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PotashCorp flags impairments as Q4, FY'16 earnings fall


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PotashCorp flags impairments as Q4, FY'16 earnings fall

Potash Corp. of Saskatchewan Inc.'s net profit in the fourth quarter of 2016 plummeted on a yearly basis as lower product prices weighed on profit margins, the company said Jan. 26.

Net income fell to US$59 million, or 7 cents per share, from US$201 million, or 24 cents per share.

Dividends declared for the quarter dropped to 10 cents per share from 38 cents per share a year ago.

Revenue for the period came in at US$1.06 billion, down from US$1.35 billion. Operating income fell year over year to US$106 million from US$314 million.

Overall gross margins at the company fell to US$183 million from US$386 million in the fourth quarter of 2015.

Sales volumes for the potash segment increased 27% year over year to 2.2 million tonnes; however, the average realized price for potash fell to US$157 per tonne in the quarter, compared to US$238 per tonne a year earlier.

In the nitrogen segment, weaker prices pushed down the gross margin to US$55 million from US$142 million in the year-ago period as average realized prices for nitrogen fell to US$182 per tonne from US$288 per tonne.

Total sales volumes of 1.6 million tonnes of nitrogen for the quarter were slightly higher from the same period in 2015, primarily due to stronger demand for nitrogen solutions relative to ammonia.

The gross margin for the phosphate segment fell to US$8 million, from US$61 million a year ago, due to weaker prices.

The average realized phosphate price per tonne stood at US$404 in the fourth quarter of 2016, down from US$522 in the corresponding period of 2015.

Sales volumes for phosphate totaled 715,000 tonnes, down from 758,000 tonnes a year ago, mainly due to weaker demand for the company's feed and industrial products.

For the full year, PotashCorp's net income totaled US$336 million, or 40 cents per share, falling from US$1.27 billion, or US$1.52 per share, booked for 2015.

Dividends for the year totaled 70 cents per share, less than half of the US$1.52 per share declared in 2015.

The company achieved sales of US$4.46 billion in the year, compared to US$6.28 billion a year ago, with operating income tumbling to US$602 million, from US$1.91 billion.

PotashCorp said it is assessing the carrying value of certain assets, with a particular focus on the phosphate sector, expected to complete in late February.

In 2017, PotashCorp expects EPS of between 35 cents to 55 cents, including costs of 5 cents per share related to its merger with Agrium Inc.

The potash segment sales volumes in 2017 are expected at between 8.7 million tonnes and 9.4 million tonnes, with a gross margin between US$550 million and US$800 million. In 2016, potash sales totaled about 8.6 million tonnes, down from 8.8 million tonnes in 2015.

Gross margin from the nitrogen and phosphate segments is estimated between US$150 million and US$400 million in 2017.

Capital expenditure this year is estimated at about US$600 million.