Having already gotten a whiff of Mosaic's (NYSE: MOS) earnings, neither the weak results reported by PotashCorp (NYSE: POT) or CF Industries (NYSE: CF) are too big of a surprise. Even some gigantic guidance cuts were taken in stride.
Let's start with fertilizer titan PotashCorp, which missed analyst estimates by a country mile. Without the favorable impact of some tax adjustments, earnings were only $0.47 per share, versus the $1.02 reported.
The firm saw North American and international potash volumes plunge 86% and 78%, respectively. While phosphate and nitrogen volumes held up a bit better, potash really drives the economic engine here, as evidenced by the 73% drop in gross margin and the 71% collapse in cash flow before changes in working capital.
We've documented the recent potash market dynamics here, here, and here. There's not a whole lot to add at this point. While PotashCorp's principals may be beating the same drum when it comes to the longer term supply and demand fundamentals for potash, I have to agree that, as with crude oil, the outlook for this commodity is quite strong. In the meantime, PotashCorp is going to bear some pain, as exemplified by the firm's sharply lowered earnings guidance for the full year.
As for CF, which is locked in a heated takeover tussle-a-trois with Agrium (NYSE: AGU) and Terra Industries (NYSE: TRA), earnings also plunged. Overall, the firm's revenue and sales volume held up quite well, and gross margin in the nitrogen segment fell only 14%. Despite more than doubling export volume, the phosphate business really fizzled, however, reporting negative margins for the quarter.
With spring planting season arriving, hope springs eternal for this CF. The firm's got one of the best balance sheets in the space, even after its blitz of a buyback ($500 million worth at around $59 per share) during the fall meltdown. Investors appear ready to acknowledge green shoots here, as they bid up the stock today, and I'm pretty convinced that CF's got a fertile future as well.
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