PotashCorp expects surge in fertiliser demand

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Publish time: 30th July, 2012      Source: www.cnchemicals.com
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July 30, 2012

   

   
PotashCorp expects surge in fertiliser demand
   
   

   

Supported by an "extended period" of elevated crop prices, PotashCorp marred an upbeat long-term picture for fertiliser demand, with a succession of near-term setbacks from production hiccups to investment devaluation.

   

   

The fertiliser giant forecast "rising demand for our products, specifically potash, in the years ahead", as farmers, lured by high crop values, strive to rebuild world crop supplies sapped by a range of weather setbacks.

   

   

"The farm production shortfalls expected this year will support an extended period of crop prices at levels that encourage high-yield agriculture, as these deficits are never made up in a single growing season," Canada-based PotashCorp said.

   

   

"Difficult weather conditions in certain parts of the world are proving that nature doesn''t provide a free lunch and appropriate steps must be taken to enhance productivity.

   

   

"Potash, specifically, is essential for plant health during periods of crop stress."

   

   

However, while forecasting record North American shipments in the second half of the year, the group cautioned that, thanks to weaker Indian demand, world potash demand for 2012 as a whole was likely to come at "at the lower" end of the range of 53 -56 million tonnes it has guided to.

   

   

Indian purchases of fertiliser have been dented both by a weak rupee and a less generous nutrient subsidy regime. And PotashCorp trimmed to US$2.6-2.9 billion its forecast for its gross margin in potash over 2012, noting that "significant scheduled maintenance" at its mines over the summer would raise the cost per tonne of nutrient produced.

   

   

With estimate for capital spending in 2012 nudged higher too, by US$100 million to US$2.2 billion, the group forecast earnings per share of US$0.70-0.90 a share in the July-September quarter. Analysts have factored in earnings of US$0.94 a share.

   

   

And this as PotashCorp revealed that its earnings for the April-June period had fallen short of forecasts of US$1.02 a share too - tumbling to US$0.60 a share, from US$0.96 a share the year before.

   

   

The decline reflected write downs of US$29 million at the group''s phosphate segment, and of US$341 million in the value of its investment in Sinofert, the Chinese fertiliser group.

   

   

"This was incurred due to the significant amount by which fair value was below our cost," said PotashCorp, which paid US$579 million for its Sinofert stake.

   

   

The group cut to US$2.80-3.20 a share, from US$3.20-3.60 a share, its forecast for full year earnings to reflect the write downs. Investors have been forecasting a US$3.46-a-share result, according to a Thomson Reuters poll.

   

   

PotashCorp shares recovered early losses to close 1.1% higher at US$44.99 in New York.