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UPDATE 3-Potash Corp. profit jumps 63 pct, raises outlook
Thu Jul 26, 2007 3:21PM EDT
(Adds CEO comments from conference call; updates share prices. In U.S. dollars, unless noted)
By Roberta Rampton
WINNIPEG, Manitoba, July 26 (Reuters) - Potash Corp. of Saskatchewan (POT.TO: Quote, Profile, Research) (POT.N: Quote, Profile, Research) reported a 63 percent jump in second-quarter profit on Thursday as farmers around the world raced to buy fertilizer to grow more crops, prompting the company to boost its outlook.
Potash, the world's largest fertilizer producer by capacity, said it earned $285.7 million, or 88 cents a share, in what it called its best-ever quarter, up from $175.1 million, or 55 cents per share, a year earlier.
"We believe we are entering a five-year period that will be the most exciting time that our company has ever seen," Chief Executive Bill Doyle told analysts on a conference call.
The profits beat average analyst projections of 82 cents a share, as polled by Reuters Estimates.
"The difference between reported results and our estimate was due to higher than expected gross profit in every product category, most notably in potash," David Silver, an analyst with J.P. Morgan, wrote in a research note.
"We believe the positive 2007 outlook will read through to other fertilizer names as well," Silver said.
Potash stock was higher early on Thursday but later dropped amid a global fall in equity markets. It was down 71 Canadian cents at C$79.83 on the Toronto Stock Exchange and down almost 2 percent, or $1.46, at $75.82 in New York.
Analyst Brian MacArthur at UBS Securities Canada raised his share price target for Potash to $92 from $84 because of the record results and positive outlook.
Potash, based in Saskatoon, Saskatchewan, said earnings would have been 9 cents a share higher if not for the strengthening Canadian dollar.
Sales in the quarter were $1.35 billion, up from $928.7 million a year earlier, when extended price negotiations hurt sales to China.
The company said it expected tight fertilizer inventories and strong demand to continue because crop prices are at or near historic highs thanks to strong food and biofuel demand.
"There's not one (potash) market we have that isn't looking for more, and that includes North America," Doyle said.
"They're coming to us because our competitors are sold out."
Doyle said he expected fertilizer prices to continue to escalate, although record ocean freight rates will eat into gains.
Potash raised its outlook for full-year net income to a range of between $3.00 and $3.25 per diluted share from $2.50 to $2.83. It said it expected to earn between 70 cents a share and 80 cents a share in the third quarter.
The company said last week it would spend $1.6 billion to build a new potash mine and expand existing operations in New Brunswick for sales to Brazil.
The mine will produce 2 million tonnes of potash a year, increasing the firm's capacity to 14.9 million tonnes by 2011.
Current capacity is around 10.7 million tonnes, and the company is working on several expansions at other mines.
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