No reaction from local investors in Incitec Pivot, our major listed fertiliser group, in the local market yesterday to a strong profit upgrade from Canadian giant, Potash Corp.
It told Canadian markets late last week that it’s now looking for a 30% plus in first half earnings per share.
Potash’s news saw the prices of other manufacturers such as Mosaic and Agrium rise by 6%-8%.
Incitec Pivot shares (IPL) eased 3% to $3.55 yesterday in the local market, a fall of 11 cents on the day.
Potash now expects earnings in the range of $C1.30-$C1.50 compared with the previous forecast of $C0.70-$C1.00 per share provided on January 28.
The company now expects a record quarter for North American sales volume, along with higher-than-expected margins in nitrogen and phosphate.
Fertiliser prices, especially phosphate and urea based, are firming from the steep lows of a year ago of around $US300 or so a tonne.
They were at $US1,000 a tonne during the boom and food shortages in early to mid 2008.
The Potash Corp news came as Agrium ended its hostile, $C5.4 billion bid to take over CF Industries. Yara of Norway was the winner of this contested bid.
The ending of that long running battle might have been expected to take some of the momentum out of the sector, but the better news from potash Corp, especially about the performance in America, changed sentiment very quickly.
"Strong farmer returns, a depleted distributor pipeline and the agronomic need to replace soil nutrients have kick-started a potash rebound from 2009 lows," said Potash Corp president and chief executive Bill Doyle said in a statement.
"While we know that growth does not follow a straight upward line, we believe the increase in potash sales volumes this quarter represents the beginning of a return to long-term growth in demand."
The company said any revisions to its annual guidance will be addressed when it reports its first-quarter earnings on April 29.
Last week’s guidance upgraded a statement made on January 28, so the upturn has happened in the space of six weeks.
That’s despite US grain farmers realising they are now expecting big crops and the prospect of large carryover stocks, especially wheat where it will be around one billion bushels by the end of May.
Potash says on its website that it is the world’s largest fertilizer enterprise by capacity producing the three primary plant nutrients and a leading supplier to three distinct market categories: agriculture, with the largest capacity in the world in potash; third largest in phosphate and nitrogen; animal nutrition, with the world’s largest capacity in phosphate feed ingredients; and industrial chemicals; as the largest global producer of industrial nitrogen products and the world’s largest capacity for production of purified industrial phosphoric acid.
Unlike Potash Corp, IPL has a different business mix, with a heavy emphasis on explosives, especially to the mining and quarrying industries.
IPL took over DynoNobel a couple of years ago and put work on its Moranbah ammonium nitrate plant on hold.
Last month IPL said work had restarted on the plant, which should now be finished in the first quarter of 2012, and within the original budget of $935 million.
That’s a sign IPL sees an upturn underway.
Coal and iron ore mining are booming industries, thanks to China, and now the rest of Asia’s rebound.
The Moranbah plant is based in the Bowen Basin, Australia’s largest metallurgical coal region, close to some of the largest coal mines in the world which are operated by globally-significant mining companies, such as BHP.
