Potash Corp profit more than doubles; raises forecast
Potash Corp, helped by rising demand for fertilizer as world food prices soar, has doubled its profit and issued far stronger forecasts for the year ahead, sending its shares more than 3% higher on Thursday.
January 28, 2011 / 16:39 IST
Potash Corp, helped by rising demand for fertilizer as world food prices soar, has doubled its profit and issued far stronger forecasts for the year ahead, sending its shares more than 3% higher on Thursday.
The Canadian company, the target of a failed USD 39 billion hostile bid last year, also announced a three-for-one split of its common shares and increased its cash dividend.Analysts said those moves demonstrate the confidence that the world's largest fertilizer producer has in the market's long-term strength, based on the view that global food price inflation will persist."Things look really strong," said Gleacher & Co. analyst Edlain Rodrigues. "The outlook is very solid - they raised their guidance and raised (potash) volume assumptions too ... Things are really looking good."Rodriguez said growth will now depend upon Potash Corp's ability to keep raising prices for its namesake crop nutrient, which comes from underground mines mainly in its home province of Saskatchewan in western Canada.Demand for fertilizers is at its strongest in years, as farmers rush to maximize yields after a surge in grain prices last year. Earlier this month, the United Nations food agency said food prices had risen to record highs in December and that some grains could climb even further. The price of corn alone has more than doubled over the last six months, while wheat, soybeans and other crops have also risen sharply.While adverse weather patterns triggered the latest spurt, the jump also aggravated longer-term concerns about global food security as emerging economies compete for limited agricultural resources.Shares of Potash Corp recently hit a 28 month high of USD 174.31 in New York. That was well above the USD 130 offered last summer by mining giant BHP Billiton, whose bid was blocked by the Canadian government in November.The gain, which Potash Corp Chief Executive Bill Doyle had predicted during the takeover battle, reflects the bullish outlook for agricultural inputs in general and fertilizers in particular.Shares of the company rose USD 5.38, or 3.2%, to USD 174 before the morning bell on Thursday.The 3-for-1 split announced late Wednesday effectively cuts the price of an individual Potash Corp share after a 70% increase over the past year. The move will help improve trading liquidity and encourage more retail investors to invest in the company, analysts say. Quarterly resultsPotash Corp's fourth-quarter net income rose to USD 482.3 million, or USD 1.61 a share, from USD 239.2 million, or 79 cents, a year earlier. The company said costs related to the takeover battle reduced profit by 16 cents a share.Revenue rose 65% to USD 1.81 billion, on the back of higher prices for its nitrogen, phosphate and potash products.Analysts on average had forecast earnings of $1.65 a share, on revenue of USD 1.62 billion, according to Thomson Reuters I/B/E/S.The company raised its 2011 earnings forecast to a range of USD 8.40 to USD 9.60 a share. In October, it had forecast full-year 2011 earnings of USD 8 to USD 8.75 a share. The Wall Street consensus for 2011 earnings is currently at USD 8.89 a share.Potash Corp also forecast first-quarter earnings of between USD 2.10 and USD 2.70 a share. Analysts have been looking for earnings of USD 2.24 a share in the quarter.After adjusting for the stock split, the company expects first-quarter earnings of 70 cents to 90 cents a share, with full-year 2011 earnings of between USD 2.80 and USD 3.20 a share.The company has earmarked USD 2 billion for capital expenditures in 2011, with USD 1.4 billion going toward potash expansion projects.Potash Corp now expects 2011 potash shipments of 9.5 million to 10 million tonnes. It had earlier forecast sales shipments of 9.3 million tonnes.The dividend will increase to 21 cents from 10 cents a share on a pre-split basis. On a post-split basis the payout will equal 7 cents a share.The company will pay out the stock split to shareholders in the form of a stock dividend, with each receiving two additional shares for each share owned on the record date of February 16. The plan is subject to regulatory approval. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
