Potash Corporation of Saskatchewan Inc. POT said that it has priced an offering of $500 million total principal amount of 4% notes due Dec 15, 2026. The offering, which is subject to customary closing conditions, is expected to close on Dec 6, 2016.
Potash Corp. plans to utilize the proceeds of the offering to refinance existing debt, which may include repaying a portion of the outstanding amounts under its commercial paper facilities. Further, it may include redeeming its $500 million total principal amount of outstanding 3.250% notes before maturity on Dec 1, 2017.
Potash Corp’s price has gained 0.44% compared with the Zacks-categorized agribusiness industry rate which has fallen 2.84% in the past three months. Potash Corp.’s adjusted earnings for the third quarter of 2016 beat Zacks Consensus Estimate. Sales fell by double digits on lower nutrient prices, and missed expectations. The company narrowed its earnings guidance for 2016.
Potash Corp. ended the quarter with cash and cash equivalents of $153 million, a more than two-fold year over year rise. Long-term debt was $3,714 million at the end of the quarter compared with $3,709 million a year ago.
Potash Corp. faces headwinds associated with macroeconomic uncertainties stemming from weakness across specific developing markets. Further, it is exposed to challenges in its nitrogen business and a weak pricing environment. Weak pricing is expected to lead to lower potash and nitrogen margins in 2016. Soft agricultural commodity prices continue to hurt the fertilizer industry.
Nevertheless, Potash Corp. will benefit from expanded operational capability and improved demand for potash in the balance of 2016. The company expects strong customer engagement in fourth-quarter 2016 and healthy demand in North America in the fall application season.
Potash Corp. and Agrium AGU, in Sep 2016, agreed to combine their businesses to create a fertilizer giant with a pro forma enterprise value of $36 billion. The proposed merger would create the world’s largest crop nutrient supplier and the integrated company will be better placed to counter the headwinds in the crop nutrient markets. The combined company is expected to generate as much as $500 million of annual operating synergies.
Zacks Rank
Potash Corp. currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic materials space include Celanese Corp. CE and The Mosaic Company MOS, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Celanese has an expected earnings growth of 9.5% for the current year.
Mosaic has an expected long-term growth of 9.5%.
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