Potash Corp. sees profit plummet as sales to Asian markets slide – by Pav Jordan (Globe and Mail – February 1, 2013)

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Potash Corp. of Saskatchewan reported a surprisingly steep 38-per-cent drop in fourth-quarter profit, stung by slumping demand in China and India.

The sagging fourth-quarter results capped a year that saw Potash Corp. profits drop by about $1-billion from a year earlier, as shifting industry economics and volatile weather punctured the Saskatoon-based company’s bottom line.

“Agriculture is inherently an unpredictable business – from variability in weather and growing conditions to government policy changes that can affect the decisions of farmers,” the company said, after a year that saw drought sweep the United States, spoiling early predictions for a massive global crop surplus for grains and oil seeds.

“It was a shift that once again put a focus on the unpredictable nature of food production,” Potash Corp.’s chief executive, Bill Doyle, said on a conference call with analysts Thursday.

Potash Corp. shares fell 1.9 per cent on the Toronto Stock Exchange Thursday, paring losses of as much as 3 per cent earlier in the day as the company predicted 2013 would be a better year, with stronger demand and higher profits.

The fall in fourth-quarter profit was driven by a 43-per-cent drop in potash shipments to offshore markets and a 37-per-cent drop in sales to India and China.

Potash prices are about half the peak touched in 2008, just before the global economic crisis interrupted booming demand from China, India and Brazil, key markets for the nutrient that makes plants stronger and more resistant to drought and disease.

Some major customers have remained reluctant to make large-scale purchases at prevailing price levels, holding out for better deals. The potash industry, meanwhile, is attracting new players and new mines that stand to add to long-term supply and boost competition among producers.

Prices today, on a per-tonne basis, are in the mid $400s, compared with nearly $1,000 at the peak in 2008 and lows of $300 later the same year, when farmers stopped buying potash as prices got too high. Since then, prices have edged up again but delayed supply contracts with China and India prevented a much anticipated rebound last year.

Mr. Doyle said an agreement with China’s Sinofert Holdings Ltd. earlier this month is a bright spot, and a deal is likely in the first quarter with India.

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