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Potash Touts Fertilizer Recovery

Potash bests Wall Street estimates for its second-quarter results and pushes aside a cloudy near-term outlook for the fertilizer business to tout a return to "more normal" business conditions.
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NEW YORK (TheStreet) -- Potash Corp. (POT) turned in better-than-expected results for its second quarter, but a tough summer for fertilizer purveyors led the company to offer conservative guidance for the third period.

In its press release, Potash trumpeted the "ongoing rebound" in the crop-nutrient business, and a "return to more normal fertilizer applications" after a prolonged recession-induced drop off in demand on the farm. The company sold 1.9 million metric tons of potash in the second quarter, for example, nearly five times the amount it sold in the corresponding period of 2009.

But, as Potash pointed out, its all-important North American sales were still "below historic norms."

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Potash also admitted that distributors of its core nutrient have been wary of increasing their inventories. Thus, pricing has been stagnant. Or, in the company's words, "Despite the improvement in demand, without the global restocking that has been seen in certain mineral and metal commodities the pattern of just-in-time purchasing did not provide consistent engagement supportive of upward pricing momentum."

Potash told investors to expect third-quarter earnings of 80 cents to $1.20 a share, a rather wide spread that looks conservative. The consensus estimate from sell-side analysts is calling for third-quarter profit of $1.17 a share.

Potash's outlook brightens a bit when it comes to the fourth quarter. "The catalysts expected to fuel near-term demand appear to be accelerating," the company said in its press release. "Strong grain consumption continues to tighten global supplies, despite consecutive record harvests in many key growing regions in recent years that have drawn down soil nutrient levels."

Potash's bullishness appears rooted in

recent strengthening of crop prices

. (Rich farmers, after all, make for good fertilIzer customers.)

The company now expects to post per-share earnings of $5.00 to $5.50 for the year -- up from the range ($4.50 to $5.25) that it provided in April, when it reported first-quarter results. Analysts as a group are looking for $5.31 a share for 2010.

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As for the quarter ended in June, Potash earned $472 million, or $1.55 a share, surpassing the Wall Street estimate of $1.19 a share. Revenue came to $1.44 billion, in-line with the consensus. A year ago, Potash posted a bottom line of $186 million, or 61 cents a share, on revenue of $856 million.

Shares of Potash climbed modestly in the first few minutes of trading Thursday, gaining nearly 2% to $99.36.

-- 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, 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.