Symbol: POT
Listed: TSX, NYSE
Key Highlights
- Second-quarter 2014 earnings of $0.56 per share1
- Earnings surpass top end of second-quarter guidance range on
potash and nitrogen strength
- Second-quarter cash from operating activities of $788 million; $1.3
billion for first six months
- Completed share buyback program; 43.3 million shares
repurchased at an average price of $34 per share
- Third-quarter guidance of $0.35-$0.45; full-year 2014 guidance increased to
$1.70-$1.90 per share
SASKATOON, July 24, 2014 /CNW/ - Potash Corporation of
Saskatchewan Inc. (PotashCorp) reported second-quarter earnings of
$0.56 per share ($472 million), bringing earnings for first-half
2014 to $0.95 per share ($812 million). Totals for the quarter and first
six months surpassed our earnings guidance on improving trends in
each nutrient, but trailed the $0.73
per share ($643 million) and
$1.37 per share ($1.2 billion) reported in the respective periods
last year.
Gross margin for the quarter of $747 million fell short of the $979 million generated during the same period in
2013 due to weaker contributions from our potash and phosphate
businesses. For the first six months, gross margin totaled
$1.3 billion, below the $1.8 billion earned during the comparative period
last year.
Adjusted earnings before finance costs, income
taxes, depreciation and amortization and certain impairment
charges2 (adjusted EBITDA) of $868 million for the quarter and $1.6 billion for the first half were below the
respective period totals in 2013. Cash from operating activities
for both the quarter and first six months of $788 million and $1.3
billion each trailed last year's comparative period amounts,
although declining capital expenditures resulted in strong free
cash flow2.
Our investments in Arab Potash Company (APC) in
Jordan, Israel Chemicals Ltd.
(ICL) in Israel and Sociedad
Quimica y Minera de Chile S.A. (SQM) in Chile contributed $55
million to our quarterly earnings and brought first-half
totals to $155 million. Similar
market conditions impacted earnings for these companies as both
amounts were below the 2013 comparative period totals of
$89 million and $166 million, respectively. The market value of
our investments in these publicly traded companies, as well as
Sinofert Holdings Limited (Sinofert), equated to approximately
$5 billion, or $6 per PotashCorp share at market close on
July 23, 2014.
"Robust global fertilizer demand provided a
supportive earnings environment during the quarter," said
PotashCorp President and Chief Executive Officer Jochen Tilk. "Performance in all three nutrient
segments improved from the beginning of the year and resulted in
our second-quarter earnings exceeding the upper end of our guidance
range. Although results were below those of the same period last
year, an improving price environment and - in the case of our
potash and nitrogen businesses - cost efficiencies contributed to
our bottom line."
Market Conditions
With all key potash markets engaged, global shipments accelerated
through the second quarter. Significant product demand, especially
in granular markets, kept most producers' operations and
distribution networks running at or near full capability. In
North America, demand at the farm
level was very strong through the spring planting season.
Second-quarter shipments from domestic producers exceeded those of
the prior year by 28 percent, with shipments for the first six
months of 2014 approaching record totals. Shipments by North
American producers to offshore markets increased from the first
quarter as rail constraints began to improve and customers in all
key markets actively secured supply. Totals for both the quarter
and year were relatively in line with prior period levels.
Improving fundamentals - most notably for granular product -
resulted in positive spot market pricing trends relative to the
first quarter, although potash prices remained well below those of
the comparative period in 2013.
In nitrogen, prices reflected typical seasonal
patterns and moved lower as the quarter progressed. While offshore
prices for ammonia and urea softened during the quarter relative to
the same period last year, key North American benchmarks remained
comparatively strong due to healthy demand and reduced imports.
After phosphate markets rebounded early in 2014,
demand and pricing remained relatively stable through the second
quarter. Continuing slow demand in India during first-half 2014 was largely
offset by the strength of demand in other regions, in particular
Brazil and North America. Increased availability of
product from offshore competitors limited exports for US producers,
but was offset by healthy domestic demand and lower output due to
reported production challenges.
Potash
With lower prices, potash gross margin of $395 million for 2014's second quarter and
$695 million for the first six months
trailed the 2013 contributions of $613
million for the quarter and $1.1
billion for the first half.
Strong customer engagement in all key potash
markets and improving rail logistics supported increased shipments
from earlier in the year. Our total sales volumes for the second
quarter reached 2.5 million tonnes, bringing the total for the
first six months to 4.8 million tonnes with both amounts relatively
flat compared to the similarly strong periods of 2013. Continued
strength in North America led to
sales volumes significantly exceeding those of the comparative
period in 2013 for both the quarter (up 13 percent) and first six
months (up 19 percent). Although rail challenges began to abate,
offshore sales volumes for the quarter (1.6 million tonnes) and
first half (2.9 million tonnes) were impacted by backlogs and
trailed 2013 comparative totals. The majority of
Canpotex's3 second-quarter shipments were to Other Asian
countries (42 percent) and Latin
America (29 percent), while China and India accounted for 13 percent and 10 percent,
respectively.
Our average realized potash price for the
quarter was $263 per tonne, down
significantly from $356 per tonne in
the same period last year due to price erosion during the second
half of 2013. Improving market fundamentals through the first half
- most notably in granular markets in North America and Brazil - resulted in our average realized
price increasing $13 per tonne
relative to first-quarter 2014.
The realignment of our workforce and operating
capabilities in December 2013 helped
deliver improved operational efficiencies. These changes, combined
with the favorable impact from a weakened Canadian dollar and lower
royalties, resulted in a reduction of per-tonne cost of goods sold
of over 10 percent for both the quarter and first half of the
year.
Nitrogen
Gross margin for the quarter totaled $304
million, surpassing the $276
million generated during the same period last year as higher
sales volumes more than offset weaker price realizations. This
result was the second-highest quarterly nitrogen gross margin total
in our history and brought our six-month total to $543 million - nearly matching last year's
comparative period record. Our three US operations contributed
$191 million of gross margin for the
quarter while our operation in Trinidad contributed $113 million, compared to $186 million and $90
million respectively in 2013.
Improved production levels across all of our
facilities helped push second-quarter nitrogen sales volumes to 1.7
million tonnes, above the 1.5 million tonnes sold during the same
period last year. Total sales volumes for the first half of 2014
reached 3.3 million tonnes, 11 percent above the comparable period
in 2013.
Our average realized price of $393 per tonne during the quarter declined from
the $410 per tonne in the same period
last year. This was primarily the result of slightly weaker
benchmark prices contributing to lower realizations for our ammonia
fertilizer products.
Cost of goods sold for the quarter averaged
$213 per tonne, slightly lower than
the same period in 2013 as efficiencies from increased production
more than offset higher natural gas costs.
Phosphate
Lower prices, reduced production levels and increased costs weighed
on our performance in phosphate. Second-quarter and half-year 2014
gross margin totals of $48 million
and $74 million were well below the
$90 million and $182 million earned during the respective periods
last year.
Short-term issues relating to weather, mining
conditions and mechanical challenges created difficulties in
sustaining the supply of ore feed to our facilities and resulted in
reduced quarterly and first-half production. Sales volumes for the
quarter of 0.8 million tonnes and first six months of 1.6 million
tonnes trailed comparative periods in 2013 by 9 percent and 11
percent, respectively.
Our average realized phosphate price for the
quarter was $509 per tonne, down
slightly from the $517 per tonne in
the same period last year. Although market fundamentals remained
largely unchanged, the decline in prices was mainly related to
industrial contracts, which tend to lag current market
conditions.
Per-tonne costs of goods sold for the second
quarter were elevated compared to the same period in 2013. The
favorable impact of lower ammonia and sulfur prices was more than
offset by decreased production levels and the recognition of
accelerated non-cash depreciation charges of $28 million related to the closure of our
Suwannee River chemical plant at White Springs.
Financial
Provincial mining and other taxes totaled $69 million for the second quarter, below the
$81 million during the same period
last year primarily due to lower average realized potash prices.
Lower total earnings resulted in income tax expense declining to
$166 million, down from $245 million during 2013's comparable period.
Capital-related cash expenditures totaled
$199 million during the quarter, well
below the $354 million in 2013's
second quarter as our multi-year potash expansion program nears
completion.
We repurchased a total of 17.5 million common
shares during the second quarter and successfully completed our
share buyback program announced in July
2013 (5 percent of outstanding common shares totaling 43.3
million shares).
Market Outlook
We move into the second half of 2014 with an improved outlook for
the balance of the year.
In potash, we have raised our 2014 global
shipment expectations to 56.5-58 million tonnes on the strength of
record first-half demand and an improved second-half outlook. We
begin the second half with a strong domestic order book and
Canpotex fully committed in offshore markets through the third
quarter. Producer inventories in North
America ended the first half at their lowest level since
2011, and are projected to remain tight as scheduled maintenance
downtime is expected to limit production for most producers in a
period of relatively robust demand.
In North
America, a successful summer-fill program has given us
better visibility on demand through the remainder of the year.
Shipments are expected to be strong during the third quarter as
dealers work to position product in advance of what is anticipated
to be an active fall application season. For full-year 2014, we now
expect potash shipments to this market could exceed 10 million
tonnes.
Potash demand in Latin
America is expected to remain strong ahead of its key
planting season. We anticipate shipments to this market will remain
elevated through the third quarter although total deliveries could
slow relative to those of the comparative period last year. We
maintain our view that Latin American demand could reach record
levels in 2014 of approximately 10.5 million tonnes.
In China, we
now expect potash demand to approximate 12 million tonnes,
exceeding our earlier estimates. With first-half contract
deliveries complete, increased seaborne import needs through the
second half are expected to be met through the execution of
optional tonnage arrangements. For the full year, Canpotex will
ship approximately 1.2 million tonnes under terms contained in the
January 2014 contract with
Sinofert.
Shipments against contracts signed with
India early in April began to move
during the second quarter and are expected to accelerate through
the balance of 2014. Although weaker-than-normal monsoon rains and
a continued imbalance in fertilizer subsidies will remain headwinds
for significant near-term potash demand growth, total annual
shipments to India are expected to
exceed 2013 and reach 3.5-4 million tonnes.
In Other Asian countries (outside of
China and India), potash demand and imports continue to
outpace the previous year although increased competitive pressure
in this region has weighed on the near-term pricing momentum. We
expect shipments to Other Asian countries to remain relatively
strong through the balance of the year, and maintain our full-year
forecast for this region of approximately 8.2 million tonnes.
Financial Outlook
With an improved global demand environment, we have increased our
estimate for potash gross margin to approximately $1.2-$1.4 billion and annual potash sales volumes
to 8.9-9.2 million tonnes. Stronger demand, particularly for
granular product, has resulted in the decision to continue
operating our Penobsquis mine in
New Brunswick and to increase our
production at Lanigan. Included in
our estimates is the impact of a successful Canpotex run at our
Allan facility increasing our allocation to approximately 54
percent effective July 1, 2014. We
remain on track to achieve our 2014 target of reducing per-tonne
cash costs by $15-$20 (from 2013's
levels), although the third quarter will reflect its normal
seasonal increase as we complete our required maintenance
downtime.
In nitrogen, we have increased our expectation
for gross margin through the balance of 2014 and now see the
potential for our full-year results to approach record levels.
Sales volumes are expected to outpace previous-year levels and act
as a continued tailwind through the second half. While gas supply
restrictions at our facility in Trinidad are anticipated to reduce our
production in the third quarter, these curtailments are expected to
remain below previous year levels.
We see phosphate markets staying relatively firm
through the second half, assuming the emergence of more robust
Indian import demand. The expected closure at Suwannee River in the
third quarter is likely to keep our sales volumes at lower levels
through the balance of the year, although reduced accelerated
depreciation charges are expected to result in improved per-tonne
cost of goods sold and enhanced margins.
We have revised our annual estimate of selling
and administrative expenses and finance costs to a range of
$235-$245 million and $175-$185 million, respectively.
Based on these factors, we expect our
third-quarter net income to be in the range of $0.35-$0.45 per share and have increased our
annual range to $1.70-$1.90 per
share. Other guidance numbers are outlined in the table below.
| Quarterly:
Q3-2014 |
| Earnings per share |
$0.35-$0.45 |
| Annual: 2014 |
| Earnings per share |
$1.70-$1.90 |
| Potash sales volumes |
8.9-9.2 million tonnes |
| Potash gross margin |
$1.2-$1.4 billion |
| Nitrogen and phosphate gross
margin |
$1.0-$1.2 billion |
| Capital expenditures |
~$1.1 billion |
| Effective tax rate |
26-28 percent |
| Provincial mining and other
taxes* |
16-18 percent |
| Selling and administrative
expenses |
$235-$245 million |
| Finance costs |
$175-$185 million |
| Income from offshore
investments** |
$230-$240 million |
* As a percentage of potash gross margin
** Includes income from dividends and share of equity earnings
Conclusion
"We see a supportive earnings environment ahead of us and this is
reflected in our outlook for the remainder of 2014," said Tilk.
"Looking ahead, we will focus on improving our position and
optimizing our world-class assets to benefit all stakeholders. As a
team, we will build on our strengths and take thoughtful and
calculated steps to enhance long-term shareholder value."
Notes
- All references to per-share amounts pertain to diluted net
income per share.
- See reconciliation and description of non-IFRS measures in
the attached section titled "Selected Non-IFRS Financial Measures
and Reconciliations."
- Canpotex Limited (Canpotex), the offshore marketing company
for Saskatchewan potash
producers.
PotashCorp is the world's largest crop nutrient
company and plays an integral role in global food production. The
company produces the three essential nutrients required to help
farmers grow healthier, more abundant crops. With the global
population rising and diets improving in developing countries,
these nutrients offer a responsible and practical solution to
meeting the long-term demand for food. PotashCorp is the largest
producer, by capacity, of potash and one of the largest producers
of nitrogen and phosphate. While agriculture is its primary market,
the company also produces products for animal nutrition and
industrial uses. Common shares of Potash Corporation of
Saskatchewan Inc. are listed on
the Toronto Stock Exchange and the New York Stock Exchange.
Website: www.potashcorp.com
This release contains forward-looking
statements or forward-looking information (forward-looking
statements). These statements can be identified by expressions of
belief, expectation or intention, as well as those statements that
are not historical fact. These statements often contain words such
as "should", "could", "expect", "may", "anticipate", "believe",
"intend", "estimates", "plans" and similar expressions. These
statements are based on certain factors and assumptions including
with respect to: foreign exchange rates, expected growth, results
of operations, performance, business prospects and opportunities
and effective tax rates. While the company considers these factors
and assumptions to be reasonable based on information currently
available, they may prove to be incorrect. Forward-looking
statements are subject to risks and uncertainties that are
difficult to predict. The results or events set forth in
forward-looking statements may differ materially from actual
results or events. Several factors could cause actual results or
events to differ materially from those expressed in the
forward-looking statements, including, but not limited to, the
following: variations from our assumptions with respect to foreign
exchange rates, expected growth, results of operations,
performance, business prospects and opportunities and effective tax
rates; risks and uncertainties related to operating and workforce
changes made in response to our industry and the markets we serve;
changes in competitive pressures, including pricing pressures;
risks and uncertainties related to our international operations and
assets; fluctuations in supply and demand in the fertilizer,
sulfur, transportation and petrochemical markets; costs and
availability of transportation and distribution for our raw
materials and products, including railcars and ocean freight;
adverse or uncertain economic conditions and changes in credit and
financial markets; the results of sales contract negotiations
within major markets; unexpected geological or environmental
conditions, including water inflows; economic and political
uncertainty around the world; risks associated with natural gas and
other hedging activities; changes in capital markets; unexpected or
adverse weather conditions; changes in currency and exchange rates;
imprecision in reserve estimates; adverse developments in new and
pending legal proceedings or government investigations;
acquisitions we may undertake; increases in the price or reduced
availability of the raw materials that we use; strikes or other
forms of work stoppage or slowdowns; timing and impact of capital
expenditures; rates of return on, and the risks associated with,
our investments and capital expenditures; changes in, and the
effects of, government policies and regulations; security risks
related to our information technology systems; risks related to
reputational loss; and earnings and the decisions of taxing
authorities 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, 2013
under the captions "Forward-Looking Statements" and "Item 1A - Risk
Factors" and in our other filings with the US Securities and
Exchange Commission and the 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.
PotashCorp will host a Conference Call on
Thursday July 24, 2014 at
1:00 pm Eastern Time.
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| Telephone Conference: |
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Dial-in numbers: |
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- From Canada and the US: 1-877-881-1303
- From Elsewhere: 1-412-902-6719
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| Live Webcast: |
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Visit www.potashcorp.com |
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Webcast participants can submit questions to
management online from their audio player pop-up window. |
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Potash Corporation of
Saskatchewan Inc.
Condensed Consolidated Statements of Financial Position
(in millions of US dollars except share amounts)
(unaudited) |
| |
|
|
|
|
| As at |
|
June 30,
2014 |
|
December
31,
2013 |
| |
|
|
|
|
|
|
| Assets |
|
|
|
|
|
|
| |
Current assets |
|
|
|
|
|
|
| |
|
Cash and cash equivalents |
|
$ |
107 |
|
$ |
628 |
| |
|
Receivables |
|
|
848 |
|
|
752 |
| |
|
Inventories |
|
|
708 |
|
|
728 |
| |
|
Prepaid expenses and other current
assets |
|
|
57 |
|
|
81 |
| |
|
|
1,720 |
|
|
2,189 |
| |
Non-current assets |
|
|
|
|
|
|
| |
|
Property, plant and equipment |
|
|
12,254 |
|
|
12,233 |
| |
|
Investments in equity-accounted
investees |
|
|
1,284 |
|
|
1,276 |
| |
|
Available-for-sale investments (Note
2) |
|
|
1,719 |
|
|
1,722 |
| |
|
Other assets |
|
|
375 |
|
|
401 |
| |
|
Intangible assets |
|
|
139 |
|
|
137 |
| Total Assets |
|
$ |
17,491 |
|
$ |
17,958 |
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
| |
Current liabilities |
|
|
|
|
|
|
| |
|
Short-term debt and current portion of
long-term debt (Note 3) |
|
$ |
430 |
|
$ |
967 |
| |
|
Payables and accrued charges |
|
|
976 |
|
|
1,104 |
| |
|
Current portion of derivative
instrument liabilities |
|
|
40 |
|
|
42 |
| |
|
|
1,446 |
|
|
2,113 |
| |
Non-current liabilities |
|
|
|
|
|
|
| |
|
Long-term debt (Note 3) |
|
|
3,711 |
|
|
2,970 |
| |
|
Derivative instrument liabilities |
|
|
111 |
|
|
129 |
| |
|
Deferred income tax liabilities |
|
|
2,115 |
|
|
2,013 |
| |
|
Pension and other post-retirement
benefit liabilities |
|
|
424 |
|
|
410 |
| |
|
Asset retirement obligations and
accrued environmental costs |
|
|
599 |
|
|
557 |
| |
|
Other non-current liabilities and
deferred credits |
|
|
138 |
|
|
138 |
| Total Liabilities |
|
|
8,544 |
|
|
8,330 |
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|
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| Shareholders' Equity |
|
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|
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| |
Share capital (Note 4) |
|
|
1,608 |
|
|
1,600 |
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|
Unlimited authorization of common shares without
par value; issued and
outstanding 829,282,715 and 856,116,325 at June 30, 2014 and
December 31, 2013, respectively |
|
|
|
|
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|
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Contributed surplus |
|
|
230 |
|
|
219 |
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Accumulated other comprehensive
income |
|
|
724 |
|
|
673 |
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Retained earnings |
|
|
6,385 |
|
|
7,136 |
| Total Shareholders' Equity |
|
|
8,947 |
|
|
9,628 |
| Total Liabilities and Shareholders'
Equity |
|
$ |
17,491 |
|
$ |
17,958 |
(See Notes to the Condensed Consolidated Financial
Statements)
|
Potash Corporation of
Saskatchewan Inc.
Condensed Consolidated Statements of Income
(in millions of US dollars except per-share and share
amounts)
(unaudited)
|
| |
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
Six Months
Ended |
| |
|
June 30 |
June 30 |
| |
|
2014 |
2013 |
2014 |
2013 |
| |
|
|
|
|
|
|
|
|
|
| Sales (Note 5) |
|
$ |
1,892 |
$ |
2,144 |
$ |
3,572 |
$ |
4,244 |
| Freight, transportation and
distribution |
|
|
(158) |
|
(147) |
|
(324) |
|
(296) |
| Cost of goods sold |
|
|
(987) |
|
(1,018) |
|
(1,936) |
|
(2,102) |
| Gross Margin |
|
|
747 |
|
979 |
|
1,312 |
|
1,846 |
| Selling and administrative
expenses |
|
|
(55) |
|
(51) |
|
(123) |
|
(117) |
| Provincial mining and other taxes |
|
|
(69) |
|
(81) |
|
(123) |
|
(144) |
| Share of earnings of equity-accounted
investees |
|
|
32 |
|
37 |
|
65 |
|
117 |
| Dividend income |
|
|
24 |
|
54 |
|
93 |
|
54 |
| Impairment of available-for-sale
investment (Note 2) |
|
|
- |
|
- |
|
(38) |
|
- |
| Other income (expenses) |
|
|
7 |
|
(11) |
|
31 |
|
(12) |
| Operating Income |
|
|
686 |
|
927 |
|
1,217 |
|
1,744 |
| Finance costs |
|
|
(48) |
|
(39) |
|
(95) |
|
(74) |
| Income Before Income Taxes |
|
|
638 |
|
888 |
|
1,122 |
|
1,670 |
| Income taxes (Note 7) |
|
|
(166) |
|
(245) |
|
(310) |
|
(471) |
| Net Income |
|
$ |
472 |
$ |
643 |
$ |
812 |
$ |
1,199 |
| |
|
|
|
|
|
|
|
|
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| Net Income per Share |
|
|
|
|
|
|
|
|
|
| |
Basic |
|
$ |
0.56 |
$ |
0.74 |
$ |
0.96 |
$ |
1.39 |
| |
Diluted |
|
$ |
0.56 |
$ |
0.73 |
$ |
0.95 |
$ |
1.37 |
| |
|
|
|
|
|
|
|
|
|
| Dividends Declared per
Share |
|
$ |
0.35 |
$ |
0.35 |
$ |
0.70 |
$ |
0.63 |
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|
|
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| Weighted Average Shares
Outstanding |
|
|
|
|
|
|
|
|
|
| |
Basic |
|
|
840,342,000 |
|
865,991,000 |
|
846,596,000 |
|
865,526,000 |
| |
Diluted |
|
|
847,014,000 |
|
877,141,000 |
|
853,320,000 |
|
876,930,000 |
| (See Notes to the Condensed Consolidated
Financial Statements) |
|
|
|
|
Potash Corporation of
Saskatchewan Inc.
Condensed Consolidated Statements of Comprehensive
Income
(in millions of US dollars)
(unaudited)
|
| |
|
|
|
|
| |
|
Three Months
Ended |
Six Months
Ended |
| |
|
June 30 |
June 30 |
| (Net of related income taxes) |
|
|
2014 |
2013 |
2014 |
2013 |
| |
|
|
|
|
|
|
|
|
|
|
| Net Income |
|
|
$ |
472 |
$ |
643 |
$ |
812 |
$ |
1,199 |
| Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
| |
|
Items that will not be reclassified to
net income: |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Net actuarial gain on defined benefit
plans (1) |
|
|
|
- |
|
150 |
|
- |
|
150 |
| |
|
Items that have been
or may be subsequently reclassified to net income: |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Available-for-sale investments
(2) |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Net fair value (loss) gain during the period |
|
|
|
(15) |
|
(656) |
|
35 |
|
(470) |
| |
|
|
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Net fair value loss during the period
(3) |
|
|
|
- |
|
- |
|
(1) |
|
- |
| |
|
|
|
Reclassification to income of net loss
(4) |
|
|
|
7 |
|
8 |
|
13 |
|
19 |
| |
|
|
Other |
|
|
|
2 |
|
(2) |
|
4 |
|
(2) |
| Other Comprehensive (Loss)
Income |
|
|
|
(6) |
|
(500) |
|
51 |
|
(303) |
| Comprehensive Income |
|
|
$ |
466 |
$ |
143 |
$ |
863 |
$ |
896 |
| (1) Net of income taxes of
$NIL (2013 - $(87)) for the three and six months ended June 30,
2014. |
| (2) Available-for-sale
investments are comprised of shares in Israel Chemicals Ltd. and
Sinofert Holdings Limited. |
(3) Cash flow hedges are
comprised of natural gas derivative instruments and were net of
income taxes of $NIL (2013 - $NIL)
for the three months ended June 30, 2014 and $1 (2013 - $NIL) for
the six months ended June 30, 2014. |
(4) Net of
income taxes of $(4) (2013 - $(4)) for the three months ended June
30, 2014 and $(8) (2013 - $(10)) for the six months
ended June 30, 2014. |
| (See Notes to the Condensed Consolidated Financial
Statements) |
|
|
|
|
|
|
|
|
Potash Corporation of
Saskatchewan Inc.
Condensed Consolidated Statement of Changes in Equity
(in millions of US dollars)
(unaudited)
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
Accumulated Other Comprehensive Income |
|
|
| |
|
Share
Capital |
Contributed
Surplus |
Net unrealized
gain on
available-
for-sale
investments |
Net
loss on
derivatives
designated as
cash flow hedges |
Other |
Total
Accumulated
Other
Comprehensive
Income |
Retained
Earnings |
Total
Equity |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance - December 31, 2013 |
|
$ |
1,600 |
$ |
219 |
$ |
780 |
$ |
(105) |
$ |
(2) |
$ |
673 |
$ |
7,136 |
$ |
9,628 |
| Net income |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
812 |
|
812 |
| Other comprehensive income |
|
|
- |
|
- |
|
35 |
|
12 |
|
4 |
|
51 |
|
- |
|
51 |
| Share repurchase (Note 4) |
|
|
(53) |
|
(2) |
|
- |
|
- |
|
- |
|
- |
|
(976) |
|
(1,031) |
| Dividends declared |
|
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(587) |
|
(587) |
| Effect of share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| including issuance of common
shares |
|
|
40 |
|
13 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
53 |
| Shares issued for dividend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| reinvestment plan |
|
|
21 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
21 |
| Balance - June 30, 2014 |
|
$ |
1,608 |
$ |
230 |
$ |
815 |
$ |
(93) |
$ |
2 |
$ |
724 |
$ |
6,385 |
$ |
8,947 |
| (See Notes to the Condensed Consolidated
Financial Statements) |
|
|
|
|
|
|
|
|
Potash Corporation of
Saskatchewan Inc.
Condensed Consolidated Statements of Cash Flow
(in millions of US dollars)
(unaudited) |
| |
|
|
|
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
June 30 |
|
June 30 |
| |
|
2014 |
2013 |
|
2014 |
2013 |
| |
|
|
|
|
|
|
|
|
|
|
| Operating Activities |
|
|
|
|
|
|
|
|
|
|
| Net income |
|
$ |
472 |
$ |
643 |
|
$ |
812 |
$ |
1,199 |
| |
|
|
|
|
|
|
|
|
|
|
| Adjustments to
reconcile net income to cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
| |
Depreciation and amortization |
|
|
182 |
|
186 |
|
|
358 |
|
340 |
| |
Share-based compensation |
|
|
4 |
|
5 |
|
|
19 |
|
21 |
| |
Net distributed (undistributed) earnings of
equity-accounted investees |
|
|
28 |
|
70 |
|
|
(3) |
|
(7) |
| |
Impairment of available-for-sale investment (Note
2) |
|
|
- |
|
- |
|
|
38 |
|
- |
| |
Realized excess tax benefit related to share-based
compensation |
|
|
2 |
|
9 |
|
|
2 |
|
10 |
| |
Provision for deferred income tax |
|
|
64 |
|
151 |
|
|
110 |
|
253 |
| |
Pension and other post-retirement benefits |
|
|
12 |
|
9 |
|
|
21 |
|
(22) |
| |
Other long-term liabilities and miscellaneous |
|
|
1 |
|
34 |
|
|
10 |
|
49 |
| |
Subtotal of adjustments |
|
|
293 |
|
464 |
|
|
555 |
|
644 |
| |
|
|
|
|
|
|
|
|
|
|
| |
Changes in non-cash operating working
capital |
|
|
|
|
|
|
|
|
|
|
| |
Receivables |
|
|
54 |
|
170 |
|
|
(104) |
|
66 |
| |
Inventories |
|
|
(3) |
|
(6) |
|
|
17 |
|
41 |
| |
Prepaid expenses and other current assets |
|
|
9 |
|
12 |
|
|
27 |
|
13 |
| |
Payables and accrued charges |
|
|
(37) |
|
(81) |
|
|
20 |
|
(23) |
| |
Subtotal of changes in non-cash operating working
capital |
|
|
23 |
|
95 |
|
|
(40) |
|
97 |
| Cash provided by operating
activities |
|
|
788 |
|
1,202 |
|
|
1,327 |
|
1,940 |
| |
|
|
|
|
|
|
|
|
|
|
| Investing Activities |
|
|
|
|
|
|
|
|
|
|
| Additions to property, plant and
equipment |
|
|
(199) |
|
(354) |
|
|
(423) |
|
(850) |
| Other assets and intangible
assets |
|
|
(8) |
|
(5) |
|
|
(10) |
|
(10) |
| Cash used in investing
activities |
|
|
(207) |
|
(359) |
|
|
(433) |
|
(860) |
| |
|
|
|
|
|
|
|
|
|
|
| Financing Activities |
|
|
|
|
|
|
|
|
|
|
| Proceeds from long-term debt
obligations |
|
|
- |
|
- |
|
|
737 |
|
- |
| Repayment of and finance costs on
long-term debt obligations |
|
|
(500) |
|
(4) |
|
|
(500) |
|
(254) |
| Proceeds from (repayment of)
short-term debt obligations |
|
|
429 |
|
(580) |
|
|
(41) |
|
(369) |
| Dividends |
|
|
(283) |
|
(233) |
|
|
(576) |
|
(410) |
| Repurchase of common shares |
|
|
(669) |
|
- |
|
|
(1,065) |
|
- |
| Issuance of common shares |
|
|
16 |
|
19 |
|
|
30 |
|
21 |
| Cash used in financing
activities |
|
|
(1,007) |
|
(798) |
|
|
(1,415) |
|
(1,012) |
| (Decrease) Increase in Cash and
Cash Equivalents |
|
|
(426) |
|
45 |
|
|
(521) |
|
68 |
| Cash and Cash Equivalents,
Beginning of Period |
|
|
533 |
|
585 |
|
|
628 |
|
562 |
| Cash and Cash Equivalents, End of
Period |
|
$ |
107 |
$ |
630 |
|
$ |
107 |
$ |
630 |
| |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents comprised
of: |
|
|
|
|
|
|
|
|
|
|
| |
Cash |
|
$ |
88 |
$ |
40 |
|
$ |
88 |
$ |
40 |
| |
Short-term investments |
|
|
19 |
|
590 |
|
|
19 |
|
590 |
| |
|
$ |
107 |
$ |
630 |
|
$ |
107 |
$ |
630 |
| |
|
|
|
|
|
|
|
|
|
|
| Supplemental cash flow disclosure |
|
|
|
|
|
|
|
|
|
|
| |
Interest paid |
|
$ |
68 |
$ |
91 |
|
$ |
92 |
$ |
100 |
| |
Income taxes paid |
|
$ |
120 |
$ |
52 |
|
$ |
170 |
$ |
107 |
| (See Notes to the Condensed Consolidated
Financial Statements) |
|
|
|
|
Potash Corporation of Saskatchewan
Inc.
Notes to the Condensed Consolidated Financial Statements
For the Three and Six Months Ended June
30, 2014
(in millions of US dollars except as otherwise
noted)
(unaudited)
1. Significant Accounting Policies
With its subsidiaries, Potash Corporation of
Saskatchewan Inc. ("PCS") - together known as "PotashCorp" or "the
company" except to the extent the context otherwise requires -
forms an integrated fertilizer and related industrial and feed
products company. The company's accounting policies are in
accordance with International Financial Reporting Standards, as
issued by the International Accounting Standards Board ("IFRS").
The accounting policies and methods of computation used in
preparing these unaudited interim condensed consolidated financial
statements are consistent with those used in the preparation of the
company's 2013 annual consolidated financial statements.
These unaudited interim condensed consolidated
financial statements include the accounts of PCS and its
subsidiaries; however, they do not include all disclosures normally
provided in annual consolidated financial statements and should be
read in conjunction with the company's 2013 annual consolidated
financial statements. Further, while the financial figures included
in this preliminary interim results announcement have been computed
in accordance with IFRS applicable to interim periods, this
announcement does not contain sufficient information to constitute
an interim financial report as that term is defined in
International Accounting Standard ("IAS") 34, "Interim Financial
Reporting". The company expects to publish an interim financial
report that complies with IAS 34 in its Quarterly Report on Form
10-Q in July 2014.
In management's opinion, the unaudited interim
condensed consolidated financial statements include all adjustments
necessary to present fairly such information. Interim results are
not necessarily indicative of the results expected for the fiscal
year.
2. Available-for-Sale Investments
The company assesses at the end of each
reporting period whether there is objective evidence of impairment.
A significant or prolonged decline in the fair value of the
investment below its cost would be evidence that the asset is
impaired. If objective evidence of impairment exists, the impaired
amount (i.e., the unrealized loss) is recognized in net income; any
subsequent reversals would be recognized in other comprehensive
income ("OCI") and would not flow back into net income. Any
subsequent decline in fair value below the carrying amount at the
impairment date would represent a further impairment to be
recognized in net income.
During 2012, the company concluded its
investment in Sinofert Holdings Limited ("Sinofert") was impaired
due to the significance by which fair value was below cost. As a
result, an impairment loss of $341
was recognized in net income during 2012. At March 31, 2014, the company concluded its
investment in Sinofert was further impaired due to the fair value
declining below the carrying amount of $238 at the previous impairment date. As a
result, an impairment loss of $38 was
recognized in net income during the three months ended March 31, 2014. The fair value was determined
through the market value of Sinofert shares on the Hong Kong Stock
Exchange.
Changes in fair value, and related accounting,
for the company's investment in Sinofert since December 31, 2013 were as follows:
| |
|
|
|
|
|
Impact of Unrealized Loss
on: |
| |
|
|
Fair Value |
|
Unrealized Loss |
|
OCI and
AOCI |
|
Net Income
and Retained
Earnings |
| Balance - December 31, 2013 |
|
$ |
254 |
$ |
(325) |
$ |
16 |
$ |
(341) |
| Decrease in fair value and recognition of
impairment |
|
|
(54) |
|
(54) |
|
(16) |
|
(38) |
| Balance - March 31, 2014 |
|
$ |
200 |
$ |
(379) |
$ |
- |
$ |
(379) |
| Increase in fair value subsequent to recognition
of impairment |
|
|
10 |
|
10 |
|
10 |
|
- |
| Balance - June 30, 2014 |
|
$ |
210 |
$ |
(369) |
$ |
10 |
$ |
(379) |
3. Long-Term Debt
On March 7, 2014,
the company closed the issuance of $750 of 3.625 percent senior notes due
March 15, 2024. The senior notes were
issued under a US shelf registration statement.
On March 7, 2014,
the company issued a notice of redemption for all of its
outstanding $500 of 5.250 percent
senior notes due May 15, 2014. On
April 7, 2014, the company completed
the redemption of all $500 of the
senior notes at a redemption price of 100.497 percent of the
principal amount of the notes redeemed plus accrued interest.
4. Share Capital
On July 24, 2013,
the company's Board of Directors authorized a share repurchase
program of up to 5 percent of PotashCorp's outstanding common
shares (up to $2,000 of its
outstanding common shares) through a normal course issuer bid.
Shares could be repurchased from time to time on the open market
commencing August 2, 2013 through
August 1, 2014 at prevailing market
prices. The timing and amount of purchases under the program were
dependent upon the availability and alternative uses of capital,
market conditions, applicable US and Canadian regulations and other
factors. The company completed the repurchase program by
June 30, 2014.
Under this program, the company repurchased for
cancellation 17,478,892 common shares during the three months ended
June 30, 2014, at a cost of
$632 and an average price per share
of $36.19. The repurchase resulted in
a reduction of share capital of $32,
and the excess of net cost over the average book value of the
shares was recorded as a reduction of contributed surplus of
$1 and a reduction of retained
earnings of $599. During the six
months ended June 30, 2014, a total
of 29,200,892 common shares were repurchased at a cost of
$1,031 and an average price per share
of $35.31, resulting in a reduction
of share capital of $53, a reduction
of contributed surplus of $2 and a
reduction of retained earnings of $976.
5. Segment Information
The company has three reportable operating
segments: potash, nitrogen and phosphate. Inter-segment sales are
made under terms that approximate market value. The accounting
policies of the segments are the same as those described in Note
1.
| |
Three Months Ended June 30,
2014 |
| |
|
Potash |
|
Nitrogen |
|
Phosphate |
|
All Others |
|
Consolidated |
| |
|
|
|
|
|
|
|
|
|
|
| Sales - third party |
$ |
747 |
$ |
656 |
$ |
489 |
$ |
- |
$ |
1,892 |
| Freight, transportation and distribution - third
party |
|
(79) |
|
(28) |
|
(51) |
|
- |
|
(158) |
| Net sales - third party |
|
668 |
|
628 |
|
438 |
|
- |
|
|
| Cost of goods sold - third party |
|
(273) |
|
(342) |
|
(372) |
|
- |
|
(987) |
| Margin (cost) on inter-segment sales
(1) |
|
- |
|
18 |
|
(18) |
|
- |
|
- |
| Gross margin |
|
395 |
|
304 |
|
48 |
|
- |
|
747 |
| Depreciation and
amortization |
|
(44) |
|
(44) |
|
(90) |
|
(4) |
|
(182) |
| Cash flows for additions to property, |
|
|
|
|
|
|
|
|
|
|
| plant and equipment |
|
103 |
|
48 |
|
45 |
|
3 |
|
199 |
| (1) Inter-segment net sales were
$33. |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended June 30,
2013 |
| |
|
Potash |
|
Nitrogen |
|
Phosphate |
|
All Others |
|
Consolidated |
| |
|
|
|
|
|
|
|
|
|
|
| Sales - third party |
$ |
975 |
$ |
629 |
$ |
540 |
$ |
- |
$ |
2,144 |
| Freight, transportation and distribution - third
party |
|
(68) |
|
(27) |
|
(52) |
|
- |
|
(147) |
| Net sales - third party |
|
907 |
|
602 |
|
488 |
|
- |
|
|
| Cost of goods sold - third party |
|
(294) |
|
(333) |
|
(391) |
|
- |
|
(1,018) |
| Margin (cost) on inter-segment sales
(1) |
|
- |
|
7 |
|
(7) |
|
- |
|
- |
| Gross margin |
|
613 |
|
276 |
|
90 |
|
- |
|
979 |
| Depreciation and
amortization |
|
(67) |
|
(42) |
|
(74) |
|
(3) |
|
(186) |
| Cash flows for additions to property, |
|
|
|
|
|
|
|
|
|
|
| plant and equipment |
|
264 |
|
27 |
|
57 |
|
6 |
|
354 |
| (1) Inter-segment net sales were
$35. |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
Six Months Ended June 30,
2014 |
| |
|
Potash |
|
Nitrogen |
|
Phosphate |
|
All Others |
|
Consolidated |
| |
|
|
|
|
|
|
|
|
|
|
| Sales - third party |
$ |
1,418 |
$ |
1,237 |
$ |
917 |
$ |
- |
$ |
3,572 |
| Freight, transportation and distribution - third
party |
|
(165) |
|
(59) |
|
(100) |
|
- |
|
(324) |
| Net sales - third party |
|
1,253 |
|
1,178 |
|
817 |
|
- |
|
|
| Cost of goods sold - third party |
|
(558) |
|
(665) |
|
(713) |
|
- |
|
(1,936) |
| Margin (cost) on inter-segment sales
(1) |
|
- |
|
30 |
|
(30) |
|
- |
|
- |
| Gross margin |
|
695 |
|
543 |
|
74 |
|
- |
|
1,312 |
| Depreciation and
amortization |
|
(96) |
|
(86) |
|
(168) |
|
(8) |
|
(358) |
| Cash flows for additions to property, |
|
|
|
|
|
|
|
|
|
|
| plant and equipment |
|
227 |
|
115 |
|
76 |
|
5 |
|
423 |
| (1) Inter-segment net sales were
$58. |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
Six Months Ended June 30,
2013 |
| |
|
Potash |
|
Nitrogen |
|
Phosphate |
|
All Others |
|
Consolidated |
| |
|
|
|
|
|
|
|
|
|
|
| Sales - third party |
$ |
1,860 |
$ |
1,288 |
$ |
1,096 |
$ |
- |
$ |
4,244 |
| Freight, transportation and distribution - third
party |
|
(139) |
|
(52) |
|
(105) |
|
- |
|
(296) |
| Net sales - third party |
|
1,721 |
|
1,236 |
|
991 |
|
- |
|
|
| Cost of goods sold - third party |
|
(604) |
|
(714) |
|
(784) |
|
- |
|
(2,102) |
| Margin (cost) on inter-segment sales
(1) |
|
- |
|
25 |
|
(25) |
|
- |
|
- |
| Gross margin |
|
1,117 |
|
547 |
|
182 |
|
- |
|
1,846 |
| Depreciation and
amortization |
|
(108) |
|
(80) |
|
(145) |
|
(7) |
|
(340) |
| Cash flows for additions to property, |
|
|
|
|
|
|
|
|
|
|
| plant and equipment |
|
613 |
|
72 |
|
122 |
|
43 |
|
850 |
| (1) Inter-segment net sales were
$80. |
|
|
|
|
|
|
|
|
|
|
6. Share-Based Compensation
On May 15, 2014,
the company's shareholders approved the 2014 Performance Option
Plan under which the company may, after February 20, 2014 and before January 1, 2015, grant options to acquire up to
3,500,000 common shares. Under the plan, the exercise price shall
not be less than the quoted market closing price of the company's
common shares on the last trading day immediately preceding the
date of the grant, and an option's maximum term is 10 years. In
general, options will vest, if at all, according to a schedule
based on the three-year average excess of the company's
consolidated cash flow return on investment over weighted average
cost of capital. As of June 30, 2014,
options to purchase a total of 2,547,900 common shares had been
granted under the plan. The weighted average fair value of options
granted was $9.42 per share,
estimated as of the date of grant using the Black-Scholes-Merton
option-pricing model with the following weighted average
assumptions:
| |
|
|
|
|
|
| Exercise price per option |
|
|
|
$ |
37.15 |
| Expected annual dividend per share |
|
|
|
$ |
1.40 |
| Expected volatility |
|
|
|
|
39% |
| Risk-free interest rate |
|
|
|
|
1.67% |
| Expected life of options |
|
|
|
|
5.4 years |
7. Income Taxes
A separate estimated average annual effective tax rate was
determined for each taxing jurisdiction and applied individually to
the interim period pre-tax income of each jurisdiction.
| |
|
Three
Months Ended |
|
Six
Months Ended |
| |
|
June 30 |
|
June 30 |
| |
|
|
2014 |
|
2013 |
|
|
2014 |
|
2013 |
| Income tax expense |
|
$ |
166 |
$ |
245 |
|
$ |
310 |
$ |
471 |
| Actual effective tax rate on ordinary
earnings |
|
|
27% |
|
25% |
|
|
27% |
|
26% |
| Actual effective tax rate including discrete
items |
|
|
26% |
|
28% |
|
|
28% |
|
28% |
| Discrete tax adjustments that
impacted the tax rate
|
|
$ |
(6) |
$ |
18 |
|
$ |
(4) |
$ |
37 |
Significant items to note include the following:
- The actual effective tax rate on ordinary earnings for the
three and six months ended June 30,
2014 increased compared to the same periods last year due to
different income weightings between jurisdictions.
- In first-quarter 2014, a non-tax deductible impairment of the
company's available-for-sale investment in Sinofert was recorded.
This increased the actual effective tax rate including discrete
items for the six months ended June 30,
2014 by 1 percent.
- In the first six months of 2013, a tax expense of $16 ($1 in the
second quarter) was recorded to adjust the 2012 income tax
provision.
- In second-quarter 2013, a deferred tax expense of $11 was recorded as a result of a Canadian income
tax rate increase.
Potash Corporation of
Saskatchewan Inc.
Selected Financial Data
(unaudited) |
| |
|
| |
|
Three Months Ended |
|
|
Six Months
Ended |
| |
|
June 30 |
|
|
June 30 |
| |
|
2014 |
|
2013 |
|
|
2014 |
|
2013 |
| |
|
|
|
|
|
|
|
|
|
| Potash Sales (tonnes - thousands) |
|
|
|
|
|
|
|
|
|
| Manufactured Product |
|
|
|
|
|
|
|
|
|
| North America |
|
943 |
|
834 |
|
|
1,931 |
|
1,628 |
| Offshore |
|
1,582 |
|
1,711 |
|
|
2,905 |
|
3,143 |
| Manufactured Product |
|
2,525 |
|
2,545 |
|
|
4,836 |
|
4,771 |
| |
|
|
|
|
|
|
|
|
|
| Potash Net Sales |
|
|
|
|
|
|
|
|
|
| (US $ millions) |
|
|
|
|
|
|
|
|
|
| Sales |
$ |
747 |
$ |
975 |
|
$ |
1,418 |
$ |
1,860 |
| Freight, transportation
and distribution |
|
(79) |
|
(68) |
|
|
(165) |
|
(139) |
| Net Sales |
$ |
668 |
$ |
907 |
|
$ |
1,253 |
$ |
1,721 |
| |
|
|
|
|
|
|
|
|
|
| Manufactured Product |
|
|
|
|
|
|
|
|
|
| North America |
$ |
303 |
$ |
352 |
|
$ |
594 |
|
683 |
| Offshore |
|
362 |
|
554 |
|
|
649 |
|
1,031 |
| Other miscellaneous and purchased
product |
|
3 |
|
1 |
|
|
10 |
|
7 |
| Net Sales |
$ |
668 |
$ |
907 |
|
$ |
1,253 |
$ |
1,721 |
| |
|
|
|
|
|
|
|
|
|
| Manufactured Product |
|
|
|
|
|
|
|
|
|
| Average Realized Sales Price per
MT |
|
|
|
|
|
|
|
|
|
| North America |
$ |
321 |
$ |
421 |
|
$ |
307 |
$ |
419 |
| Offshore |
$ |
229 |
$ |
324 |
|
$ |
223 |
$ |
328 |
| Average |
$ |
263 |
$ |
356 |
|
$ |
257 |
$ |
359 |
| Cost of Goods Sold per MT |
$ |
(102) |
$ |
(114) |
|
$ |
(111) |
$ |
(124) |
| Gross Margin per MT |
$ |
161 |
$ |
242 |
|
$ |
146 |
$ |
235 |
| |
|
|
|
|
|
|
|
|
|
Potash Corporation of
Saskatchewan Inc.
Selected Financial Data
(unaudited) |
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three Months Ended |
|
|
Six Months Ended |
| |
|
|
June 30 |
|
|
June 30
|
| |
|
|
2014 |
|
2013 |
|
|
2014 |
|
2013 |
| |
|
|
|
|
|
|
|
|
|
|
| Average Natural Gas Cost in Production per
MMBtu |
|
$ |
5.91 |
$ |
5.67 |
|
$ |
$ 5.65 |
$ |
$ 5.88 |
| Nitrogen Sales (tonnes - thousands) |
|
|
|
|
|
|
|
|
|
|
| Manufactured Product |
|
|
|
|
|
|
|
|
|
|
| Ammonia
(1) |
|
|
665 |
|
549 |
|
|
1,248 |
|
1,108 |
| Urea |
|
|
258 |
|
277 |
|
|
606 |
|
582 |
| Solutions/Nitric
acid/Ammonium nitrate |
|
|
740 |
|
656 |
|
|
1,438 |
|
1,278 |
| Manufactured Product |
|
|
1,663 |
|
1,482 |
|
|
3,292 |
|
2,968 |
| |
|
|
|
|
|
|
|
|
|
|
| Fertilizer sales tonnes
(1) |
|
|
551 |
|
488 |
|
|
1,128 |
|
898 |
| Industrial/Feed sales tonnes |
|
|
1,112 |
|
994 |
|
|
2,164 |
|
2,070 |
| Manufactured Product |
|
|
1,663 |
|
1,482 |
|
|
3,292 |
|
2,968 |
| |
|
|
|
|
|
|
|
|
|
|
| Nitrogen Net Sales |
|
|
|
|
|
|
|
|
|
|
| (US $ millions) |
|
|
|
|
|
|
|
|
|
|
| Sales - third party |
|
$ |
656 |
$ |
629 |
|
$ |
1,237 |
$ |
1,288 |
| Freight, transportation
and distribution - third party |
|
|
(28) |
|
(27) |
|
|
(59) |
|
(52) |
| Net sales - third
party |
|
|
628 |
|
602 |
|
|
1,178 |
|
1,236 |
| Inter-segment net
sales |
|
|
33 |
|
35 |
|
|
58 |
|
80 |
| Net Sales |
|
$ |
661 |
$ |
637 |
|
$ |
1,236 |
$ |
1,316 |
| |
|
|
|
|
|
|
|
|
|
|
| Manufactured Product |
|
|
|
|
|
|
|
|
|
|
| Ammonia
(2) |
|
$ |
360 |
$ |
318 |
|
$ |
606 |
$ |
660 |
| Urea |
|
|
114 |
|
120 |
|
|
264 |
|
265 |
| Solutions/Nitric
acid/Ammonium nitrate |
|
|
180 |
|
170 |
|
|
344 |
|
331 |
| Other miscellaneous and purchased
product (3) |
|
|
7 |
|
29 |
|
|
22 |
|
60 |
| Net Sales |
|
$ |
661 |
$ |
637 |
|
$ |
1,236 |
$ |
1,316 |
| |
|
|
|
|
|
|
|
|
|
|
| Fertilizer net sales
(2) |
|
$ |
234 |
$ |
226 |
|
$ |
447 |
$ |
411 |
| Industrial/Feed net sales |
|
|
421 |
|
382 |
|
|
768 |
|
845 |
| Other miscellaneous and purchased
product (3) |
|
|
6 |
|
29 |
|
|
21 |
|
60 |
| Net Sales |
|
$ |
661 |
$ |
637 |
|
$ |
1,236 |
$ |
1,316 |
| |
|
|
|
|
|
|
|
|
|
|
| Manufactured Product |
|
|
|
|
|
|
|
|
|
|
| Average Realized Sales Price per
MT |
|
|
|
|
|
|
|
|
|
|
| Ammonia |
|
$ |
542 |
$ |
578 |
|
$ |
486 |
$ |
596 |
| Urea |
|
$ |
441 |
$ |
432 |
|
$ |
436 |
$ |
455 |
| Solutions/Nitric
acid/Ammonium nitrate |
|
$ |
243 |
$ |
259 |
|
$ |
239 |
$ |
259 |
| Average |
|
$ |
393 |
$ |
410 |
|
$ |
369 |
$ |
423 |
| Fertilizer average price
per MT |
|
$ |
424 |
$ |
463 |
|
$ |
396 |
$ |
458 |
| Industrial/Feed average
price per MT |
|
$ |
379 |
$ |
384 |
|
$ |
355 |
$ |
408 |
| Average |
|
$ |
393 |
$ |
410 |
|
$ |
369 |
$ |
423 |
| Cost of Goods Sold per MT |
|
$ |
(213) |
$ |
(227) |
|
$ |
(206) |
$ |
(241) |
| Gross Margin per MT |
|
$ |
180 |
$ |
183 |
|
$ |
163 |
$ |
182 |
| |
|
|
|
|
|
|
|
|
|
|
| (1) Includes inter-segment ammonia sales (tonnes -
thousands) |
|
|
52 |
|
33 |
|
|
100 |
|
79 |
| (2) Includes inter-segment ammonia net sales |
|
$ |
31 |
$ |
19 |
|
$ |
56 |
$ |
50 |
| (3) Includes inter-segment other
miscellaneous and purchased product net sales |
|
$ |
2 |
$ |
16 |
|
$ |
2 |
$ |
30 |
| |
|
|
|
|
|
|
|
|
|
|
Potash
Corporation of Saskatchewan Inc.
Selected Financial Data
(unaudited)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three Months
Ended |
|
|
Six Months Ended |
| |
|
|
June 30
|
|
|
June 30 |
| |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Phosphate Sales (tonnes -
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Manufactured Product |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fertilizer |
|
|
539 |
|
|
635 |
|
|
1,041 |
|
|
1,225 |
| |
|
Feed and Industrial |
|
|
310 |
|
|
295 |
|
|
582 |
|
|
608 |
| |
Manufactured Product |
|
|
849 |
|
|
930 |
|
|
1,623 |
|
|
1,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Phosphate Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
| |
(US $ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Sales |
|
$ |
489 |
|
$ |
540 |
|
$ |
917 |
|
$ |
1,096 |
| |
|
Freight, transportation and distribution |
|
|
(51) |
|
|
(52) |
|
|
(100) |
|
|
(105) |
| |
|
Net Sales |
|
$ |
438 |
|
$ |
488 |
|
$ |
817 |
|
$ |
991 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Manufactured Product |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fertilizer |
|
$ |
245 |
|
$ |
288 |
|
$ |
455 |
|
$ |
585 |
| |
|
Feed and Industrial |
|
|
187 |
|
|
193 |
|
|
352 |
|
|
392 |
| |
Other miscellaneous and purchased
product |
|
|
6 |
|
|
7 |
|
|
10 |
|
|
14 |
| |
Net Sales |
|
$ |
438 |
|
$ |
488 |
|
$ |
817 |
|
$ |
991 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Manufactured Product |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Average Realized Sales Price per
MT |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fertilizer |
|
$ |
455 |
|
$ |
454 |
|
$ |
437 |
|
$ |
478 |
| |
|
Feed and Industrial |
|
$ |
603 |
|
$ |
654 |
|
$ |
605 |
|
$ |
644 |
| |
|
Average |
|
$ |
509 |
|
$ |
517 |
|
$ |
497 |
|
$ |
533 |
| |
Cost of Goods Sold per MT |
|
$ |
(457) |
|
$ |
(422) |
|
$ |
(455) |
|
$ |
(437) |
| |
Gross Margin per MT |
|
$ |
52 |
|
$ |
95 |
|
$ |
42 |
|
$ |
96 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potash
Corporation of Saskatchewan Inc.
Selected Additional Data
(unaudited) |
| |
|
|
|
|
|
|
|
|
| Exchange Rate (Cdn$/US$) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
2014 |
|
2013 |
| |
|
|
|
|
|
|
|
|
| December 31 |
|
|
|
|
|
|
|
1.0636 |
| June 30 |
|
|
|
|
|
1.0676 |
|
1.0512 |
| Second-quarter average conversion
rate |
|
|
|
|
|
1.0997 |
|
1.0211 |
| |
|
|
|
|
|
|
|
|
| |
Three Months
Ended |
|
|
Six Months
Ended |
| |
June 30 |
|
|
June 30 |
| |
2014 |
|
2013 |
|
|
2014 |
|
2013 |
| |
|
|
|
|
|
|
|
|
| Production |
|
|
|
|
|
|
|
|
| Potash production (KCl Tonnes -
thousands) |
2,321 |
|
2,677 |
|
|
4,716 |
|
4,702 |
| Potash shutdown weeks
(1) |
3 |
|
4 |
|
|
5 |
|
20 |
| Nitrogen production (N Tonnes -
thousands) |
830 |
|
726 |
|
|
1,663 |
|
1,449 |
| Phosphate production
(P2O5 Tonnes - thousands) |
459 |
|
521 |
|
|
828 |
|
1,020 |
| Phosphate P2O5
operating rate |
77% |
|
88% |
|
|
70% |
|
86% |
| |
|
|
|
|
|
|
|
|
| Shareholders |
|
|
|
|
|
|
|
|
| PotashCorp's total shareholder
return |
6% |
|
-2% |
|
|
17% |
|
-5% |
| |
|
|
|
|
|
|
|
|
| Customers |
|
|
|
|
|
|
|
|
| Product tonnes
involved in customer complaints (thousands) |
2 |
|
4 |
|
|
15 |
|
12 |
| |
|
|
|
|
|
|
|
|
| Community |
|
|
|
|
|
|
|
|
| Taxes and royalties ($ millions)
(2) |
199 |
|
201 |
|
|
369 |
|
401 |
| |
|
|
|
|
|
|
|
|
| Employees |
|
|
|
|
|
|
|
|
| Annualized turnover rate (excluding
retirements) (3) |
5% |
|
4% |
|
|
12% |
|
4% |
| |
|
|
|
|
|
|
|
|
| Safety |
|
|
|
|
|
|
|
|
| Total site recordable
injury rate (per 200,000 work hours) (4) |
1.27 |
|
1.10 |
|
|
1.16 |
|
1.00 |
| |
|
|
|
|
|
|
|
|
| Environment |
|
|
|
|
|
|
|
|
| Environmental incidents
(5) |
6 |
|
3 |
|
|
11 |
|
10 |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
June 30, |
|
December 31, |
| As at |
|
|
|
|
|
2014 |
|
2013 |
| |
|
|
|
|
|
|
|
|
| Number of employees
(6) |
|
|
|
|
|
|
|
|
| Potash |
|
|
|
|
|
|
2,479 |
|
2,912 |
| Nitrogen |
|
|
|
|
|
|
802 |
|
789 |
| Phosphate |
|
|
|
|
|
|
1,376 |
|
1,637 |
| Other |
|
|
|
|
|
|
411 |
|
449 |
| Total |
|
|
|
|
|
|
5,068 |
|
5,787 |
| |
|
|
|
|
|
|
|
|
|
(1) Represents weeks
of full production shutdown; excludes the impact of any periods of
reduced operating rates and planned routine
annual maintenance shutdowns. |
(2) Taxes and
royalties = current income tax expense - investment tax credits -
realized excess tax benefit related to share-based
compensation + potash production tax + resource surcharge +
royalties + municipal taxes + other miscellaneous taxes (calculated
on
an accrual basis). |
| (3) Results in 2014 include a portion
of the impact of our workforce reduction announced in 2013.
|
| (4) As defined in our 2013 Annual
Integrated Report. Total site includes PotashCorp employees,
contractors and others on site. |
(5) Total of
reportable quantity releases, permit excursions and provincial
reportable spills (as defined in our 2013 Annual Integrated
Report). |
| (6) Totals as at June 30, 2014 and
December 31, 2013 do not fully reflect workforce changes announced
in December 2013. |
Potash Corporation of Saskatchewan
Inc.
Selected Non-IFRS Financial Measures and Reconciliations
(in millions of US dollars except percentage amounts)
(unaudited)
The following information is included for convenience only.
Generally, a non-IFRS financial measure is a numerical measure of a
company's performance, financial position or cash flows that either
excludes or includes amounts that are not normally excluded or
included in the most directly comparable measure calculated and
presented in accordance with IFRS. EBITDA, adjusted EBITDA,
adjusted EBITDA margin, cash flow prior to working capital changes
and free cash flow are not measures of financial performance (nor
do they have standardized meanings) under IFRS. In evaluating these
measures, investors should consider that the methodology applied in
calculating such measures may differ among companies and
analysts.
The company uses both IFRS and certain non-IFRS measures to assess
performance. Management believes these non-IFRS measures provide
useful supplemental information to investors in order that they may
evaluate PotashCorp's financial performance using the same measures
as management. Management believes that, as a result, the investor
is afforded greater transparency in assessing the financial
performance of the company. These non-IFRS financial measures
should not be considered as a substitute for, nor superior to,
measures of financial performance prepared in accordance with
IFRS.
A. EBITDA, ADJUSTED EBITDA AND
ADJUSTED EBITDA MARGIN
Set forth below is a reconciliation of "EBITDA" and "adjusted
EBITDA" to net income and "adjusted EBITDA margin" to net income as
a percentage of sales, the most directly comparable financial
measures calculated and presented in accordance with IFRS.
| |
|
|
|
|
|
|
|
|
| |
Three Months
Ended |
Six Months
Ended |
| |
June 30 |
June 30 |
| |
2014 |
2013 |
2014 |
2013 |
| Net income |
$ |
472 |
$ |
643 |
$ |
812 |
$ |
1,199 |
| Finance costs |
|
48 |
|
39 |
|
95 |
|
74 |
| Income taxes |
|
166 |
|
245 |
|
310 |
|
471 |
| Depreciation and amortization |
|
182 |
|
186 |
|
358 |
|
340 |
| EBITDA |
$ |
868 |
$ |
1,113 |
$ |
1,575 |
$ |
2,084 |
| Impairment of available-for-sale
investment |
|
- |
|
- |
|
38 |
|
- |
| Adjusted EBITDA |
$ |
868 |
$ |
1,113 |
$ |
1,613 |
$ |
2,084 |
| |
|
|
|
|
|
|
|
|
EBITDA is calculated as net income before
finance costs, income taxes and depreciation and amortization.
Adjusted EBITDA is calculated as net income before finance costs,
income taxes, depreciation and amortization and certain impairment
charges. PotashCorp uses EBITDA and adjusted EBITDA as supplemental
financial measures of its operational performance. Management
believes EBITDA and adjusted EBITDA to be important measures as
they exclude the effects of items which primarily reflect the
impact of long-term investment and financing decisions, rather than
the performance of the company's day-to-day operations. As compared
to net income according to IFRS, these measures are limited in that
they do not reflect the periodic costs of certain capitalized
tangible and intangible assets used in generating revenues in the
company's business, or the charges associated with impairments.
Management evaluates such items through other financial measures
such as capital expenditures and cash flow provided by operating
activities. The company believes that these measurements are useful
to measure a company's ability to service debt and to meet other
payment obligations or as a valuation measurement.
| |
|
|
|
|
|
|
|
|
| |
Three Months
Ended |
Six Months
Ended |
| |
June 30 |
June 30 |
| |
2014 |
2013 |
2014 |
2013 |
| Sales |
$ |
1,892 |
$ |
2,144 |
$ |
3,572 |
$ |
4,244 |
| Freight, transportation and
distribution |
|
(158) |
|
(147) |
|
(324) |
|
(296) |
| Net sales |
$ |
1,734 |
$ |
1,997 |
$ |
3,248 |
$ |
3,948 |
| |
|
|
|
|
|
|
|
|
| Net income as a percentage of sales |
|
25% |
|
30% |
|
23% |
|
28% |
| Adjusted EBITDA margin |
|
50% |
|
56% |
|
50% |
|
53% |
| |
|
|
|
|
|
|
|
|
Adjusted EBITDA margin is calculated as adjusted
EBITDA divided by net sales (sales less freight, transportation and
distribution). Management believes comparing EBITDA to net sales
earned (net of costs to deliver product) is an important indicator
of efficiency. In addition to the limitations given above in using
adjusted EBITDA as compared to net income, adjusted EBITDA margin
as compared to net income as a percentage of sales is also limited
in that freight, transportation and distribution costs are incurred
and valued independently of sales; adjusted EBITDA also includes
earnings from equity investees whose sales are not included in
consolidated sales. Management evaluates these items individually
on the consolidated statements of income.
Potash Corporation of Saskatchewan
Inc.
Selected Non-IFRS Financial Measures and Reconciliations
(in millions of US dollars)
(unaudited)
B. CASH FLOW
Set forth below is a reconciliation of "cash flow prior to working
capital changes" and "free cash flow" to cash provided by operating
activities, the most directly comparable financial measure
calculated and presented in accordance with IFRS.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Three Months
Ended |
|
|
Six Months
Ended |
| |
|
|
June 30 |
|
|
June 30 |
| |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
| Cash flow prior to working capital
changes |
|
$ |
765 |
|
|
1,107 |
|
$ |
1,367 |
|
$ |
1,843 |
| Changes in non-cash operating working
capital |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Receivables |
|
|
54 |
|
|
170 |
|
|
(104) |
|
|
66 |
| |
Inventories |
|
|
(3) |
|
|
(6) |
|
|
17 |
|
|
41 |
| |
Prepaid expenses and other current assets |
|
|
9 |
|
|
12 |
|
|
27 |
|
|
13 |
| |
Payables and accrued charges |
|
|
(37) |
|
|
(81) |
|
|
20 |
|
|
(23) |
| Changes in non-cash
operating working capital |
|
|
23 |
|
|
95 |
|
|
(40) |
|
|
97 |
| Cash provided by operating
activities |
|
$ |
788 |
|
$ |
1,202 |
|
$ |
1,327 |
|
$ |
1,940 |
| Additions to property, plant and
equipment |
|
|
(199) |
|
|
(354) |
|
|
(423) |
|
|
(850) |
| Other assets and intangible
assets |
|
|
(8) |
|
|
(5) |
|
|
(10) |
|
|
(10) |
| Changes in non-cash operating working
capital |
|
|
(23) |
|
|
(95) |
|
|
40 |
|
|
(97) |
| Free cash flow |
|
$ |
558 |
|
$ |
748 |
|
$ |
934 |
|
$ |
983 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Management uses cash flow prior to working
capital changes as a supplemental financial measure in its
evaluation of liquidity. Management believes that adjusting
principally for the swings in non-cash working capital items due to
seasonality or other timing issues assists management in making
long-term liquidity assessments. The company also believes that
this measurement is useful as a measure of liquidity or as a
valuation measurement.
The company uses free cash flow as a
supplemental financial measure in its evaluation of liquidity and
financial strength. Management believes that adjusting
principally for the swings in non-cash operating working capital
items due to seasonality or other timing issues, additions to
property, plant and equipment, and changes to other assets assists
management in the long-term assessment of liquidity and financial
strength. Management also believes that this measurement is
useful as an indicator of its ability to service its debt, meet
other payment obligations and make strategic investments.
Readers should be aware that free cash flow does not represent
residual cash flow available for discretionary expenditures.
SOURCE Potash Corporation of Saskatchewan Inc.