Potash’s 4Q15 sales
The Potash Corporation of Saskatchewan (POT), or PotashCorp, is in the business of all three NPK (nitrogen, phosphorous, and potash or potassium) fertilizers. The company earns about 37% of its total sales from its potash segment, about 31% from its nitrogen segment, and the remaining 32% from its phosphate segment. PotashCorp’s sales are impacted by shipment and fertilizer prices for all three fertilizers.
Understanding PotashCorp’s sales decline
For the latest quarter of 4Q15, PotashCorp reported sales of $1.3 billion, which represents a decline of about 29% from the corresponding quarter one year ago in 4Q14. Below are a few key considerations:
- The decline in sales came from a decline in prices of nitrogen fertilizers such as the UAN, urea, and ammonia.
- Potash segment sales declined by 41% to $454 million, down from $777 million in the corresponding quarter one year ago, in 2014.
- Nitrogen segment sales declined by 26% to 459 million
- Phosphate segment sales declined by 11% to 441 million year-over-year.
Outlook for 2016
The broad outlook for sales in 2016 remains week as a result of weakness in the pricing environment for nitrogen as well as potash fertilizers. On the other hand, phosphate fertilizer prices are expected to fare better. (We’ll discuss this in greater detail later in the series.) That said, the company anticipates the farm environment to lift in 2016, particularly with improvements in Brazil market’s credit availability. India is also expected to drive demand.
An alternative way to gain exposure to PotashCorp without investing directly in the company’s stock is the VanEck Vectors Agribusiness ETF (MOO). MOO has approximately 5% of its total holdings in PotashCorp (POT). PotashCorp (POT), the Mosaic Company (MOS), CF Industries Holdings (CF), and Agrium (AGU) form about 14% of the VanEck Vectors Agribusiness ETF (MOO).
Now let’s look at PotashCorp’s 4Q15 shipments.