PotashCorp Q2 Profit Falls

(RTTNews) - PotashCorp. (POT.TO, POT) Thursday announced a fall in second quarter net income to $121 million from $417 million in the prior year. On a per share basis, earnings declined to $0.14 from $0.50 last year. The company noted that the fertilizer market has been under pressure through the first six months.

Sales for the quarter was $1.053 billion, down from $1.731 billion in the previous year.

The company said it plans reduce its quarter dividend to $0.40 to $0.55 per share.

Looking ahead to the full year, the company lowered its earnings per share guidance range to $0.40 to $0.55. For the third quarter, the company's projection is in a range of $0.05 to $0.10 per share.

While markets have stabilized in recent weeks and we continue to forecast our 2016 potash sales volumes in the range of 8.3-8.8 million tonnes, lower prices earlier in the year are expected to weigh on our results for the remainder of 2016. We now expect potash gross margin to be in the range of $400-$600 million.

Similarly, we anticipate a weaker price environment to negatively impact our nitrogen and phosphate segments through the rest of 2016. We have lowered our combined nitrogen and phosphate gross margin guidance for the year to a range of $400-$550 million.

Lower earnings have reduced our expected provincial mining and other taxes for 2016, now forecast in the range of 23-26 percent of potash gross margin (excluding $32 million of New Brunswick severance costs). Additionally, our effective income tax rate is expected to fall to a range of 16-18 percent given reduced earnings and a greater proportion of income from lower-tax jurisdictions.

Anticipated selling and administrative expenses for the year have been lowered to a range of $220-$230 million. Due to the recent strength of the Canadian dollar, the company have revised our full-year foreign exchange rate assumption to CDN$1.32 per US dollar.

Further, the company lowered full-year 2016 earnings guidance to $0.40-$0.55 per share, including notable charges through the first half of $0.11 per share. For the third quarter, we forecast a range of $0.05-$0.10 per share. The company also reduced its quarterly dividend from $0.25 per share to $0.10 per share commencing with the declaration of our next dividend in September.

The company said, with customer sentiment improving and announced industry shutdowns, it anticipates a more supportive potash environment through the balance of the year.

The company sees potential for record demand in 2017 with annual shipments in the range of 61-64 million tonnes, as strong affordability incents farmers to replenish soil nutrients. "We are positioned to benefit from an improved environment next year and we support Canpotex as they take a cautious approach to the Chinese and Indian markets, committing volumes only through the remainder of 2016."