Lauren Krugel, The Canadian Press
Potash Corp. profits fell by 38 per cent in the fourth quarter, missing analyst expectations, as customers held off on buying crop nutrients while international sales contracts were worked out.
The fertilizer producer's net income was US$421 million, or 48 cents per share in the last three months of 2012. Analysts surveyed by Thomson Reuters were, on average, expecting PotashCorp to post earnings of 57 cents per share.
During the same quarter of 2011, the Saskatoon-based company (TSX:POT) posted earnings of $683 million, or 78 cents per share.
CEO Bill Doyle said demand for all three major types of fertilizer — potash, phosphate and nitrogen — was affected by "the absence of significant immediate needs and amid lack of direction, particularly in phosphate and potash."
"Despite these temporary challenges, we operated with a consistent approach — temporarily slowing potash production and leveraging our diversified product mix in our other nutrients — to best position our company for the expected rebound in fertilizer demand in 2013."
Potash, the mineral from which the company derives its name, normally sees a dip in demand around this time of year, but it was made more severe this time as buyers waited for contracts to be settled before committing to purchase supply.
Shipments to offshore markets declined by 43 per cent in the fourth quarter compared with a year earlier. However, shipments within North America rose by 38 per cent.
Meanwhile, things appear to be looking up. A recent contract settlement with China has boosted buyer confidence and the company expects global potash shipments in 2013 to be between 55 million and 57 million tonnes — well ahead of the 51 million tonnes it shipped last year.
"It's hard not to like the stock here," said Jeffrey Nelson, an analyst with Edward Jones in St. Louis, Mo.
The North American market is strengthening, the China contract should force other major buyers such as India to the table and the company recently raised its quarterly dividend by a third, Nelson said.
"I think the longer-term outlook for the potash markets is pretty bright. I think we're certainly going to bounce off of 2012 levels," he said.
"The quarter was obviously a little bit weaker. You can argue that that's backward looking."
Revenue for the quarter was $1.64 billion, down from $1.86 billion a year earlier.
Also Thursday, the company provided earnings estimates for 2013 calling for between 50 and 65 cents per share in the three months ending March 31 and for between $2.75 and $3.25 per share for all of 2013.
The consensus estimate has been for 64 cents per share of earnings in the first quarter and $3.27 per share of net earnings for all of 2013.
Potash was also one of three companies — along with Calgary-based Agrium (TSX:AGU) and Minnesota-based Mosaic Co. (NYSE:MOS) to recently settle U.S. antitrust suits filed in 2008.
Potash and Mosaic each agreed to pay $43.75 million and Agrium agreed to pay $10 million.
The three fertilizer companies, which jointly sell their product abroad through a firm called Canpotex, deny any wrongdoing and say they decided to settle to avoid the cost and distraction of a protracted legal fight.
Potash's results included a $41 million, or four-cent per share, provision for the settlement in the fourth quarter.
The company's full-year earnings for 2012 were $1.2 billion, or $2.37 per share. That included a second-quarter, $341-million writedown related to its investment in Sinofert Holdings Ltd. in China.
The 2012 profit was down substantially from 2011, when PotashCorp's net income was $3.1 billion or $3.51 per share.
The company says its offshore investments in Jordan, Israel and Chile contributed $94 million to earnings in the fourth quarter of 2012. For the full year, contributions from these investments — and a dividend from Sinofert — reached a record $412 million.
Potash shares were down more than two per cent to $42.25 in mid-day trading Thursday on the Toronto Stock Exchange.