Reduced offshore sales hurt Potash Corp. earnings in ’89

In its first year as a public company, Potash Corp. of Saskatchewan said its earnings and revenues were affected by a drop in offshore sales and a stronger Canadian dollar. The former Crown company reported a net profit for the year ended Dec. 31 of $82 million, compared with $106.1 million in 1988. Operating income per tonne sold last year was $24.08, down from $25.30 the previous year.

Total revenue from the company’s Saskatchewan potash operations declined to $330 million in 1989 from $367.8 million the previous year.

Chairman C.E. Childers, in a recent address to the Toronto Society of Financial Analysts, said his company has 15% of world potash capacity and controls 50% of world excess capacity. The company has an estimated 4.3 billion tonnes of reserves, good for more than 100 years, he said.

The Saskatchewan government in 1989 sold 37% of its equity in the company to the general public. Bonds exchangeable into shares were also sold to residents of the prairie province; if all of the bonds were to be converted, the provincial government would retain a 31% interest in the company.

Potash Corp. ended the year with short-term debt of $90 million and long-term debt of $95 million, $89 million of which was in long-term leases. The company’s long-term debt-to-equity ratio is 1-to-7.

Although the average price of potash sold in 1989 was 7% higher than the average price in 1988, North American potash prices reached their lowest point during the last two weeks of December, when fertilizer producers reduced prices and increased shipments to the U.S. markets.

“This resulted in higher than average December shipments and in lower than average sales volumes during the first quarter of 1990,” Childers said.

The company’s list price (FOB) for potash in 1989 averaged $84 per tonne, almost double the $44 charged in 1986.

The company has an annual production capacity of 8.6 million tonnes; in 1989 its output from five Saskatchewan mines totalled about 4.3 million tonnes. Total sales last year were slightly more than four million tonnes.

Potash Corp. markets its product offshore through Canpotex, an export association to which Potash provides 50% of the total tonnes.

World potash consumption grew by about 300% between 1970 and 1989, Childers said. In the near future, growth of 1.6-2% is anticipated, he said, with the Asian and Latin American markets expected to add considerably to the company’s sales.