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Behind PotashCorp’s Merger and Overall 3Q17 Performance

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Overall margins

Now that we’ve discussed the gross margin performance for each of PotashCorp’s (POT) operating segments (XLB), let’s assess the company’s overall margin performance in 3Q17.

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Margin performance

For 3Q17, PotashCorp’s overall gross margin expanded YoY (year-over-year) to 19%, up from 17% in 3Q16. As we saw earlier, much of its gross margin growth was driven by its Potash segment. However, these gains were wiped out by an increase in operating costs.

POT’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin fell YoY from 29% to 28.7%. Its net margin contracted YoY to 4% in 3Q17, down from 7% in 3Q16.

An update on POT’s merger

PotashCorp is now waiting to merge with Agrium (AGU). During POT’s 3Q17 earnings call, its management stated that the company recently received a conditional approval from India, which will require the company to divest its minority interest in some of its companies within an 18-month period. This includes divesting its interest in Sociedad Química y Minera (SQM) and Israel Chemicals (ICL).

During the 3Q17 earnings call, POT President Jochen E. Tilk also stated: “We continue to work with enforcement agencies in two remaining jurisdictions, Malcolm and China, and the FTC in the US, and are confident in our ability to consummate the merger by the end of 2017.”

Of course, we’ll be tracking and reporting on PotashCorp’s merger with Agrium here at Market Realist. Be sure to check back in for updates.

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