Potash Corp.'s (POT) Q2 Earnings In Line, Revenues Lag

Potash Corp. POT posted a profit of $121 million or 14 cents per share in second-quarter 2016, down roughly 71% from $417 million or 50 cents per share earned a year ago. Earnings as adjusted, excluding one-time items, came in at 18 cents per share and were on par with the Zacks Consensus Estimate.

Revenues for the quarter slumped 41.8% year over year to $935 million and lagged the Zacks Consensus Estimate of $1,137 million.

Segment Review

Potash: Potash gross margin was $123 million in the reported quarter, down from $417 million in the year-ago quarter due to considerably lower prices and offshore sales volumes. Sales volumes for the segment were 2.1 million tons, down 16% year over year. Average realized potash price was $154 per ton, down from $273 per ton in the year-ago quarter.

Nitrogen: Sales volumes for the quarter were 1.5 million tons, down 8% from the year-ago quarter due to weaker North-American industrial demand. Second-quarter gross margin was $130 million, 41% lower than the year-ago quarter. Average realized price for nitrogen products fell to $244 per ton from $334 per ton a year ago, owing to weaker benchmark pricing.

Phosphate: Sales volumes were 0.5 million, down 25% mainly due to weaker North-American demand. Gross margin was a negative $10 million, adversely affected by lower phosphate prices, charges of $29 million related to inventory write-downs and an unfavorable discount rate adjustment to asset retirement obligations

Average realized phosphate price for the quarter was $485 per ton, down from $553 per ton in the prior-year quarter as lower demand weighed on prices.

Financials

Potash Corp.’s cash and cash equivalents were $143 million as of Jun 30, 2016 compared with $449 million as of Jun 30, 2015. Long-term debt was $3,713 million as of Jun 30, 2016 compared with $3,710 million as of Jun 30, 2015.

Guidance
 
Potash Corp. – which is among the top players in the fertilizer industry along with Agrium AGU, Mosaic MOS and CF Industries CF – reiterated its 2016 potash sales volumes guidance in the range of 8.3-8.8 million tons, though lower prices earlier in the year are expected to weigh on the results for the balance of 2016. The company now projects potash gross margin to be in the $400-$600 million range.

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