Fertilizer king PCS keeps turning a profit

While not quite matching the previous year’s stellar performance, Potash Corp. of Saskatchewan (pcs-t) still managed to turn a considerable profit in 1998.

PCS earned US$261 million (or US$4.82 per share) last year on net sales of US$2.31 billion, compared with US$297.1 million in 1997 (US$5.68 per share) on record sales of US$2.33 billion.

The company was hit by a 70% increase in income taxes, shelling out US$117 million in 1998, compared with US$69 million in the previous year. Income before income taxes was in fact a record high US$378 million, up from US$366 million in 1997.

In the fourth quarter of 1998, PCS earned US$54.2 million (US$1 per share) on net sales of US$542 million, compared with US$72.4 million (US$1.35 per share) on US$611 million in the corresponding period of 1997.

“For the first time in eight years, I cannot report that our net income and earnings per share reached new annual records,” says PCS Chairman Charles Childers, “but we have some 1998 records of which we can be proud: 1998 gross margin, EBITDA [earnings before interest, taxes, depreciation and amortization], cash flow and cash flow per share all reached new highs.”

Strong world demand carried PCS’s 1998 potash sales to 6.28 million tonnes. Despite the Asian economic downturn, offshore volumes were down only 1% from the record 1997 levels, with offshore markets accounting for 57% of total sales volumes.

Record 1998 phosphate production totalled 2.36 million tonnes P2O5, up 4% from 1997. The increase is partially due to the inclusion of a full year of production from phosphate facilities acquired at Geismar, La. In 1998, the company sold a record 4.63 million tonnes of phosphate products (4% more than in 1997), with sales to North American customers accounting for 65% of the total.

Through its subsidiary, PCS Nitrogen, the company produced 3.81 million tonnes of ammonia in 1998, with 63% derived from its U.S. plants and the remainder from its expanded facilities in Trinidad. In 1998, PCS sold 6.7 million tonnes of nitrogen products — 11% more than in its 10 months in the nitrogen business in 1997. However, nitrogen prices continued to deteriorate in the fourth quarter and to date in first-quarter 1999 (with the exception of the still-robust nitric acid market).

In total, excluding selling and corporate costs, PCS’s potash subsidiary supplied 47% of operating income, PCS Phosphate supplied 41%, and PCS Nitrogen supplied 12%.

In 1998, PCS paid off a net US$240 million in debt. Other highlights include purchasing a potash property in New Brunswick and acquiring a 9% interest in Israel Chemicals, owner of the large potash producer Dead Sea Works.

PCS remains the world’s largest potash company by capacity, the third-largest phosphate producer and the second-largest nitrogen producer. Operations include: eight potash mines in Saskatchewan, New Brunswick and Utah; phosphate facilities in Florida, North Carolina and Louisiana; and nitrogen facilities in six states, plus large-scale operations in Trinidad.