Potash Corp.'s mine in Rocanville, Sask.
A recovery in demand for its fertilizer ingredients helped Potash Corp. report higher-than-expected first-quarter profits, but its conservative outlook suggests the rest of the year may not be quite as robust.
Chief executive officer Bill Doyle dismissed concerns of sliding demand on Wednesday, instead trying to focus investors on the need for potash as a soil nutrient for years to come.
"We believe the higher demand we are seeing today is a precursor to a longer-term rebound as farmers strive to catch up on applications missed in 2009," Mr. Doyle said.
"Food and fertilizer are essential industries for global and human development, and cannot be managed with a short-term view."
Saskatoon-based Potash Corp. said profit rose to $449.2-million, or $1.47 a share for the January-March period, up from $307.4-million, or $1.01 a share a year ago.
The company also raised its full-year earnings forecast to a range of $4.50 to $5.25 a share, from a previous forecast of $4.00 to $5.00 a share.
The revised range still fell short of a consensus forecast of $5.52 a share, according to analysts surveyed by Thomson Reuters.
The company's second-quarter forecast of earnings of $1.00 to $1.30 a share was also below the average forecast of $1.46.
Revenue in the quarter rose 86 per cent to $1.71-billion on larger potash sales volumes.
"Management's estimates may be overly conservative as we have seen in earlier guidance," BMO Nesbitt Burns said in a note Wednesday.
Analyst Edwin Chee said while potash demand and deliveries have recovered strongly, "pricing continues to be lacklustre and we do not expect price increases to be visible until sometime toward the end of Q2/Q3."
Potash prices and sales fell sharply last year after hitting a high of about $1,000 a tonne on the spot market in 2008. Prices are now around $350 a tonne as farmers boost production for crop such as sugar, palm oil and corn.
"We do not believe that (Potash Corp's) guidance is a strategy of 'under-promise and over-deliver.'" TD Newcrest analyst Paul D'Amico wrote in a note.
"In our view, the report on a net basis is mixed to negative (given the outlook is below consensus)."
Mr. Doyle, the fertilizer giant's colourful CEO, dismissed critics, pointing to growing global food demand that he says will only increase demand for fertilizer and drive up prices due to limited supply.
"When China goes on one of its growth spurts, it's the dickens for everybody to keep up with, and you'll see that and you'll see that in the next couple of years' period. China is ready to take off again," he said. "We'll be ready for it."
He said China will be the biggest potash market in the world, even though its consumption has dropped in recent years.
Mr. Doyle also used the first-quarter earnings report as a platform to dismiss the giant mining companies such as Vale and BHP Billiton who are entering the potash space dominated by his company today.
He called Vale's project in Argentina "foolish" from a cost structure perspective, and said the boards of both it and BHP would never approve projects given how expensive they would be to build.
"The board members would look at you like you've got a hole in your head. It's just not the way business works," Mr. Doyle told investors during a conference call Thursday.
He also noted that none of the proposed projects from those mining majors are under way.
"If it was such a hot-spit deal, we would be doing it."
With files from Reuters