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PotashCorp slashes FY'16 earnings, CapEx guidance as Q1 profit slumps to US$75M

Potash Corp. ofSaskatchewan Inc., or PotashCorp, cut its full-year earnings forecastto between 60 U.S. cents and 80 cents per share from 90 cents to US$1.20 per sharepreviously after its first-quarternet earnings slumped to US$75 million, or 9 cents per share from US$370 million,or 44 cents per share bookedin the same period a year earlier.

"Lower prices for all nutrients weighed on our performancefor the quarter and contributed to a more subdued outlook for the year," Presidentand CEO Jochen Tilk said in the statement.

The absence of new contracts in China, limited demand from Indiaand cautious buying patterns in spot markets reduced global potash deliveries inthe first quarter, "resulting in a weaker demand environment and lower prices."

In response to weaker demand, the company has and lowered expectationsfor 2016 potash sales volumes to a range of 8.3 million tonnes to 8.8 million tonneswhile potash gross margin is expected between US$500 million and US$700 million— reflecting lower volumes and a decline in potash prices.

This compares to previous Potash sales volumes expectations ofbetween 8.3 million tonnes to 9.1 million tonnes, and potash gross margin of betweenUS$800 million and US$1.1 billion.

Meanwhile, CapEx guidance has been reduced by about US$100 millionto range US$700 million to US$800 million.

The company's EBITDA in the quarter fell to US$326 million fromUS$731 million a year earlier.

In addition, investments in Arab Potash Co. Plc in Jordan, Israel Chemicals Ltd. in Israel and Sociedad Quimica y Minera de Chile SA in Chile and SinofertHoldings Ltd. in China contributed US$21 million in the company's quarterly earnings,below the US$33 million impact last year while the recorded impairments of US$27million during the period under review.

During the quarter, the company's consolidated sales fell toUS$1.21 billion from US$1.67 billion a year earlier while gross margin fell to US$234million from US$667 million recorded in the same period of 2015.

Potash sales volumes during the three-month period were lowerat 1.8 million tonnes, compared to 2.3 million tonnes a year ago. Average realizedpotash price was US$178 per tonne, well below the US$284 per tonne generated inthe first quarter last year due to weak global demand.

Nitrogen sales volumes were up 27% on a yearly basis to 1.7 milliontonnes due to strong demand and increased production at the company's recently expandedLima facility. However, weaker benchmark pricing saw average realizations drop toUS$244 per tonne during the quarter, down significantly from US$351 in the corresponding2015 period.

Quarterly sales volumes for phosphate were 700,000 tonnes, whichwere up 10% on a yearly basis primarily due to fewer production constraints. Theaverage realized phosphate price for the quarter was down to US$499 per tonne fromthe US$574 per tonne in the same period last year as weaker demand weighed on prices,most notably for solid fertilizers.

PotashCorp's income tax expense totaled US$32 million, significantlydown from year-ago figures of US$140 million.

For the second quarter, the company is expecting EPS in the rangeof 15 cents to 25 cents.

The Canadian firm declared a dividend per share of 25 cents forthe quarter, down from 38 cents in the year-ago period.