PotashCorp (POT) Tops Q4 EPS by 3c; Guides Q1, FY15 EPS; Offers Market Outlook

PotashCorp (NYSE: POT) reported Q4 EPS of $0.49, $0.03 better than the analyst estimate of $0.46. Revenue for the quarter came in at $1.9 billion versus the consensus estimate of $1.67 billion.

PotashCorp sees FY2015 EPS of $1.90-$2.20, versus the consensus of $2.12.

PotashCorp sees Q1 2015 EPS of $0.45-$0.55, versus the consensus of $0.50.

Market Outlook

Despite a strong US recovery, weakening economic growth in other regions of the world continues to temper the global outlook. In this environment, currencies have generally weakened relative to the US dollar and commodity prices remain subdued. While we closely monitor these factors, we enter 2015 with a positive – albeit moderated – view for our business.

The agricultural outlook remains supportive. Even as prices for many crops settled at lower levels in 2014, we believe they continue to provide economic incentives for farmers to improve yields, encouraging growth in demand for our products.

In potash, global shipments are expected to slow from 2014's record level of more than 61 million tonnes. We believe the conditions that emerged in 2014, including encouraging consumption trends, a drawdown of producer inventories and potential production constraints among certain competitors, will help offset the expected reduction in shipments. In this environment, we see opportunity for suppliers with the ability to quickly respond to customers' needs. For 2015, we estimate global shipments will range between 58 million and 60 million tonnes with strong consumption underpinning demand.

In North America, we expect the necessity of replenishing nutrients at the farm level after a record crop in 2014 will support healthy demand as we approach the spring season. Customers are now working to position product and PotashCorp is shipping tonnage against significant winter-fill commitments. The anticipated reduction in planted acres and improved distributor inventories are likely to result in a modest decline in annual shipments compared to 2014, with 2015 totals anticipated at 9.5-10 million tonnes.

Potash shipments to Latin America are expected to remain strong. After a subdued start to the year, customers in this region are now engaging and procuring new tonnage. We anticipate that weaker crop economics will result in some moderation of growth in this market and forecast total shipments of 10.8-11.3 million tonnes in 2015.

In China, with the completion of potash deliveries against previous contracts, negotiations continue on new first-half supply agreements. We see the encouraging Chinese consumption trends that emerged in 2014 continuing, especially for compound fertilizers with higher potassium content. We forecast Chinese demand at 12.5-13.0 million tonnes in 2015, including import expectations of 6.5-7 million tonnes.

In India, we also saw positive consumption trends for both direct application and compound fertilizers, and these will help drive continuing demand growth. Canpotex has completed shipments against previous contracts and is beginning to negotiate new supply agreements to meet Indian customers' needs. For 2015, we forecast potash shipments of 4.5-4.8 million tonnes.

Potash demand in Other Asian countries (outside of China and India) has been slow to gain momentum this year due to higher distributor inventories. We see this situation improving as agronomic need and supportive crop economics – especially for oil palm – are expected to foster greater import needs as the year progresses. We forecast shipments to these countries for 2015 to be in the range of 8.3-8.7 million tonnes.

For earnings history and earnings-related data on PotashCorp (POT) click here.

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