Potash Corp. (NYSE: POT - News) is the world's leading producer of potash and the world's largest fertilizer producer. The company has leverage to higher fertilizer application rates, higher crop plantings, increasing demand for biofuels and rising crop prices. The company is located in low cost areas and financials are solid. Hence, we rate the stock a Buy.
The company enjoys significant cost advantage with regard to raw materials. All potash produced by the company in Saskatchewan is in the area, where extensive potash deposits are found. Moreover, the company has lower cost nitrogen operations in Trinidad due to the long-term, lower-cost gas contracts with Natural Gas Company of Trinidad and Tobago Limited as well as proximity to the U.S. market.
In response to the rising prices of potash products, the company has engaged in expansion and development of projects that will raise annual operational capacity to capture a significant share of the growth in global demand.
On April 24, 2008, Potash Corporation of Saskatchewan announced first-quarter earnings of $1.72 per share, an increase over the $0.62 per share earned in the same period last year. Potash realized prices contributed to this result, improving by $130/ton versus last year. Higher global natural gas costs and strong world demand for agricultural and industrial nitrogen drove up realized ammonia prices by 56 percent from last year's first quarter. The impact was also evident in urea prices, which rose 32 percent from the first quarter of 2007.
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