PotashCorp’s Q1 Earnings: 5 Shocking Numbers You Need

to Know

Image source: Potash Corp.

$0.09 vs $0.44

#1 Earnings per share

What happened

In Q4, PotashCorp projected its first-quarter earnings to be between $0.10 and $0.20 per share. However, it missed even the lower end of its estimate and earned only $0.09 -- a staggering 80% drop year over year.

Weak demand from international markets, significantly lower nutrient prices.

PotashCorp’s averaged realized prices in Q1: Potash: down 37% year over year.Nitrogen: down 31% year over year.Phosphate: down 13% year over year.

Why earnings slumped

$128 vs $101

#2 Cost of goods sold for potash

What happened

PotashCorp curtailed production in response to falling demand. However, that drove its Q1 potash cost of goods sold up by 27% year over year to $128 per tonne.

As a result, POT earned only $88 million in potash gross profit in Q1 compared to $428 million in the year-ago quarter.

The impactPotashCorp’s total gross profit slumped 65% year over year in Q1.

Source: Company Q1 Earnings Presentation

$1.1 billion-$1.5 billion

#3 Projected gross profit

What happened PotashCorp’s Q1 gross profit hit six-year lows.

The impact PotashCorp lowered its already muted full-year gross profit guidance.

Data source: Company financials

Nutrient

Gross profit

Actual 2015 Previous projection 2016

Revised projection 2016

Potash $1.3 billion $0.8-$1.1 billion $0.5-$0.7 billion

Nitrogen + phosphate $0.95 billion $0.7-$0.9 billion $0.6-$0.8 billion

$0.6-$0.8

#4 Earnings per share guidance

In Q1, PotashCorp lowered its 2016 EPS guidance range to $0.6-$0.8 from $0.9-$1.2.

POT expects to earn $0.15-$0.25 per share during the second quarter. It earned $0.5 per share in Q2 2015.

The outlook

Why it mattersAt mid-point, POT’s guided EPS represents a 54% and 80% drop from

2015 and 2011 levels, respectively.

*mid-point estimate. Data source: Company financials. Chart by author

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-$58 million

#5 Free cash flow

What happenedWith the sharp slump in profits, PotashCorp generated negative

free cash flow worth $58 million in Q1.

In Q1, PotashCorp lowered its full-year capital expenditures guidance by around $100 million to boost FCF.

However, POT’s dividend payments in 2016 will likely exceed its FCF as profits are expected to decline significantly, which is a yellow flag. In 2015, POT generated $1 billion in free cash flow, but paid out $1.2 billion in dividends.

The impact

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