potashcorp’s q1 earnings: 5 shocking numbers you need to know
TRANSCRIPT
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
2008 2009 2010 2011 2012 2013 2014 2015 2016* 0
0.5
1
1.5
2
2.5
3
3.5
4
Earn
ings
per
shar
e in
$
-$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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