PotashCorp (POT) is the most diversified publicly traded fertilizer company an investor can find, producing all three kinds of fertilizers: potash, phosphate, and nitrogen. Its peer include Mosaic Company (MOS), Agrium Inc. (AGU), CF Industries Holdings, Inc. (CF), Intrepid Potash, Inc. (IPI), and Sociedad Quimica y Minera de Chile (SQM). PotashCorp also makes up a large percent, 6.8%, of the Market Vectors Agribusiness ETF (MOO).
Most of PotashCorp’s operations are concentrated in Canada, U.S., and Trinidad. However, the company also has strategic investments in other fertilizer producers, distributors, marketers, and suppliers around the world, worth ~$3.00 billion at the end of 2013.
For the first quarter of 2014, PotashCorp generated $585 million in potash net sales, $379 million in phosphate net sales, and $550 million in nitrogen net sales. Throughout the last ten years, each fertilizer has made up ~33% of the company’s total revenue. But because of higher profitability, potash typically makes up more than 50% of the company’s gross margins.
Adjusted first quarter earnings were $0.44 per share for the first quarter, which was 25.44% higher than what analysts had expected ($0.35), and toward the upper end of the guidance management provided earlier in January. Because companies trade based on future earnings, earnings are often adjusted to exclude temporary items that aren’t expected to occur regularly. It’s also a more apples-to-apples comparison against analysts’ estimates.
Since fertilizers are essentially commodities, PotashCorp’s performances are largely driven by industry fundamentals. However, there are certain company specific factors that make the company unique. This series will cover PotashCorp’s key performance indicators for the first quarter and factors that will likely affect the company’s performance over the next few months.