On Dec 30, 2015, we issued an updated research report on fertilizer company Potash Corp. POT.
Potash Corp. is currently faced with macroeconomic uncertainties and other issues such as price volatility and currency exchange fluctuation. Softness across certain developing markets is weighing on the global outlook. Moreover, depressed crop pricing has created uncertainty about potash consumption. Further, a challenging currency environment combined with economic weakness has resulted in sluggish demand for potash across certain emerging markets.
Potash Corp., in its third-quarter call, also disclosed its intention to take three-week inventory shutdowns at its Allan, Cory and Lanigan operations in Saskatchewan, which started in mid-Dec 2015. These shutdowns, along with the closure of Penobsquis, are anticipated to reduce production by about 500,000 tons in the fourth quarter and lead to modestly higher per-ton cost of goods sold.
Additionally, potash pricing is expected to remain under pressure moving ahead. Higher supply, reduced global energy prices and relatively softer agricultural fundamentals have contributed to a more tempered nitrogen pricing environment this year. Weak pricing is anticipated to lead to lower nitrogen margin in 2015.
Further, nitrogen sales volumes are expected to be lower on a year-over-year basis in 2015 owing to weaker demand in North America, lower production due to mechanical challenges and an expansion-related turnaround. Moreover, the company has been facing earnings headwinds from tax changes.
Potash Corp. is a Zacks Rank #5 (Strong Sell) stock.
Stocks to Consider
Better-ranked companies in the basic materials sector include Stepan Company SCL, Innospec Inc. IOSP, and PPG Industries, Inc. PPG. While Stepan sports a Zacks Rank #1 (Strong Buy), both Innospec and PPG Industries hold a Zacks Rank #2 (Buy).
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