The Saskatoon-based company said Thursday that its second-quarter earnings were impacted by the $341-million impairment charge recorded on the company's investment in China's Sinofert Holdings Ltd.
"In fact, our earnings would have set at a second-quarter record if not for the non-cash impairment charge related to our invest in Sinofert — that had an impact of 39 cents per share," president and CEO Bill Doyle said during a conference call.
The company reported earnings of $522 million, or 60 cents per share, for the quarter, down from $840 million, or 96 cents per share in the same period last year.
Potash Corp. adjusted its full-year 2012 earnings guidance downward to $2.80 to $3.20 per share — from April's guidance of $3.20 to $3.60 per share — also citing higher production costs as a factor.
Third-quarter guidance is set at 70 cents to 90 cents per share, the company said.
Potash demand in the quarter increased in most major markets, Doyle said, and that demand should continue.
"Looking at the world's potash markets as a whole, we anticipate that shipments could be quite strong for the remainder of the year," he told analysts.
Greater potash demand, including what the company called "unprecedented" offshore sales, resulted in gross margin of $1.2 billion for the quarter, the third-best quarterly total in company history. Gross margin is a measure of how a company controls its production costs.
"Brazil and other parts of Latin America shifted into a higher gear while China and most other Asian markets also increased purchases," Doyle said.
Sales revenue came in at $2.4 billion for the quarter, up slightly from $2.3 billion year over year.
Analysts polled by Thomson Reuters were on average expecting revenues of more than $2.5 billion.
Potash Corp. reported adjusted net income — which excluded the impairment, finance, income tax and depreciation and amortization costs — of $1.35 billion for the quarter.
The company is the world's largest fertilizer company by capacity and Saskatchewan has the world's largest deposits of potash, a valuable mineral mainly used in fertilizer.
An ongoing drought that's been ravaging the U.S. Midwest this summer has raised questions about future demand for fertilizer. Potash and phosphates tend to linger in the soil if plants don't soak them up, so farmers may not wind up needing to buy more crop nutrients when they plant their fields in the spring.
But the company said it believes farm production shortfalls expected this year will support an extended period of crop prices at levels that encourage high-yield agriculture. This in turn will encourage rising demand for the company's products, specifically potash, in the years ahead.
"We expect the remainder of 2012 and the years that follow will bring a sharp new focus in the world to the necessity of food production and proper crop nutrition. We have prepared for these times and we will be prepared to deliver."
In 2010, Potash was the target of a hostile US$40-billion takeover bid by Ango-Australian mining giant BHP Billiton.
The takeover battle became a major political flashpoint in Ottawa, and in the company's home province of Saskatchewan. Premier Brad Wall was an outspoken critic of the bid.
In the end, the federal government rejected the offer on the grounds it did not provide a net-benefit to Canada.
Shares in Potash Corp. closed up 25 cents to $45.54 on the Toronto Stock Exchange.