euan Rocha

TORONTO, July 29 (Reuters) - Potash Corp of Saskatchewan POT.TO reported on Thursday its second-quarter profit more than doubled, soaring past expectations, as a four-fold rise in sales volumes offset lower prices for the crop nutrient.

The company, the world’s largest producer of potash, said it expected global demand to increase roughly 10 percent industrywide to about 55 million tonnes in 2011.

It said net income rose to $472 million, or $1.55 a share, from $186.2 million, or 61 cents, a year earlier.

Excluding a one-time gain from a special dividend from its investment in Israel Chemicals (ICL.TA), the Saskatoon, Saskatchewan-based company earned $402.4 million, or $1.38 a share.

“The undeniable need for sustainable food production continued to drive fertilizer demand and our performance in the second quarter,” Chief Executive Bill Doyle said in a statement.

Revenue rose nearly 70 percent to $1.44 billion, as potash shipments rose sharply from year-earlier levels, when the world recession and weak grain prices had hit fertilizer demand.

Analysts, on average, had forecast earnings of $1.19 a share, on revenues of $1.40 billion, according to Thomson Reuters I/B/E/S.

Shares of Potash Corp closed up 5.2 percent at $102.80 on the New York Stock Exchange, while ending the day up 4.6 percent at C$106.39 in Toronto.


The company said it sold 1.9 million tonnes of potash in the quarter, up from about 400,000 tonnes a year earlier.

It said the increased demand boosted its operating rates and helped reduce its cost per tonne of potash production.

Last week, U.S. fertilizer manufacturer Mosaic Co (MOS.N) also said its second-quarter profit more than doubled on strong potash sales and higher margins. [ID:nN22265581]

Potash Corp, the world’s largest fertilizer maker, said gross margins from both its phosphate and nitrogen businesses more than doubled, as prices of fertilizers that use these nutrients rose sharply in the quarter.

The company said its capital expenditures in the quarter were $436.5 million, mostly for ongoing expansion projects.


Although the company raised its 2010 earnings forecast, it tightened its potash sales volumes outlook and lowered its potash gross margin forecast for the year.

“They are still being very positive ... but I believe the market is still in flux,” said Gleacher & Co analyst Edlain Rodriguez.

The company forecast third-quarter earnings of 80 cents to $1.20 a share and full year 2010 earnings of $5 to $5.50 a share, up from a prior forecast of $4.50 to $5 per share.

Wall Street currently expects third-quarter earnings of $1.17 a share and full-year earnings of $5.30 a share.

The company also tightened its full year potash sales volumes forecast to a range of 7.5-7.8 million tonnes, from a prior range of 7.4-8 million tonnes.

It lowered its potash gross margin view to between $1.4 billion and $1.7 billion, from a prior range of $1.5 billion to $1.8 billion.

Despite its cautious forecast, Potash Corp expects a strong fertilizer application season this fall, with an anticipated early harvest in many parts of the United States.

“There is no (potash) inventory in the dealer system, and so the fill that we’re looking at ... looks to be incredibly strong, record in many places,” said Doyle, who expect potash prices to begin to start climbing from the fourth quarter onward, with demand from Brazil and China being the big drivers.

Potash Corp raised its nitrogen and phosphate gross profit expectation to a range of $600 million to $800 million, from a prior forecast of $500 million to $700 million.

$1=$1.03 Canadian Reporting by Euan Rocha; editing by Rob Wilson

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