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PotashCorp hurt by fall in income from overseas investments

(Dave Bedard photo)

Reuters — Saskatchewan-based PotashCorp has narrowed its full-year earnings forecast range and reported a lower-than-expected quarterly profit as income fell from its overseas investments.

The price of potash has plunged year over year, triggered by the breakup last year of trading partnership Belarusian Potash Co. that created more competition among producers.

PotashCorp, the world’s biggest fertilizer company by market value, said the average realized price for potash fell 8.5 per cent to $281 per tonne in the third quarter from a year earlier.

Potash prices rose seven per cent from the second quarter, however, and sales volume jumped 29 per cent from a year earlier.

PotashCorp said the global potash industry was now expected to ship 58 to 60 million tonnes in 2014, more than the 56.5-58 million it had estimated earlier.

Global potash demand in 2015 looked to reach similar levels, despite a drop in crop prices, said CEO Jochen Tilk.

“While we expect lower farm profitability still has the potential to impact demand in certain regions, we also believe crop pricing remains within the band that is supportive of farmer economics and fertilization,” he said.

U.S. farmers have used less fertilizer this autumn due to lower crop prices and a delay in harvest.

Even so, fundamentals are improving, said Jeffrey Nelson, analyst at Edward Jones.

“It’s a slow slog through. They’re still digesting what happened (with BPC) last summer, but fundamentals are getting better for sure.”

PotashCorp, which also makes phosphate and nitrogen fertilizers, narrowed its 2014 forecast profit to $1.75-$1.85 per share from $1.70-$1.90, citing a reduction in estimated income from offshore investments and a higher tax rate.

The company’s investments in Israel Chemicals Ltd., Arab Potash Co. PLC and Chile’s SQM accounted for eight per cent of its profit in the third quarter, down from 24 per cent a year earlier.

The company cut its forecast for full-year income from offshore investments to $205 million-$215 million from $230 million-$240 million. It also raised its effective tax rate for the year ending December to 27-29 per cent from 26-28 per cent, citing a tax change in Chile.

PotashCorp’s net income fell 11 per cent to $317 million, or 38 cents per share, in the third quarter. The company’s profit was hurt also by a 34 per cent rise in tax expenses.

Revenue increased eight per cent to $1.64 billion.

Analysts on average had expected a profit of 42 cents per share and revenue of $1.52 billion, according to Thomson Reuters I/B/E/S.

— Reporting for Reuters by Swetha Gopinath in Bangalore and Rod Nickel in Winnipeg.

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