Seeing a “sharp rebound” in demand for potash ahead of its first-quarter report, fertilizer giant PotashCorp has rethought its Q1 earnings guidance.
The Saskatoon-based company, the world’s largest potash producer by capacity, on Thursday estimated its expected first-quarter earnings, due to be released late next month, to be in the range of $1.30-$1.50 per share.
That’s well up from its initial guidance on Jan. 28, which pegged its Q1 earnings in the range of 70 cents to $1 per share.
“The upward revision reflects a sharp rebound in potash demand that is expected to drive a record quarter for North American sales volumes and strong offshore shipments, as well as higher-than-expected margins in nitrogen and phosphate,” the company said in its release Thursday.
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“Strong farmer returns, a depleted distributor pipeline and the agronomic need to replace soil nutrients have kick-started a potash rebound from 2009 lows,” CEO Bill Doyle said in the release.
“While we know that growth does not follow a straight upward line, we believe the increase in potash sales volumes this quarter represents the beginning of a return to long-term growth in demand.”
PotashCorp has stated repeatedly over the past season that farmers, many of whom deferred potash applications in the 2009 growing season due to high prices, cannot postpone their applications indefinitely.
“We believe the sharp reduction in potash use and de-stocking of the distribution system in 2009 created the need for a multi-year replenishment, which we expect to begin in 2010,” the company said in its Q1 market analysis report issued March 5.
Specifically, PotashCorp said it estimates its shipments in 2010 at “approximately 50 million tonnes, marking the transition between the historical lows of 2009 and a return to higher demand in 2011.”
PotashCorp, in its March 5 outlook, noted that the collapse of the Soviet Union in the late 1980s led to a “sharp reduction” in potash demand from that region, boosting exports of its potash production and creating “an extended period of excess global capacity” in the 1990s.
High-cost operations shut down during that time and reinvestment in new capacity was “limited.”
By 2003, however, “operating rates exceeded 80 per cent and we believe the potash industry shifted from one defined by excess capacity to one that is likely to remain supply-challenged for years to come.”
