Potash Falls on Another Profit Warning
(Updated for stock price.)
SASKATOON, Canada (
) -- Shares of
Potash
(POT)
dropped sharply in the wake of the fertilizer maker's profit warning Friday night.
Potash, along with the fertilizer business in general, has been suffering from slack demand worldwide as farmers cut back on production during the recession and farm-gear retailers neglect to stock up. The company has been ratcheting back its financial guidance all year.
This time around, Potash said full-year 2009 earnings will likely amount to $3.25 to $3.75 a share, down from earlier predictions of $4 to $5 a share. A survey of 15 analysts had forecast the company's 2009 bottom line at $4.39 a share.
For the third quarter, Potash said its bottom line will fall to the "low end" of the range it had earlier forecast: 80 cents to $1.20 a share. Analysts had been looking for $1.01.
The company expects potash volumes to fall 60% between 2008 and 2009 and profit margins in its phosphate and nitrogen businesses to decline by 85%. It also said that fertilizer makers around the world have cut back on potash production by nearly 20 million tons.
So has Potash itself. In its press release delivering the news, the company said it "will continue to keep a tight rein on our production until demand returns in the new year."
Still, Potash strove to put things in the best possible light, saying "Our 2009 earnings are still expected to be among the best in company history."
Potash also made sure to illustrate why it's optimistic about its long-term business: the global recession has severely reduced the amount of potash used by farmers, especially in the developing world. This will cause crop yields to fall sharply, thus creating a big future need for fertilizer. "We expect 2010 global potash demand to be in the range of 50-55 million tones," the company said.
Potash shares ended trading Monday at $92.09, down $4.05, or 4.2%, on volume of 12.4 million shares. Average daily turnover is about 8 million shares.
-- Written by Scott Eden in New York
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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.
