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Canada’s Potash Corporation of Saskatchewan (TSX, NYSE:POT), the world’s largest producer of the fertilizer by capacity, reported Thursday a higher-than-expected quarterly profit thanks lower costs and increased sales volumes.
The Saskatoon, Saskatchewan-based company expects potash demand to remain strong this year, adding that its 2017 earnings outlook has improved since January on the back of recovering prices, which are finally helping producers turn around their fortunes.
PotashCorp had $149 million of net income in the first quarter, equal to 18 cents per share. That’s double the $75 million or nine cents per share in the same quarter last year.
“Potash market fundamentals continued to improve in the first quarter, creating a supportive earnings environment,” PotashCorp President and Chief Executive Officer, Jochen Tilk, said in the statement.
PotashCorp, which reports its results in US dollars, now expects between 45 and 65 cents per share of profit this year, or roughly 25% better than its previous estimate.
Despite the positive tone of today’s release, the fertilizer producer noted first quarter revenue was down 8% at $1.11 billion, but that was offset by higher margins for potash.
The firm kept its forecast for worldwide industry potash shipments of as much as 64 million tonnes for 2017, up from 60 million in 2016. But it increased expectations for the Latin American market and noted that China, the largest buyer, is now seen consuming as much as 15.5 million tonnes.
The company, which expected to complete its $12.8 billion merger with Agrium in mid-2017, was not that optimistic for its two types of crop nutrients as it said conditions remain difficult, with first-quarter sales volumes, prices and margins weaker for both nitrogen and phosphate fertilizers.
A global oversupply of the fertilizer has caused prices to tumble in the last decade, leading to layoffs, mine closures and reduced capacity across the sector as the downward trend became more dramatic in the past two years.
Investors reacted positively to the news, with the stock up 2.8% to Cdn$23.29 in Toronto at 9:37AM EDT, and trading 3% higher in New York to $17.15 at 9:50AM local time.
