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Canada’s Potash Corp (TSX, NYSE:POT), the world’s biggest fertilizer producer, reported Thursday a massive and unexpected drop in quarterly profit, and it expects a challenging year ahead despite some positive signs in the market.
The Saskatoon, Saskatchewan-based company ’s preliminary net earnings plunged to US$59 million, or 7 cents per share, in the quarter ended Dec. 31, down from the US$201 million, or 24 cents per share, it logged a year earlier. And year-on-year earnings fell a staggering 73%.
Potash prices are currently at decade-lows and the outlook remains gloomy as several new low-cost mines are scheduled to start production in the short-term.
The depressing results were mostly a result of persistent weak prices for crop nutrients after years of oversupply that has pushed miners to lay off employees and close operations.
All three of the firm’s main products — potash, nitrogen and phosphate fertilizers — were affected by plummeting prices.
Potash, in particular, is currently trading at decade-lows and the outlook remains gloomy as several new low-cost mines are scheduled to start production in the short-term, beginning this year.
Potash Corp, which is expected to complete its proposed merger with Agrium (TSX:AGU) (NYSE: AGU) later this year, said it anticipates “challenging market fundamentals” in the phosphate-fertilizer market, adding that it is currently assessing the valuation of the its phosphate assets, which may lead to writedowns.
But not everything was gloom and doom in Potash Corp.’s report. The company flagged strengthening conditions in the global potash market thanks to a recovery in demand.
“With increased demand and limited new capacity additions, we anticipate relatively balanced market fundamentals in 2017,” it said in the statement.
Shares in Potash Corp. were trading 2.66% lower to Cdn$25.28 in Toronto at 11:12AM ET, and fell almost 3.3% in New York at $19.22 11:29AM ET.
