Potash Corp
recently reported disappointing Q4 and full-year results for 2012, and offered
restrained guidance for 2013. Earnings
per share are expected be $2.75-3.25 for 2013, compared to adjusted EPS of
$2.76 in 2012. Demand is forecast to be
strong in the Americas and most of Asia, with India being the wild card. While Potash Corp is often considered the
industry's swing producer, India has stumbled its way into the position of
swing buyer. While management wisely
assumed little change in India when offering guidance for 2013, they expressed guarded
optimism that the Indian government will eventually put agronomics ahead of
politics and revisit a flawed subsidy regime.
It's difficult to predict exactly when, however.
CEO Bill Doyle
addressed the all-important issue of future potash supply. He firmly reiterated his long-held position
that fears of oversupply are overblown.
Brownfield expansions are likely to go forward, but at a slower pace, he
predicted, while greenfield expansions will face significant delays.
The status of
Potash Corp's interest in Israel Chemicals was not addressed in the quarterly
conference call, either in management's prepared remarks or in the question and
answer session with analysts that followed.
The political jockeying that will take place after the recent Israeli
election is likely to put any big decisions on hold for months. This is good news for Potash Corp shareholders,
who should fear a purchase of Israel Chemicals, given that it would almost
certainly be paid for using underpriced POT stock, in exchange for rather
expensive ICL shares. Warren Buffett has
pithily explained that investing is simply "buying dimes for
nickels"; Potash Corp management should bear this in mind, because at
present any deal looks like it would be just the reverse.
On a happier note,
the company significantly increased its dividend, to $0.28 per quarter, and the
stock now yields better than 2.5%.
Here is my original investment analysis of Potash Corp.
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