From Potash Corporation

Potash Corporation of Saskatchewan Inc. (PotashCorp) reported second-quarter earnings of $0.14 per share ($121 million), resulting in first-half earnings of $0.23 per share ($196 million). Results for both periods trailed those in 2015 and included notable charges of $0.04 per share ($38 million) and $0.11 per share ($94 million), respectively.

Gross margin for the quarter ($243 million) and first six months ($477 million) was below 2015 levels ($711 million and $1.4 billion, respectively), primarily due to weaker prices for all three nutrients and lower potash sales volumes to offshore markets. Cash from operating activities of $424 million for the second quarter, and $612 million for the first half of 2016, were both well below prior year totals.

While markets have stabilized in recent weeks and we continue to forecast our 2016 potash sales volumes in the range of 8.3-8.8 million tons, lower prices earlier in the year are expected to weigh on our results for the remainder of 2016. We now expect potash gross margin to be in the range of $400-$600 million.

Lower earnings have reduced our expected provincial mining and other taxes for 2016, now forecast in the range of 23-26 percent of potash gross margin (excluding $32 million of New Brunswick severance costs). Additionally, our effective income tax rate is expected to fall to a range of 16-18 percent given reduced earnings and a greater proportion of income from lower-tax jurisdictions.

“With customer sentiment improving and announced industry shutdowns, we anticipate a more supportive potash environment through the balance of the year. Importantly, we see the potential for record demand in 2017 with annual shipments in the range of 61-64 million tonnes, as strong affordability incents farmers to replenish soil nutrients,” PotashCorp President and Chief Executive Officer Jochen Tilk stated.

As a result of the noted changes, we have lowered our full-year 2016 earnings guidance to $0.40-$0.55 per share, including notable charges through the first half of $0.11 per share. For the third quarter, we forecast a range of $0.05-$0.10 per share. We also intend to reduce our quarterly dividend from $0.25 per share to $0.10 per share commencing with the declaration of our next dividend in September.