Potash profits from rising crop prices
Potash Corp. of Saskatchewan Inc., with corporate offices in Northbrook, the world's largest maker of crop nutrients, said profit more than doubled to a record as rising commodity prices spurred fertilizer demand.
Shares jumped 7.5 percent Thursday.
Net income in the fourth quarter rose to $376.8 million, or $1.16 a share, from $186 million, or 58 cents, a year earlier, Saskatoon, Saskatchewan-based Potash Corp. said Thursday in a statement. Excluding one-time items, per-share profit was $1.11, topping the 97-cent average estimate of 13 analysts surveyed by Bloomberg. Sales soared 40 percent to $1.43 billion.
Record corn, wheat and soybeans prices are prompting farmers to pay more for fertilizers. The company said a "robust" global economy, low fertilizer inventories and record agricultural prices will continue to drive demand for crop nutrients.
"Demand for fertilizer is explosive," Paul Taylor, chief investment officer for Canada at BMO Harris Private Banking, a unit of Bank of Montreal, said Thursday. "We still believe that there's lots of upside" for Potash Corp. and Agrium Inc., a rival fertilizer producer, he said.
Potash Corp. gained $8.95 to $129.10 in New York Stock Exchange composite trading. The shares have more than doubled in the past year.
Before Thursday, Potash Corp. fell 17 percent this month amid concern a U.S. recession may hurt profit growth.
"Fertilizer and all of agriculture is certainly cyclical, but it is definitely a different cycle than what the broader North American economy is experiencing now," said Jacob W. Doft, chief executive officer of New York-based Highline Capital Management LLC, which owns Potash Corp. shares.
Potash Corp., which also produces phosphates and nitrogen- based fertilizer, said its average North American selling price for potash rose 29 percent to $214 a metric ton in the fourth quarter from a year earlier. The company's average offshore potash price gained 27 percent to $170.63 a ton.
Net income will be $1.30 to $1.60 a share in the current quarter and $6.25 to $7.25 for the full year, the company said in the statement. Analysts surveyed by Bloomberg forecast profit excluding some items of $1.20 in the first quarter and $5.57 in 2008.
In the fourth quarter, the company's gross profit margin on potash rose 39 percent to $256.4 million from a year earlier. During that time, the margin on phosphates more than quadrupled to $141.9 million and the margin on nitrogen fertilizer rose 67 percent to $136.7 million.