SASKATOON, Dec. 18 /PRNewswire-FirstCall/ -- Reflecting the current softness in demand for crop nutrients as a result of widespread uncertainty in the global economy, Potash Corporation of Saskatchewan Inc. (PotashCorp) today announced the downward revision of full-year 2008 earnings guidance to approximately $10.75 per share(1), which is 10 percent below the midpoint of our last indicated guidance range. Fourth-quarter earnings are expected to be the third-highest in our history (behind only the second and third quarter 2008) and full-year 2008 earnings will be our fifth consecutive record year and should be more than triple the $3.40 per share earned in 2007. This revision was precipitated by weaker fourth-quarter sales volumes in all three nutrients, lower potash volumes to higher netback spot markets and lower prices and margins in our nitrogen and phosphate segments. These impacts have been partially offset by a 1 percent reduction in our consolidated reported corporate income tax rate.
We anticipate total potash sales volumes for 2008 will be below 9 million tonnes with potash gross margin more than triple that of 2007. Consistent with our long-held strategy of matching production to meet market demand, we recently announced a 2-million-tonne curtailment of production beginning in January. We currently anticipate 2009 potash volumes could be similar to slightly above 2008 levels with a strong final three quarters next year. Annualizing expected fourth-quarter 2008 per-tonne potash prices alone could push 2009 realizations to almost $200 per tonne higher than those for full-year 2008, without considering price increases already achieved by Canpotex(2) for first-half 2009 shipments to Korea and Japan or upcoming contract settlements with China and India for 2009.
Potash prices remain strong due to reduced global production while some customers defer purchases, and customer recognition that higher prices are necessary to justify investment in greenfield potash capacity, which has a multi-billion-dollar cost and takes at least five to seven years to develop. Given difficult global credit conditions and increased geopolitical risk in certain regions where prospective potash capacity might have been added over the next decade, we believe that the 8 million tonnes of brownfield capacity we are adding over the next five years is even more valuable today than it was when we announced the projects.
With high levels of nitrogen and phosphate in the supply chain when the financial crisis hit, and with raw material input costs declining dramatically, selling prices for these products have fallen precipitously in recent months. As a result, we have adjusted fourth-quarter volumes and margins downward. We now expect our full-year 2008 nitrogen gross margin to exceed 2007 levels by 35 percent and our 2008 phosphate segment gross margin to be approximately 2.5 times higher than 2007 levels.
While we anticipate a slow start to 2009 for all three nutrients, we believe global production curtailments - the logical economic response to supply/demand imbalances when buyers step away from the market - will significantly tighten these markets when demand returns, which we expect to be during the second-quarter of 2009.
"Like every other industry, agriculture has felt the impact of the global financial downturn," said PotashCorp President and Chief Executive Officer Bill Doyle. "Unlike other industries, however, food production and fertilizer applications cannot be delayed indefinitely. The global food crisis captured the world's focus early in 2008, but attention and capital is currently being diverted to economic issues. That does not mean the food crisis has been resolved. In reality, it could become more severe, increasing the need for and value of fertilizers, especially potash. Given the essential nature of our products and the underlying fundamentals for our business, we anticipate strong demand will return as 2009 progresses, creating even greater opportunities for growth."
Notes ---- (1) All references to per-share amounts pertain to diluted net income per share. (2) Canpotex Limited (Canpotex) is the offshore marketing company for Saskatchewan potash producers.
Potash Corporation of Saskatchewan Inc. is the world's largest fertilizer enterprise by capacity producing the three primary plant nutrients and a leading supplier to three distinct market categories: agriculture, with the largest capacity in the world in potash, second largest in nitrogen and third largest in phosphate; animal nutrition, with the world's largest capacity in phosphate feed ingredients; and industrial chemicals, as the largest global producer of industrial nitrogen products and the world's largest capacity for production of purified industrial phosphoric acid.
This release contains forward-looking statements. These statements are based on certain factors and assumptions including foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities and effective income tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to: fluctuations in supply and demand in fertilizer, sulfur, transportation and petrochemical markets; changes in competitive pressures, including pricing pressures; timing and amount of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets and corresponding effects on the company's investments; changes in currency and exchange rates; the current global financial crisis and changes in credit markets; unexpected geological or environmental conditions, including water inflow; strikes and other forms of work stoppage or slowdowns; changes in and the effects of, government policy and regulations; and earnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2007 under captions "Forward-Looking Statements" and "Item 1A - Risk Factors" and in our filings with the US Securities and Exchange Commission and Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this release and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
