Potash Corp. of Saskatchewan Inc. (POT) recently guided to earnings in the range of $3.25 to $3.75 per share in 2009, down from its July view of $4.00 to $5.00. The Zacks Consensus Estimate is pegged at $4.39.

The company attributed the downward revision in guidance to lower potash demand and limited restocking by fertilizer distributors worldwide. It said global potash producers have curtailed nearly 20 million tons of production in the last 12 months.

The company expects a 60% year-over-year decline in potash sales volumes and an 85% drop in the combined phosphate and nitrogen gross margin. It sees third-quarter profit at the low-end of its prior guidance of 80 cents to $1.20 per share. The company also trimmed its 2010 global potash demand forecast to 50 million to 55 million tons from 55 million to 60 million tons. In January, Potash Corp. had forecast earnings of $10 to $12 per share in 2009.

Potash Corp.’s second-quarter profit of 62 cents per share missed both management’s guidance of 70 cents and the Zacks Consensus Estimate of 72 cents. Earnings declined 80% year over year. The quarter also saw a 67% drop in sales to $856 million.

Potash Corp. is the world’s largest producer of potash, representing about 17% of the global production and 22% of the global and 55% of North America’s capacity. It also controls 55% of the global and 70% of North America’s unused potash supplies.

Potash Corp. is the third-largest producer of phosphate in the world based on capacity. The company estimates its phosphate operations to produce around 6% of the world’s phosphoric acid. Its North Carolina facility is believed to be the world’s largest integrated phosphate mine and processing plant.

However, the global economic crisis and weakened demand are matters of concern.

We maintain our Neutral recommendation on the stock.

Zacks Investment Research
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