Canada's largest fertilizer producer has issued a profit warning to investors, but the news produced only a modest negative effect on the company's stock.
Potash Corporation of Saskatchewan said Wednesday it was revising its outlook because of delays in reaching contracts with fertilizer buyers in China and India.
As a result, earnings for the full 2012 financial year will fall below even the lowest previous estimate of $2.80 to $3.20 per share, PotashCorp said.
The Saskatoon-based company also said earnings for the third quarter will be at the lower end of its estimate of between 70 and 90 cents per share.
The company intends to provide further details when its third-quarter financial results are released Oct. 25.
On the Toronto Stock Exchange, PotashCorp stock was down 29 cents, or 0.71 per cent, at $40.81 at mid-morning Wednesday.
Drought raises concerns
While PotashCorp cited contract delays in Asia for the disappointing outlook, there have also been concerns about how fertilizer producers might be affected by a prolonged drought in much of the United States.
If farmers' yields aren't as strong because of the dry conditions, the plants won't take up all the nutrients in the soil, leaving some of them behind. Phosphate and potash can remain in the soil throughout the winter, whereas nitrogen tends to leach out of soil more easily.
However, PotashCorp said back in July that expected farm production shortfalls this year would support an extended period of crop prices at levels that should encourage high-yield agriculture.
This in turn would encourage rising demand for potash in the years ahead, the company said in an outlook that accompanied its second-quarter results.
At the time, PotashCorp also forecast strong global shipments for the balance of the year, although it warned that 2012 profits would be lower due to the impact of a $341-million impairment charge on its investment in China's Sinofert Holdings Ltd.
PotashCorp is the world's largest fertilizer company by capacity and Saskatchewan has the world's largest deposits of potash, a valuable mineral mainly used in fertilizer.
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