POTASH CORP. OF SASKATCHEWAN $33 (Toronto symbol POT $33 Aggressive Growth Portfolio, Resources sector; Shares outstanding: 863.2 million; Market cap: $28.5 billion; Price-to-sales ratio: 3.6; Dividend yield: 4.5%; TSINetwork Rating: Average; www.potashcorp.com) operates five potash mines in Saskatchewan and one in New Brunswick that account for 20% of global capacity. The company also makes fertilizers from nitrogen and phosphate.
Potash Corp. continues to suffer from last July’s breakup of a marketing alliance between producers in Russia and Belarus. The resulting uncertainty has prompted big clients like China and India to delay signing new potash supply deals because they feel prices will keep falling. In the third quarter of 2013, Potash Corp. sold its potash for $307 U.S. a tonne, down 28.4% from $429 U.S. a year earlier.
In response, the company is slowing production and cutting 18% of its workforce. Potash Corp. expects to pay $70 million in severance costs and related charges (all amounts except share price and market cap in U.S. dollars).
To put that figure in context, it earned $356 million, or $0.41 a share, in the latest quarter. That’s down 44.8% from $645 million, or $0.74 a share, a year earlier. Sales fell 29.1%, to $1.5 billion from $2.1 billion.
The company should earn $2.13 a share in 2013, down 12.0% from $2.42 in 2012. The stock trades at 14.6 times that forecast. The $1.40 dividend yields 4.5%.
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