Potash Corporation of Saskatchewan has reported a bigger profit in its third quarter of 2008 than it made in all of 2007.
The Saskatoon fertilizer firm on Thursday reported net income of $1.236 billion on $3.064 billion in sales for its quarter ending Sept. 30, well up from $243.1 million on $1.295 billion in the year-earlier Q3 and up from its $1.1 billion net income for all of 2007.
“Despite the recent onset of a global economic downturn, the need for food is not abating,” CEO Bill Doyle said in the company’s release Thursday. “That enabled us to utilize our unique strengths in each nutrient (potash, nitrogen, phosphate) to achieve the best quarterly performance in our history, producing record cash flow and gross margin while also preparing our company for the expected growth in potash demand.”
Potash producers’ inventories were at “historically low levels” entering Q3, PotashCorp said. Its own inventories sat at a record low 212,000 tonnes at the end of the quarter. Seasonal maintenance turnarounds for all producers — as well as ongoing strikes at PotashCorp mines at Allan, Cory and Patience Lake, Sask. — limited the available supplies, leaving potash fundamentals strong through all of Q3, the company said.
For PotashCorp, potash generated a record $909.7 million of gross margin in Q3, up from $221.3 million in the same quarter last year.
Meanwhile, the U.S., Brazil and India, the major markets for solid nitrogen and phosphate fertilizers, appeared “cautious in light of uncertain global economic conditions,” PotashCorp said. Offsetting those trends were China’s continuing export taxes on urea and phosphate, limiting Chinese participation in the trade.
Thus, PotashCorp’s nitrogen operations contributed a record $324.1 million gross margin in Q3, while its phosphate gross margin also sat at a record $507.2 million.
Looking ahead, the company said, “although all sectors, including agriculture, have been impacted by the response to the accelerating global financial crisis and increased selling of liquid assets to attain and hold cash, the most basic drivers of our business remain intact.”
In its Q4, “we expect previously announced potash price increases to take hold and raise our total realized price by approximately $100 per tonne. Looking ahead, limited new potash capacity is scheduled to
come on stream in 2009, even as producers are reporting record-low
With global sales growth estimates ranging from flat to a five per cent increase, “we expect potash fundamentals to remain tight,” PotashCorp said.
“In the event of temporary demand weakness in this current economic
environment, we will follow our long-held practice of matching our production
to meet market demand, reducing volatility in our financial performance.”
PotashCorp said that practice could also “significantly minimize the downside of production lost” during the current strikes by unionized employees at Allan, Cory and Patience Lake.
The employees, represented by the United Steelworkers (USW), are calling for a “commodities-based bonus” tied to a share of profits, similar to others in the mining industry, along with increased wages, benefits, pension and savings plan.
USW has previously said PotashCorp gets “far more profit per worker than most mining companies, (yet) pays wages lower than many other major Canadian mining operations.” The workers went on strike in early August and management workers have since carried out limited production at one of the three sites.