Potash shares down after producer lowers 2009 earnings guidance amid lower sales

By Kristine Owram, The Canadian Press

Shares in most publicly traded potash companies tumbled Monday after Potash Corp. (TSX: POT.TO) slashed its earnings forecast for 2009 due to lower-than-expected sales volumes for agricultural fertilizers as the waning recession continues to put downward pressure on food prices.

Potash Corp. stock retreated modestly, losing $2.99 or 2.9 per cent to $98.88 on the Toronto Stock Exchange.

Other potash companies took more of a beating. Athabasca Potash Inc. (TSX: API.TO) lost 41 cents or 6.4 per cent to $6.03, while Potash One Inc. (TSX: KCL.TO) fell 17 cents or 6.6 per cent to $2.40.

Agrium Inc. slipped $1.32 or 2.3 per cent to $55.92.

On the New York Stock Exchange, shares in Mosaic Co. fell $3.07 or 5.7 per cent to US$51.18.

Saskatoon-based Potash Corp., the world's largest potash producer, has repeatedly lowered its production and earnings forecasts due to slow fertilizer demand.

Late Friday, the company said it now expects to earn between $3.25 and $3.75 per share for the year, down from earlier guidance of between $4 and $5 per share provided in July.

Earnings for the third quarter of this year are expected to be at the low end of the 80 cents to $1.20 per share guidance previously provided, Potash Corp. said.

The average analyst estimate according to Thomson Reuters was for earnings of 85 cents per share for the third quarter and $3.89 per share for the year.

"The change primarily reflects lower-than-forecasted potash sales volumes due to continued slow demand and limited restocking by fertilizer distributors around the world," the company stated, adding that 20 million tonnes of potash production has been curtailed by global producers over the last 12 months.

In June, Potash Corp. said it would reduce its 2009 output to brings curtailments this calendar year to 4.7 million tonnes and total curtailments to 5.5 million tonnes since August 2008.

And in July, the company downgraded its 2009 sales forecast to between 4.5 and five million tonnes, adding further production curtailments would be necessary.

The company said it now expects year-over-year potash volumes to decline by 60 per cent in 2009.

However, Potash Corp. said cutbacks in fertilizer use will lead to lower crop yields in several regions, which will in turn lead to "a significant rebound" in global demand in 2010 to between 50 million and 55 million tonnes.

In July, Potash Corp. CEO Jim Doyle expressed optimism that "the fertilizer depression is over" after Canpotex - a marketing consortium between Potash Corp., Mosaic and Agrium - agreed to sell 850,000 tonnes of potash to Indian buyers at $460 per tonne delivered.

Global demand for potash has fallen as farmers do without the expensive commodity in response to the recession and lower food prices. In addition, a late start to the growing season in the United States and severe drought in Western Canada are likely to lower North American crop production this year.