Potash Corp. Of Saskatchewan, Inc. Q2 2010 Earnings Call Transcript

Potash Corp. of Saskatchewan, Inc. Q2 2010 Earnings Call Transcript
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Potash Corp. of Saskatchewan, Inc. (POT)

Q2 2010 Earnings Call

July 29, 2010 1:00 PM ET

Executives

Denita Stann – Senior Director, Investor Relations

Bill Doyle – President and CEO

Wayne Brownlee – Executive Vice President and CFO

David Delaney – Executive Vice President and COO

Joe Podwika – Senior Vice President and General Counsel

Garth Moore – President, PCS Potash

Tom Regan – President, PCS Phosphate and PCS Nitrogen

Stephen Dowdle – President, PCS Sales

Analysts

Vincent Andrews – Morgan Stanley

PJ Juvekar – Citi

Edlain Rodriguez – Gleacher & Company

Lindsay Druckerman – Goldman Sachs

Jeff Zekauskas – J.P. Morgan

Jacob Bout – CIBC World Markets

Fai Lee – RBC Capital Markets

Elaine Yip – Credit Suisse

David Silver – Bank of America/Merrill Lynch

Mark Connelly – CLSA

Michael Picken – Cleveland Research

David Begleiter – Deutsche Bank

Sam Kanes – Scotia Capital

Martin Lavigueur – Macquarie

Pat Benjamin – Hayes Unicon

Hari Sambasivam – National Bank Financial

Presentation

Operator

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Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Potash Corp. Second Quarter Earnings Conference Call. At this time, all calling participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. (Operator Instructions)

I would like to remind everyone this conference call is being recorded on Thursday, July 29th at 1 PM Eastern. I will now turn the conference over to Denita Stann, Senior Director, Investor Relations. Please go ahead.

Denita Stann

Thanks, Rick. Good afternoon. Thank you for joining us. And welcome to our second quarter earnings call. In the room with us today, we have Bill Doyle, our President and CEO; Wayne Brownlee, our Executive Vice President and Chief Financial Officer; David Delaney, Executive Vice President and Chief Operating Officer; Joe Podwika, Senior Vice President and General Counsel; Garth Moore, President of PCS Potash; Tom Regan, President of PCS Phosphate and PCS Nitrogen; and Stephen Dowdle, President of PCS Sales. I’d like to welcome the media who are listening in and remind people that we are live on our website.

I would also like to remind everyone that today’s call may include forward-looking statements. Such forward-looking statements are given as of the date of this call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of such statements and actual results could differ materially. For additional information with respect to forward-looking statements, factors, and assumptions, we direct you to our news release and our most recent Form 10-K.

Also today’s news release, which is posted on our website, includes a reconciliation of certain non-GAAP financial measures to the most directly comparable GAAP measures.

I’ll now turn the call over to Bill Doyle for some comments and then we’ll go to questions.

Bill Doyle

All right. Denita, thank you, and good afternoon, everyone. Thank you for joining us for this discussion of Potash Corp’s second quarter performance and our outlook as we enter a very promising time for our company.

Over the past year, investor questions have had a common theme. The people wondering when we will reach an inflection point for potash, a point where demand reemerges, supply tightens and pricing opportunity returns. It has been a difficult question to answer, but recent supply and demand developments lead us to believe that we are rapidly approaching that important juncture.

Our results for this quarter demonstrated once again that the realities of global food production are taking hold and igniting improved demand for the fertilizer industry. Tighter grain and oilseed inventories, along with supportive prices for crop commodities, led farmers in most growing regions to pursue the economic opportunity that comes with increased production and return to the practice of replenishing essential nutrients in their soils.

This was particularly evident in potash, as volumes for our core nutrient were nearly five times the level of last year’s second quarter. With a notable exception of China, where adverse weather impacted spring planting and fertilizer use, virtually every major potash market moved closer to historical consumption patterns.

Our performance this quarter and for the first six months of 2010 reflected ongoing improvement in fertilizer markets. We generated earnings of $1.55 per share, more than double the same quarter last year. This is the second consecutive quarter of strong earnings, increasing our first half total to $3.02 per share or $921 million, almost matching our full year 2009 earnings.

The unique potential of potash is reemerging and this enabled us to triple our gross margin from last year’s second quarter. It also led to increased contributions from our equity investments in other global potash producers.

We believe a strong foundation has been re-established and that fertilizer buyers and food producers around the world are preparing to take on the significant challenge of meeting food demand in the months and years ahead.

During the quarter, however, the positive fundamentals that underpin our industry appear to be overshadowed by lingering questions about the debt levels of certain European countries and the pace of global economic recovery. This overlooks the fact that on a long-term basis, agriculture operates on a different platform than other industries.

Keeping pace with global food demand is not a choice, it is an ongoing necessity. We believe this demand will support a powerful period of growth for agriculture, especially in North America, which exports more crop commodities than any other region in the world.

The bottom line is that the long-term drivers of our business remain solidly in place and the catalysts that fuel near term-fertilizer demand are accelerating. In recent weeks, pressure on grain and oilseed inventories has become more pronounced, with global grain consumption projected to once again exceed production this year.

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