PotashCorp (POT) Misses Q3 EPS by 6c; FY17 EPS Outlook Below Consensus

PotashCorp (NYSE: POT) reported Q3 EPS of $0.06, $0.06 worse than the analyst estimate of $0.12. Revenue for the quarter came in at $0 versus the consensus estimate of $1.02 billion.

Financial Outlook With greater clarity on potash markets through the balance of the year, we have narrowed our guidance range for potash sales volumes, to 9.1-9.3 million tonnes, and for gross margin, to $750-$800 million.

In nitrogen, we expect markets to remain volatile in the fourth quarter and anticipate full-year gross margin will be significantly weaker than in 2016. In phosphate, we expect challenging market fundamentals will continue to weigh on our realizations. With these factors in mind, and taking into consideration the third-quarter phosphate impairment charge, we have lowered our combined nitrogen and phosphate gross margin range and now estimate $140-$190 million in 2017, trailing last year's combined total.

We now anticipate our effective income tax rate to be in a negative range of 2-4 percent, primarily due to discrete tax adjustments.

We have lowered the upper end of our estimates for provincial mining and other taxes and now expect a range of 19-21 percent of potash gross margin for 2017. Further, we have lowered our range for selling and administrative expenses to $215-$225 million and increased our range for finance costs to $230-$240 million.

We have raised the bottom end of our range for income from equity investments and now expect $180-$190 million, primarily due to the strength of SQM earnings.

Due to the recent strength of the Canadian dollar, we have revised our full-year foreign exchange rate assumption to CDN $1.30 per US dollar.

Based on these factors, we have narrowed our full-year 2017 earnings guidance and now estimate $0.48-$0.54 per share. Merger-related costs are now anticipated to be $0.08 per share, with $0.05 per share expected in the fourth quarter.

GUIDANCE:

PotashCorp sees FY2017 EPS of $0.48-$0.54, versus the consensus of $0.64.

Key Highlights

• Third-quarter earnings of $0.06 per share,1 including $0.03 per share related to a non-cash impairment charge in phosphate
• Record quarterly potash sales volumes
• Canpotex2 fully committed for 2017
• Expect merger of equals with Agrium3 to close by the end of the fourth quarter of 2017
• Full-year 2017 earnings guidance range adjusted to $0.48-$0.54 per share, including merger-related costs of $0.08 per share

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

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