Potash Corp. recorded net earnings of $201 million or 24 cents per share in second-quarter 2017, up 71.4% from $121 million or 14 cents per share it earned a year ago.
The company’s adjusted earnings came in at 16 cents per share which narrowly missed the Zacks Consensus Estimate of 17 cents.
Net sales (as adjusted) for the quarter increased 7.4% year over year to $1,004 million and surpassed the Zacks Consensus Estimate of $936 million.
Potash: Potash gross margin was $213 million in the reported quarter, up from $123 million in the year-ago period due to increased prices, higher offshore sales volumes and reduced per ton costs. Sales volumes for the segment were 2.4 million tons, up 14.3% year over year. Average realized potash price was $174 per ton, up from the year-ago quarter figure of $154. This improvement reflects continued recovery in global spot prices.
Nitrogen: Gross margin was $68 million in the reported quarter, down from $130 million in the year-ago quarter due to weaker prices and higher U.S. natural gas costs. Sales volumes for the quarter were 1.6 million tons, up 6% due to stronger fertilizer demand. Average realized price of $223 per ton during the quarter was down from the year-ago quarter figure of $244. The decline was due to increased global supply.
Phosphate: Sales volumes rose to 0.6 million tons from the year-ago figure of 0.5 million tons due to stronger North American agriculture demand. The company witnessed negative gross margin of $26 million for the quarter compared with a negative gross margin of $10 million in the year-ago quarter. Average realized phosphate price for the quarter was $407 per ton, down from $485 per ton recorded in the year-ago period owing to lower pricing of all products.
Potash Corporation of Saskatchewan Inc. Price, Consensus and EPS Surprise
Potash Corp.’s cash and cash equivalents were $97 million as of Jun 30, 2017 compared with $143 million as of Jun 30, 2016. As of Jun 30, 2017, long-term debt was $3,708 million down from the year-ago figure of $3,713 million.
Potash Corp. expects full-year 2017 earnings in the range of 45–65 cents per share that includes merger related charges of 6 cents per share. The company has revised total potash sales volume guidance and it now expects sales in the range of 9-9.4 million tons (up from 8.9-9.4 million tons) in 2017. It projects potash gross margin of $650–$850 million for the year.
Capital expenditures for the year are projected at $600 million.
Potash Corp. expects combined gross margin for nitrogen and phosphate in the band of $150–$300 million for 2017.
The company expects effective income tax rate to be negative in the range of 3–6% and selling and administrative expenses in the range of $220 million–$230 million for 2017.
Potash Corp. outperformed the industry
over the last three months. While the company’s shares rose 5.8% over this period, the industry recorded a gain of 2.8%.
Zacks Rank & Key Picks
Potash Corp. currently carries a Zacks Rank #3 (Hold).
Akzo Nobel has an expected long-term earnings growth of 11.1%.
Arkema has an expected long-term earnings growth of 12.4%.
Hitachi Chemical has an expected long-term earnings growth of 5%.
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