(Reuters) – Potash Corp of Saskatchewan raised its full-year earnings outlook on Thursday after second-quarter profit fell less than expected due to improving global fertilizer demand.
Earnings have declined year over year for four straight quarters as the price of the crop nutrient hit a six-year low earlier this year. The breakup last year of global trading partnership Belarusian Potash Co accelerated the price slide, as it created more competition among producers.
Lower prices have recently rekindled demand, however, and cost-cutting has also improved Potash Corp’s bottom line.
Shares of Potash Corp jumped 4 percent to $37.62 in premarket trading. “The key question is, ‘Is this just pent-up (potash) demand finally being satisfied, or is it going to continue into 2015,'” said Peter Prattas, analyst at Cantor Fitzgerald. “Our view is that demand has room to increase slightly in 2015, but we’re not going to continue with the momentum we’ve had to start the year.”
The company said it has a strong potash order book from U.S. buyers for the second half, and Canpotex Ltd – its offshore trading partnership with Mosaic Co and Agrium Inc – is fully committed through the third quarter.
China is driving some of the renewed potash demand. Potash Corp said it expected Canpotex to ship 1.2 million tonnes for the year factoring in optional tonnage arrangements in its contract with Sinofert Holdings Ltd.
Potash shipments to India also look to exceed last year’s level despite weaker monsoon rains that have limited Indian crop potential.
Second-quarter net earnings for the world’s biggest fertilizer company by market capitalization fell to $472 million, or 56 cents per share, from $643 million, or 73 cents per share, a year earlier.
Analysts on average had expected a profit of 46 cents per share, according to Thomson Reuters I/B/E/S. Potash Corp had forecast 40 cents to 45 cents.
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