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Potash Corp. shares boosted by record profit
Thu Jul 27, 2006 2:39pm ET

WINNIPEG, July 27 (Reuters) - Fertilizer company Potash Corp. of Saskatchewan reported record second-quarter earnings on Thursday, helped by strong performances from its nitrogen and phosphate operations and changes to Canadian tax rates.

Profit at the world's top fertilizer producer by market value was $175.1 million (C$198 million), or $1.65 a share, up from $164.2 million, or $1.46 a share, a year earlier.

Potash shares rose C$5.86, or 5.9 percent, to $105.34 on the Toronto Stock Exchange on Thursday afternoon.

The strong results came despite a 12.2 percent drop in sales, partly because of pricing issues in China. Potash, based in Saskatoon, Saskatchewan, said sales for the quarter fell to $928.7 million from $1.06 billion.

"This quarter demonstrated the importance of our nitrogen and phosphate operations, as well as the effectiveness of our potash strategy as prices remained strong and we achieved record net income, even without potash shipments to China," Chief Executive Bill Doyle said in a release.

Potash said results in the quarter were hurt by the rising Canadian dollar, which increased production costs, as well as costs related to potash mine shutdowns and a non-cash charge for stock-option expensing.

Gains from its Jordanian, Chilean and Chinese investments helped partly offset the negative impact.

Following the company's report early on Thursday, Potash announced it had completed the much-anticipated sales agreement for potash shipments to China for the August-December 2006 shipping period, which will see a $25 per tonne base price increase.

The agreement was made between Canpotex Ltd., the offshore marketing company for Saskatchewan potash producers of which Potash owns one-third, and Sinofert, a fertilizer importer and distributor in China, of which Potash owns 20 percent.

"We expect this to provide momentum for our potash business as customers begin to catch up on overdue purchases," Doyle told analysts on a conference call.

The company expects China will require 2 million tonnes of potash to restore its inventories in 2007. India should require 1 million tonnes and North America 500,000 to 1 million tonnes, Doyle said.

Due to the late settlement, resulting in a short shipping period, the tonnage and shipping schedules to China in 2006 have not been finalized, the company said.

Potash demand was expected to increase amid a growing biofuel industry and record oil prices. Crops grown for biofuel are intensive potash users.

In North America, consumption of potash, nitrogen and phosphate is expected to increase by 10 percent to 15 percent in 2007, returning to average or above average levels, the company said.

"Once potash starts rolling, fundamentals should be tight, which is also good news for prices," Doyle said.

Based on a foreign exchange of C$1.12 (89.29 U.S. cents) relative to the U.S. dollar, Potash expects third-quarter net income will range from $1.25 to $1.50 a share.

Source: Reuters

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