Near-record crop commodity prices have cleared a path to near-record profits for fertilizer giant PotashCorp.
The wold’s biggest fertilizer company by capacity on Thursday posted a year-end profit of $1.806 billion on $6.539 billion in sales for 2010, up from $981 million on $3.977 billion in 2009 and down only from the $3.495 billion profit it logged on $9.447 billion in sales in 2008 (all figures US$).
“With global food demand as the powerful engine, we believe we have moved into the next stage of growth for our business,” CEO Bill Doyle said in the company’s release.
“Our company stands poised to capitalize on that growth and we believe our fourth-quarter results provide a glimpse of the capabilities and earning potential of our expanding world-class operations.”
The Saskatoon company’s fourth quarter ending Dec. 31 also ended up as its second-largest in profits, as it logged $482.3 million on $1.812 billion in sales, up from $239.2 million on $1.099 billion in the year-earlier period.
Fertilizer demand accelerated, especially for potash, and pricing increased as Potash’s Q4 progressed, the company said.
“With (fertilizer) commitments testing global supply limitations, price increases announced during the quarter took firm hold,” the company said of general fertilizer market conditions. “We believe the majority of product shipped went straight to the field and limited dealer inventory restocking occurred.”
Record fourth-quarter sales volumes of 2.4 million tonnes pushed the gross margin in the company’s potash segment alone to $519.5 million, PotashCorp said. Its phosphate gross margin in Q4 reached $91.6 million, almost quadruple the $23.4 million earned in the year-earlier period.
Higher demand and “significantly higher prices” for all nitrogen products boosted Potash’s Q4 nitrogen gross margin to $151.9 million, more than triple the same number in the year-earlier period.
Potash in Q4 also rung up costs tied to its defense against the hostile takeover bid launched in August by Australian/British mining giant BHP Billiton. The bid was called off in November, but not before PotashCorp booked $64.2 million in related costs in Q4.
On the Wednesday before rolling out its year-end data, PotashCorp announced a three-for-one stock split on its outstanding common shares, with all shareholders to expect two extra shares for each it owns as of Feb. 16. It also boosted its quarterly cash dividend to 21 cents per share, up from 10.
“The doubling of our dividend reflects the confidence we have in the long-term drivers of our business and further commitment to using our strong cash flow to create value for our shareholders,” Doyle said in Wednesday’s release. “Additionally, the increased number of shares resulting from the split should enhance trading liquidity in our stock.”
PotashCorp’s profit picture on Thursday came under fire in its home province, as the provincial opposition New Democrats cited the company’s financial statement in calling for a “comprehensive review” of Saskatchewan’s potash royalty structure.
“The people of our province came together overwhelmingly last year to oppose a foreign takeover of this strategic resource and we stood alongside them in doing so,” Prince Albert MLA Darcy Furber, the NDP’s energy and resources critic, said in a release Thursday.
“But the next step has yet to be taken. What good is declaring a resource to be strategic and stopping a foreign takeover if we are not fully benefiting from it here at home?”
An update on PotashCorp’s “pledge to Saskatchewan” is needed immediately, Furber added, saying the party aims to hold the company accountable for promises made in the midst of Billiton’s hostile bid.
Among PotashCorp’s promises, Furber said, were the repatriation of head office jobs from Chicago to Saskatoon, becoming the largest corporate contributor to community investment in the province, and measurable targets for First Nations and Metis hiring initiatives.
PotashCorp, in a separate unrelated release Friday, announced an immediate contribution of C$1 million to 28 Saskatchewan food banks and affiliates, to buy food for “individuals and families in need.”