SASKATOON – Potash Corp. of Saskatchewan says it’s looking to better times ahead after profits were down for another quarter due to weaker prices for its three major fertilizer products.
The company said in its third quarter results out Thursday that it sees signs of a turnaround for the key potash market, while it continues to ramp up production at its expanding Rocanville mine and moves forward on the proposed mega-merger with Agrium Inc. (TSX:AGU).
Saskatoon-based PotashCorp (TSX:POT), which keeps its books in U.S. dollars, said potash prices have already rebounded about 15 per cent from the lows reached earlier this year, but at $150 per tonne in the quarter they are still well off the $250 a tonne from a year ago.
The company said it achieved record sales volume, but the lower prices on potash, nitrogen and phosphate saw sales revenue fall to $1.14 billion from $1.53 billion.
Profits came in at $81 million, or 10 cents per share, in the quarter ended Sept. 30, down from $282 million, or 34 cents per share, in the same period last year.
PotashCorp chief executive Jochen Tilk said on a conference call with analysts that improved market fundamentals should see rising potash demand going forward.
“After evaluating fundamentals in each of our key markets, we expect rising potash consumption and the need to replenish inventories,” said Tilk.
The company is also looking to become less dependent on the market swings of raw commodities by pushing ahead with the merger with Agrium, which will combine PotashCorp’s mining operations with Agrium’s extensive direct-to-farmer retail network.
Tilk said response to the proposed merger from shareholders has been encouraging, while independent proxy advisory firms Institutional Shareholder Services and Glass Lewis have come out in favour.
“Vote results to date are overwhelmingly in favour of the merger,” said Tilk.
Both companies are holding separate meetings on Nov. 3 to vote on the proposed merger, which they say would create an agricultural giant worth an estimated US$36 billion and result in upwards of US$500 million in annual savings once the merger is complete.
Tilk said he expects the merger, which will leave PotashCorp shareholders with roughly 52 per cent of the combined company and Agrium shareholders the rest, to be completed sometime around mid-2017.
That’s also around the time PotashCorp expects to have its $3.1-billion Rocanville mine expansion in Saskatchewan complete, which will more than double mine capacity to about six million tonnes a year.
Tilk said the modernized operation is expected to produce potash at about $45 a tonne, and help bring the company’s overall costs down to about $70 a tonne in the future.
“That’s a significant improvement, and I think thanks to the scale of Rocanville and its competitiveness,” said Tilk.
He said the company will be managing inventories and production at other mines closely to accommodate the extra production from Rocanville.
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