Potash of Saskatchewan (POT)

Q4 2011 Earnings Call

January 26, 2012 1:00 pm ET


Denita C. Stann - Vice President of Investor and Public Relations

David Delaney - President

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William J. Doyle - Chief Executive Officer, President, Non-Independent Director, Chief Executive Officer of Potash Corporation and President of Potash Corporation

Wayne R. Brownlee - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Garth William Moore - President of PCS Potash

Stephen Francis Dowdle - President of PCS Sales


Michael Picken - Cleveland Research Company

Elaine Yip - Crédit Suisse AG, Research Division

P.J. Juvekar - Citigroup Inc, Research Division

Lindsay Mann - Goldman Sachs Group Inc., Research Division

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division

Jacob Bout - CIBC World Markets Inc., Research Division

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

Kevin W. McCarthy - BofA Merrill Lynch, Research Division

Vincent Andrews - Morgan Stanley, Research Division

Ben Isaacson - Scotia Capital Inc., Research Division



Good day, ladies and gentlemen. Thank you for standing by. Welcome to the PotashCorp Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this conference call is being recorded on Thursday, January 26 at 1:00 p.m. Eastern.

I will now turn the conference over to Denita Stann, Vice President Investor and Public Relations. Please go ahead.

Denita C. Stann

Thanks, Brock. Good afternoon. Thank you for joining us, and welcome to our fourth quarter and year-end 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; Brent Heimann, 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. This morning, we posted an investor presentation on our website. And during Bill's remarks, we'll be highlighting some information from this presentation.

I would like to remind everyone that today's call may include forward-looking statements. Such 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-IFRS financial measures to their most directly comparable IFRS measures.

I'd like to turn the call over now to Bill Doyle for some comments, and then we'll go to questions.

William J. Doyle

All right, thank you very much, Denita, and good afternoon, everyone, and thank you for joining us for this discussion of PotashCorp's fourth quarter and full year 2011 results.

We always appreciate the opportunity to discuss the conditions that shaped our performance as well as to look back at 2011 and then on to 2012 and beyond.

While the need to increase food production is relatively constant, the past few months have reinforced that fertilizer buying can, at times, happen in ways. Through the first 9 months of 2011, buyers made a strong push to meet rising global fertilizer demand. So we entered the fourth quarter, a typically slower period, we expected the pace of buying would ease although the Cs [ph] were more still than we predicted.

With continuing macroeconomic uncertainty, fertilizer dealers moved cautiously in an effort to reduce their inventory positions at year end. As purchasing slowed, prices for urea and phosphate products backed off from annual highs, and buyers became even more hesitant to make commitments for all 3 nutrients. This behavior was most prevalent in North America and certain markets in Latin America and Southeast Asia.

While potash pricing remained relatively stable in most key markets, our average realized price declined slightly from the trailing quarter. This reflected greater pressure from offshore imports in certain regions of the United States and higher fix per tonne in transportation and distribution costs due to a reduction in domestic volumes.

In addition, we sold a larger percentage of tonnes to lower netback offshore contract markets. Still, our earnings of $0.78 per share for the fourth quarter were 39% higher than in the same quarter of 2010, reflecting the pricing gains established for all 3 nutrients over the course of the year.

Looking at 2011 as a whole, we once again achieved significant earnings growth. As you can see on Slide 5 in our presentation, our 2011 earnings of $3.51 per share were the second highest in the history of this company, 80% above 2010.

We sold 9 million tonnes of potash, a 5% increase over the previous year and ended 2011 with average potash prices up $108 per tonne compared to the fourth quarter of 2010.

Our cash flow from operations rose to a record $3.5 billion. We spent $1.6 billion in our potash expansion program and have now completed more than 70% of the capital spending on multi-year projects that are expected to make a lasting contribution to future earnings.

In 2011, we took a number of steps to enhance our transportation and distributions system, which is a critical component of our business that is often overlooked. We purchased 1,000 new high-capacity rail cars and announced plans to build a major potash distribution center in the U.S. Midwest.

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