Symbol: POT
Listed: TSX, NYSE
Key Highlights
- Second-quarter earnings of $0.50
per share1
- Record first-half offshore potash shipments of 3.4 million
tonnes
- Full-year 2015 earnings guidance adjusted to $1.75 - $1.95
- Third-quarter earnings guidance set at $0.35 - $0.45 per share
- Proposal to acquire K+S Aktiengesellschaft (K+S)
CEO
Commentary
"Our earnings for the quarter hit the midpoint of our guidance
range but trailed last year's total, primarily due to weaker
nitrogen prices," said PotashCorp President and Chief Executive
Officer Jochen Tilk. "While we have
faced some near-term market headwinds, we are encouraged by the
strength of global potash demand, especially in offshore markets.
During the first six months of this year, our offshore shipments
reached a record total and we believe these conditions will
continue to support further growth of our potash business in the
years ahead."
SASKATOON, July 30, 2015 /CNW/ - Potash Corporation of
Saskatchewan Inc. (PotashCorp) reported second-quarter earnings of
$0.50 per share ($417 million), bringing the first-half total to
$0.94 per share ($787 million). Earnings for both the quarter and
the first six months trailed 2014's comparable period amounts of
$0.56 per share ($472 million) and $0.95 per share ($812
million), respectively.
Improved potash and phosphate contributions were offset by
weaker nitrogen earnings, resulting in gross margin of $711 million in this year's second quarter (down
5 percent) and $1.4 billion for the
first half (up 5 percent).
Cash from operating activities of $836
million in the second quarter and $1.4 billion for the first half of 2015 surpassed
last year's comparable totals due to favorable changes in non-cash
operating working capital. Earnings before finance costs, income
taxes and depreciation and amortization (EBITDA)2 of
$792 million for the quarter and
$1.5 billion for the first six months
were below 2014 comparative figures.
Our investments in Arab Potash Company (APC) in Jordan, Israel Chemicals Ltd. (ICL) in
Israel, Sociedad Quimica y Minera
de Chile S.A. (SQM) in Chile and
Sinofert Holdings Limited (Sinofert) in China contributed $64
million to our quarterly earnings. This result exceeded the
$55 million earned in the second
quarter of 2014 and brought first-half contributions to
$97 million, down significantly from
last year's total of $155 million,
which included a special dividend from ICL.
Market Conditions
Global potash shipments remained strong during the second
quarter, especially to China and
India where higher contract
volumes supported robust shipments for most producers. Demand in
other offshore markets remained at historically high levels,
although the impacts of weaker crop economics, currency volatility
and credit availability slowed purchases from 2014's record pace –
most notably in Brazil. In
North America, a shortened
planting season and greater availability of product from offshore
suppliers kept domestic producer sales below 2014's exceptionally
strong comparative period.
In nitrogen, prices for most products declined from those
realized in second-quarter 2014 as market fundamentals weakened on
increased global supply and record Chinese urea exports over the
past 12 months. As the quarter progressed, urea prices found
support on stronger demand in key import markets and slowing
exports from China, while ammonia
markets stabilized due to supply constraints in major exporting
regions.
In phosphate, solid phosphate fertilizer prices were generally
consistent with those in the second quarter of 2014 as improved
Indian demand more than offset weakness in Latin America and record Chinese exports.
Robust demand for other phosphate products – most notably liquid
fertilizers in India and
North America – supported improved
prices relative to 2014's second quarter.
Potash
Potash gross margin of $417
million for 2015's second quarter and $845 million for the first six months reflected
improved realizations, with results in both periods exceeding the
respective totals of $395 million and
$695 million generated in 2014.
While total sales volumes for both the quarter (2.5 million
tonnes) and first six months (4.9 million tonnes) were in line with
those of 2014, offshore shipments were especially robust, up 18
percent and 17 percent, respectively. Canpotex3
shipments reached record levels for both periods in 2015 due to
improved rail logistics and enhanced infrastructure and
distribution capabilities. For the quarter, the majority of
Canpotex's shipments were to Latin
America (37 percent) and Other Asian countries outside of
China and India (30 percent), while China and India accounted for 20 percent and 8 percent,
respectively. North American sales volumes declined for both the
quarter (down 31 percent) and the first six months (down 25
percent) from the exceptionally strong comparative periods in
2014.
Our average realized potash price of $273 per tonne for the second quarter was up from
$263 per tonne in the same period
last year. This improvement reflected higher prices in most markets
compared to last year's second quarter when realizations were still
recovering from the lows experienced in early 2014.
Per-tonne cost of goods sold for the second quarter was slightly
above the same period in 2014. The favorable impact of a weakened
Canadian dollar and operational efficiencies was more than offset
by fewer tonnes sourced from our lower-cost mines. This was due
largely to the Allan Canpotex proving run that we completed in the
second quarter of 2014.
Nitrogen
Weaker prices for all nitrogen product categories resulted in
gross margin of $222 million for the
quarter and $403 million for the
first six months, trailing last year's comparable periods by 27
percent and 26 percent, respectively. Our US operations accounted
for 71 percent of our nitrogen gross margin for the quarter, with
Trinidad providing the
remainder.
Second-quarter sales volumes of 1.6 million tonnes were
relatively flat with the same period in 2014. Total first-half
sales volumes were 2.9 million tonnes – 11 percent below the same
period last year. This reduction was primarily due to first-quarter
headwinds, which included market weakness, mechanical challenges at
Lima and greater gas curtailments
in Trinidad.
Our average realized price of $334
per tonne during the quarter declined from the $393 per tonne in the same period last year. This
was largely the result of increased supply in key producing
regions, which pressured benchmark prices and realizations for all
our products.
Cost of goods sold for the quarter averaged $201 per tonne, down from $213 per tonne in 2014's second quarter, driven
primarily by lower natural gas costs in both the US and
Trinidad.
Phosphate
Phosphate gross margin of $72
million for the second quarter (up 50 percent) and
$130 million for the first six months
of 2015 (up 76 percent) improved significantly from the comparable
periods in 2014. The absence of accelerated depreciation charges
incurred in 2014 related to the closure that year of our
Suwannee River chemical plant – as
well as higher average netbacks this year – supported improved
margins and more than offset lower sales volumes.
Absence of production from Suwannee
River reduced tonnes available for sale. Sales volumes of
0.7 million tonnes for the quarter and 1.3 million tonnes for the
first six months trailed comparative periods in 2014 by 20 percent
and 18 percent, respectively.
Our average realized phosphate price for the quarter was
$553 per tonne, up from $509 per tonne in the same period last year,
reflecting a greater proportion of sales from higher-netback feed,
industrial and liquid fertilizer products.
Cost of goods sold of $450 per
tonne for the second quarter was slightly below the same period in
2014. The absence of accelerated depreciation charges more than
offset the negative impact of reduced production.
Financial
Provincial mining and other taxes for the second quarter
increased to $90 million from the
$69 million recorded in 2014,
reflecting the impacts of a weaker Canadian dollar, higher potash
prices and changes in the timing of allowable deductions within
Saskatchewan's potash taxation
regulations.
Lower total earnings resulted in income tax expense declining to
$152 million in the second quarter
from $166 million during 2014's
comparable period.
Capital-related cash expenditures totaled $294 million during the quarter, exceeding the
total in the same period last year, as we advanced work at our
potash expansions in Rocanville
and New Brunswick as well as our
nitrogen expansion in Lima.
During the quarter, we proposed to acquire K+S for €41 per
share. This business combination would bring together complementary
assets to create a well-capitalized, more diversified company
across products, geographies, distribution and customers. Despite
K+S' initial rejection, we believe that our proposal balances the
interests of investors and other stakeholders, including the
employees and communities in which the companies operate. As such,
we remain focused on engaging with and having constructive
discussions with K+S management that would include commitments to
secure German locations and employment. Please bear in mind that we
have not yet decided to make a formal offer.
Potash Market Outlook
Our expectations of global potash demand remain unchanged as we
anticipate 2015 shipments of approximately 60 million tonnes.
In North America, demand for
our summer-fill program has been strong. We expect shipments in
this market to accelerate through the remainder of the year,
although competitive pressures have resulted in lower prices than
recognized during the first six months. We now expect total 2015
shipments of 9.0-9.5 million tonnes.
In Latin America, we anticipate
strong third-quarter demand ahead of its key planting season.
However, reduced credit availability and currency weakness in
Brazil could slow purchases
compared to the record pace in 2014. For the full year, we now
forecast shipments of 10.6-11.1 million tonnes for this region.
In China, strong shipments are
expected through the second half as suppliers deliver against
significant annual contracted volumes. Rising demand in
China for compound fertilizers and
bulk blends with higher potassium content is expected to require
optional tonnage deliveries and push Canpotex sales volumes above
its 1.8 million tonne minimum. Based on this strength – and
increased domestic production – we now expect total shipments to
reach 14.2-14.7 million tonnes.
In India, potash demand
continues to improve without meaningful subsidy change. Robust
demand for direct application and compound fertilizers – as well as
a later first-half contract settlement – is expected to result in
significant Canpotex shipments through the rest of 2015. We
maintain our full-year shipment estimate of 4.5-5.0 million tonnes
and believe total deliveries could reach the upper end of our
range.
In Other Asian countries (outside of China and India), we maintain our estimate for shipments
of 8.4-8.8 million tonnes. Significant competitive pressures and
currency volatility could weigh on prices in these markets through
the balance of the year.
Financial Outlook
With the first half behind us, we have revised our full-year
expectations for our potash business. Our full-year sales volumes
estimate has been narrowed to 9.3-9.6 million tonnes and – due to a
decline in certain spot market prices through the second quarter –
we have lowered the upper end of our previous potash gross margin
range, now forecast at $1.5-$1.7
billion.
We maintain our combined nitrogen and phosphate gross margin
estimate of $1.0-$1.2 billion in
2015. In nitrogen, we expect greater supply will lead to a more
subdued market and weaker prices relative to 2014, although lower
natural gas prices are expected to keep cost of goods sold below
last year's level. In phosphate, a shift to a more profitable
product mix and supportive market fundamentals are expected to keep
realizations above those of 2014. Additionally, we expect to
benefit from per-tonne costs trending lower through the balance of
the year on improved mining conditions at Aurora.
We have increased our estimate of income from offshore equity
investments to a range of $190-$210
million due to increased dividend income from ICL in the
first half of the year. Selling and administrative expenses are now
forecast in the range of $235-$245
million and finance costs are now expected to be in the
range of $190-$200 million.
As a result of the noted changes, we have revised our full-year
2015 earnings guidance to $1.75-$1.95
per share. For the third quarter, we forecast a range of
$0.35-$0.45 per share.
Other annual guidance numbers – including those noted above –
are outlined in the table below.
2015 Guidance
|
Earnings per
share
|
Annual:
$1.75-$1.95 Q3: $0.35-$0.45
|
Potash sales
volumes
|
9.3-9.6 million
tonnes
|
Potash gross
margin
|
$1.5-$1.7
billion
|
Nitrogen and
phosphate gross margin
|
$1.0-$1.2
billion
|
Capital
expenditures*
|
~$1.2
billion
|
Effective tax
rate
|
26-28
percent
|
Provincial mining and
other taxes**
|
20-22
percent
|
Selling and
administrative expenses
|
$235-$245
million
|
Finance
costs
|
$190-$200
million
|
Income from offshore
equity investments***
|
$190-$210
million
|
Annual Foreign
Exchange Rate
|
CDN$1.24 per
US$
|
Annual EPS
sensitivity to Foreign Exchange
|
US$ strengthens vs.
CDN$ by $0.02 = +$0.01 EPS
|
* Does not include
capitalized interest
|
** As a percentage of
potash gross margin
|
*** Includes income
from dividends and share of equity earnings
|
|
Notes
1. All references to per-share amounts pertain to diluted net
income per share.
2. See reconciliation and description of non-IFRS measures in
the attached section titled "Selected Non-IFRS Financial Measures
and Reconciliations."
3. Canpotex Limited (Canpotex), the offshore marketing company
for Saskatchewan potash
producers.
PotashCorp is the world's largest integrated fertilizer and
related industrial and feed products company by capacity and plays
an integral role in global food production. PotashCorp is the
world's largest producer, by capacity, of potash and one of the
largest producers of nitrogen and phosphate. These three essential
nutrients are 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. While agriculture is its primary market, the company also
produces products for animal feed and industrial uses. Common
shares of Potash Corporation of Saskatchewan Inc. are listed on the
Toronto Stock Exchange and the New York Stock Exchange.
This release contains "forward-looking statements" (within
the meaning of the US Private Securities Litigation Reform Act of
1995) or "forward-looking information"(within the meaning of
appropriate Canadian securities legislation) that relate to future
events or our future performance.
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 as set
forth in this document, including with respect to: foreign exchange
rates, expected growth, results of operations, performance,
business prospects and opportunities, including our proposal to
acquire K+S, and effective tax rates. While we consider 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 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; fluctuations
in supply and demand in the fertilizer, sulfur, transportation and
petrochemical markets; changes in competitive pressures, including
pricing pressures; costs and availability of transportation and
distribution for our raw materials and products, including railcars
and ocean freight; risks and uncertainties related to operating and
workforce changes made in response to our industry and the markets
we serve; risks and uncertainties related to our international
operations and assets; failure to prevent or respond to a major
safety incident; adverse or uncertain economic conditions and
changes in credit and financial markets; the results of sales
contract negotiations within major markets; 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; catastrophic events or malicious acts,
including terrorism; changes in currency and exchange rates;
imprecision in reserve estimates; adverse developments in new and
pending legal proceedings or government investigations; our
prospects to reinvest capital in strategic opportunities and
acquisitions, including our proposal to acquire K+S; our ownership
of non-controlling equity interests in other companies; the impact
of further technological innovation; increases in the price or
reduced availability of the raw materials that we use; security
risks related to our information technology systems; 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; certain
complications that may arise in our mining process, including water
inflows; our ability to attract, retain, develop and engage skilled
employees; risks related to reputational loss; earnings; and the
decisions of taxing authorities, which could affect our effective
tax rates. These risks and uncertainties are discussed in
more detail under the headings "Risk Factors" and "Management's
Discussion and Analysis of Results and Operations and Financial
Condition" in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2014 and in other
documents and reports subsequently filed by us with the US
Securities and Exchange Commission and the Canadian provincial
securities commissions. Forward-looking statements are given only
as of the date hereof and we disclaim any obligation to update or
revise any forward-looking statements in this release, 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 30, 2015 at 1:00 pm Eastern Time.
|
|
Telephone Conference:
|
Dial-in
numbers:
|
|
- From Canada
and the US 1-877-881-1303
|
|
- From
Elsewhere
1-412-902-6719
|
|
|
Live Webcast:
|
Visit
www.potashcorp.com
|
|
Webcast participants
can submit questions to management online from their audio player
pop-up window.
|
|
|
Potash Corporation of Saskatchewan Inc.
|
Condensed Consolidated Statements of
Income
|
(in millions of US dollars except as otherwise
noted)
|
(unaudited)
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
June 30
|
June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Sales (Note
2)
|
$
|
1,731
|
$
|
1,892
|
$
|
3,396
|
$
|
3,572
|
Freight,
transportation and distribution
|
(124)
|
(158)
|
(252)
|
(324)
|
Cost of goods
sold
|
(896)
|
(987)
|
(1,766)
|
(1,936)
|
Gross Margin
|
711
|
747
|
1,378
|
1,312
|
Selling and
administrative expenses
|
(60)
|
(55)
|
(120)
|
(123)
|
Provincial mining and
other taxes
|
(90)
|
(69)
|
(185)
|
(123)
|
Share of earnings of
equity-accounted investees
|
35
|
32
|
71
|
65
|
Dividend
income
|
31
|
24
|
31
|
93
|
Impairment of
available-for-sale investment
|
-
|
-
|
-
|
(38)
|
Other (expenses)
income
|
(8)
|
7
|
3
|
31
|
Operating Income
|
619
|
686
|
1,178
|
1,217
|
Finance
costs
|
(50)
|
(48)
|
(99)
|
(95)
|
Income Before Income Taxes
|
569
|
638
|
1,079
|
1,122
|
Income taxes (Note
3)
|
(152)
|
(166)
|
(292)
|
(310)
|
Net Income
|
$
|
417
|
$
|
472
|
$
|
787
|
$
|
812
|
|
|
|
|
|
Net Income per Share
|
|
|
|
|
|
Basic
|
$
|
0.50
|
$
|
0.56
|
$
|
0.94
|
$
|
0.96
|
|
Diluted
|
$
|
0.50
|
$
|
0.56
|
$
|
0.94
|
$
|
0.95
|
|
|
|
|
|
Dividends Declared per Share
|
$
|
0.38
|
$
|
0.35
|
$
|
0.76
|
$
|
0.70
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
|
|
|
Basic
|
834,441,000
|
840,342,000
|
832,924,000
|
846,596,000
|
|
Diluted
|
837,746,000
|
847,014,000
|
837,399,000
|
853,320,000
|
(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)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Net Income
|
$
|
417
|
$
|
472
|
$
|
787
|
$
|
812
|
Other comprehensive
income (loss)
|
|
|
|
|
|
Items that have been
or may be subsequently reclassified to net income:
|
|
|
|
|
|
|
Available-for-sale
investments (1)
|
|
|
|
|
|
|
|
Net fair value gain
(loss) during the period
|
21
|
(15)
|
59
|
35
|
|
|
Cash flow
hedges
|
|
|
|
|
|
|
|
Net fair value gain
(loss) during the period (2)
|
1
|
-
|
(21)
|
(1)
|
|
|
|
Reclassification to
income of net loss (3)
|
15
|
7
|
26
|
13
|
|
|
Other
|
-
|
2
|
(4)
|
4
|
Other Comprehensive Income (Loss)
|
37
|
(6)
|
60
|
51
|
Comprehensive Income
|
$
|
454
|
$
|
466
|
$
|
847
|
$
|
863
|
(1) Available-for-sale investments are comprised of
shares in Israel Chemicals Ltd. and Sinofert Holdings
Limited.
|
(2) Cash flow
hedges are comprised of natural gas derivative instruments and
treasury lock derivatives and were net of income taxes of $NIL
(2014 - $NIL) for the three months ended June 30, 2015 and $12
(2014 - $1) for the six months ended June 30,
2015.
|
(3) Net of
income taxes of $(8) (2014 - $(4)) for the three months ended June
30, 2015 and $(14) (2014 - $(8)) for the six months ended June 30,
2015.
|
(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
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
Net income
|
$
|
417
|
$
|
472
|
$
|
787
|
$
|
812
|
Adjustments to
reconcile net income to cash provided by
|
|
|
|
|
|
operating activities
(Note 4)
|
248
|
293
|
429
|
555
|
Changes in non-cash
operating working capital (Note 4)
|
171
|
23
|
141
|
(40)
|
Cash provided by operating activities
|
836
|
788
|
1,357
|
1,327
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
Additions to
property, plant and equipment
|
(294)
|
(199)
|
(522)
|
(423)
|
Other assets and
intangible assets
|
(10)
|
(8)
|
(15)
|
(10)
|
Cash used in investing activities
|
(304)
|
(207)
|
(537)
|
(433)
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
Proceeds from
long-term debt obligations
|
-
|
-
|
494
|
737
|
Repayment of
long-term debt obligations
|
-
|
(500)
|
-
|
(500)
|
Proceeds from
(repayment of) short-term debt obligations
|
-
|
429
|
(536)
|
(41)
|
Dividends
|
(312)
|
(283)
|
(586)
|
(576)
|
Repurchase of common
shares
|
-
|
(669)
|
-
|
(1,065)
|
Issuance of common
shares
|
12
|
16
|
42
|
30
|
Cash used in financing activities
|
(300)
|
(1,007)
|
(586)
|
(1,415)
|
Increase (Decrease) in Cash and Cash
Equivalents
|
232
|
(426)
|
234
|
(521)
|
Cash and Cash Equivalents, Beginning of
Period
|
217
|
533
|
215
|
628
|
Cash and Cash Equivalents, End of Period
|
$
|
449
|
$
|
107
|
$
|
449
|
$
|
107
|
|
|
|
|
|
Cash and cash
equivalents comprised of:
|
|
|
|
|
|
Cash
|
$
|
62
|
$
|
88
|
$
|
62
|
$
|
88
|
|
Short-term
investments
|
387
|
19
|
387
|
19
|
|
$
|
449
|
$
|
107
|
$
|
449
|
$
|
107
|
(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
|
|
|
|
|
Net
unrealized
|
Net
|
|
Total
|
|
|
|
|
|
gain on
|
loss on
|
|
Accumulated
|
|
|
|
|
|
available-
|
derivatives
|
|
Other
|
|
|
|
Share
|
Contributed
|
for-sale
|
designated
as
|
|
Comprehensive
|
Retained
|
Total
|
|
Capital
|
Surplus
|
investments
|
cash flow
hedges
|
Other
|
Income
|
Earnings
|
Equity
|
|
|
|
|
|
|
|
|
|
Balance - December 31, 2014
|
$
|
1,632
|
$
|
234
|
$
|
623
|
$
|
(119)
|
$
|
(1)
|
$
|
503
|
$
|
6,423
|
$
|
8,792
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
787
|
787
|
Other comprehensive
income (loss)
|
-
|
-
|
59
|
5
|
(4)
|
60
|
-
|
60
|
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
-
|
(635)
|
(635)
|
Effect of share-based
compensation
|
|
|
|
|
|
|
|
|
|
including issuance of
common shares
|
56
|
1
|
-
|
-
|
-
|
-
|
-
|
57
|
Shares issued for
dividend
|
|
|
|
|
|
|
|
|
|
reinvestment
plan
|
24
|
-
|
-
|
-
|
-
|
-
|
-
|
24
|
Balance - June 30, 2015
|
$
|
1,712
|
$
|
235
|
$
|
682
|
$
|
(114)
|
$
|
(5)
|
$
|
563
|
$
|
6,575
|
$
|
9,085
|
|
|
|
|
|
|
|
|
|
(See Notes to the
Condensed Consolidated Financial Statements)
|
|
|
|
|
Potash Corporation of Saskatchewan Inc.
|
Condensed Consolidated Statements of Financial
Position
|
(in millions of US dollars except share
amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
June 30,
|
December 31,
|
As at
|
|
|
2015
|
2014
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
449
|
$
|
215
|
|
|
Receivables
|
|
|
805
|
1,029
|
|
|
Inventories
|
|
|
709
|
646
|
|
|
Prepaid expenses and
other current assets
|
|
|
50
|
48
|
|
|
|
2,013
|
1,938
|
|
Non-current
assets
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
12,801
|
12,674
|
|
|
Investments in
equity-accounted investees
|
|
|
1,224
|
1,211
|
|
|
Available-for-sale
investments
|
|
|
1,586
|
1,527
|
|
|
Other
assets
|
|
|
286
|
232
|
|
|
Intangible
assets
|
|
|
143
|
142
|
Total Assets
|
|
|
$
|
18,053
|
$
|
17,724
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Short-term debt and
current portion of long-term debt
|
|
|
$
|
495
|
$
|
1,032
|
|
|
Payables and accrued
charges
|
|
|
1,100
|
1,086
|
|
|
Current portion of
derivative instrument liabilities
|
|
|
75
|
80
|
|
|
|
1,670
|
2,198
|
|
Non-current
liabilities
|
|
|
|
|
|
|
Long-term debt (Note
5)
|
|
|
3,710
|
3,213
|
|
|
Derivative instrument
liabilities
|
|
|
114
|
115
|
|
|
Deferred income tax
liabilities
|
|
|
2,284
|
2,201
|
|
|
Pension and other
post-retirement benefit liabilities
|
|
|
518
|
503
|
|
|
Asset retirement
obligations and accrued environmental costs
|
|
|
557
|
589
|
|
|
Other non-current
liabilities and deferred credits
|
|
|
115
|
113
|
Total Liabilities
|
|
|
8,968
|
8,932
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
Share
capital
|
|
|
1,712
|
1,632
|
|
|
Unlimited
authorization of common shares without par value; issued
and
outstanding
834,648,800 and 830,242,574 at June 30, 2015 and
December
31, 2014,
respectively
|
|
|
|
|
|
Contributed
surplus
|
|
|
235
|
234
|
|
Accumulated other
comprehensive income
|
|
|
563
|
503
|
|
Retained
earnings
|
|
|
6,575
|
6,423
|
Total Shareholders' Equity
|
|
|
9,085
|
8,792
|
Total Liabilities and Shareholders' Equity
|
|
|
$
|
18,053
|
$
|
17,724
|
(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, 2015
(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 2014 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 2014 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 August 2015.
In management's opinion, the unaudited interim condensed
consolidated financial statements include all adjustments necessary
to fairly present such information. Interim results are not
necessarily indicative of the results expected for the fiscal
year.
2. Segment Information
The company has three reportable operating segments: potash,
nitrogen and phosphate. The accounting policies of the segments are
the same as those described in Note 1. Inter-segment sales are made
under terms that approximate market value.
|
Three Months Ended June 30, 2015
|
|
Potash
|
Nitrogen
|
Phosphate
|
All Others
|
Consolidated
|
|
|
|
|
|
|
Sales - third
party
|
$
|
748
|
$
|
559
|
$
|
424
|
$
|
-
|
$
|
1,731
|
Freight,
transportation and distribution - third party
|
(59)
|
(27)
|
(38)
|
-
|
(124)
|
Net sales - third
party
|
689
|
532
|
386
|
-
|
|
Cost of goods sold -
third party
|
(272)
|
(323)
|
(301)
|
-
|
(896)
|
Margin (cost) on
inter-segment sales (1)
|
-
|
13
|
(13)
|
-
|
-
|
Gross
margin
|
417
|
222
|
72
|
-
|
711
|
Depreciation and
amortization
|
(60)
|
(47)
|
(61)
|
(5)
|
(173)
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
plant and
equipment
|
103
|
123
|
54
|
14
|
294
|
(1) Inter-segment net sales were $19.
|
|
|
|
|
|
|
|
|
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
|
(65)
|
(44)
|
(90)
|
17
|
(182)
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
plant and
equipment
|
103
|
48
|
45
|
3
|
199
|
(1) Inter-segment net sales were $33.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015
|
|
Potash
|
Nitrogen
|
Phosphate
|
All Others
|
Consolidated
|
|
|
|
|
|
|
Sales - third
party
|
$
|
1,486
|
$
|
1,041
|
$
|
869
|
$
|
-
|
$
|
3,396
|
Freight,
transportation and distribution - third party
|
(123)
|
(50)
|
(79)
|
-
|
(252)
|
Net sales - third
party
|
1,363
|
991
|
790
|
-
|
|
Cost of goods sold -
third party
|
(518)
|
(613)
|
(635)
|
-
|
(1,766)
|
Margin (cost) on
inter-segment sales (1)
|
-
|
25
|
(25)
|
-
|
-
|
Gross
margin
|
845
|
403
|
130
|
-
|
1,378
|
Depreciation and
amortization
|
(118)
|
(93)
|
(125)
|
(9)
|
(345)
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
plant and
equipment
|
214
|
183
|
90
|
35
|
522
|
(1) Inter-segment net sales were $37.
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
(117)
|
(86)
|
(168)
|
13
|
(358)
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
plant and
equipment
|
227
|
115
|
76
|
5
|
423
|
(1) Inter-segment net sales were $58.
|
|
|
|
|
|
3. 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
|
|
|
|
|
2015
|
2014
|
2015
|
2014
|
Income tax
expense
|
|
|
|
$
|
152
|
$
|
166
|
$
|
292
|
$
|
310
|
Actual effective tax
rate on ordinary earnings
|
|
|
|
26%
|
27%
|
27%
|
27%
|
Actual effective tax
rate including discrete items
|
|
|
|
27%
|
26%
|
27%
|
28%
|
Discrete tax
adjustments that impacted the tax rate
|
|
|
|
$
|
3
|
$
|
(6)
|
$
|
6
|
$
|
(4)
|
In the first quarter of 2014, a $38 discrete non-tax deductible impairment of an
available-for-sale investment was recorded. This increased the
actual effective tax rate including discrete items for the six
months ended June 30, 2014 by 1
percentage point.
4. Consolidated Statements of Cash Flow
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
June 30
|
June 30
|
|
|
2015
|
2014
|
2015
|
2014
|
Reconciliation of cash provided by operating
activities
|
|
|
|
|
Net income
|
|
$
|
417
|
$
|
472
|
$
|
787
|
$
|
812
|
Adjustments to
reconcile net income to cash provided by
|
|
|
|
|
|
operating
activities
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
173
|
182
|
345
|
358
|
|
Share-based
compensation
|
|
4
|
4
|
19
|
19
|
|
Net distributed
(undistributed) earnings of equity-accounted
|
|
|
|
|
|
|
investees
|
|
19
|
28
|
(16)
|
(3)
|
|
Impairment of
available-for-sale investment
|
|
-
|
-
|
-
|
38
|
|
Provision for
deferred income tax
|
|
47
|
64
|
72
|
110
|
|
Pension and other
post-retirement benefits
|
|
11
|
12
|
16
|
21
|
|
Asset retirement
obligations and accrued environmental costs
|
|
(11)
|
2
|
(24)
|
9
|
|
Other long-term
liabilities and miscellaneous
|
|
5
|
1
|
17
|
3
|
|
Subtotal of
adjustments
|
|
248
|
293
|
429
|
555
|
|
|
|
|
|
|
|
Changes in non-cash operating working
capital
|
|
|
|
|
|
Receivables
|
|
29
|
54
|
85
|
(104)
|
|
Inventories
|
|
2
|
(3)
|
(60)
|
17
|
|
Prepaid expenses and
other current assets
|
|
11
|
9
|
3
|
27
|
|
Payables and accrued
charges
|
|
129
|
(37)
|
113
|
20
|
|
Subtotal of changes
in non-cash operating working capital
|
|
171
|
23
|
141
|
(40)
|
Cash provided by operating activities
|
|
$
|
836
|
$
|
788
|
$
|
1,357
|
$
|
1,327
|
|
|
|
|
|
|
Supplemental cash flow disclosure
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
55
|
$
|
68
|
$
|
93
|
$
|
92
|
|
Income taxes
paid
|
|
$
|
23
|
$
|
120
|
$
|
65
|
$
|
170
|
5. Long-Term Debt
On March 26, 2015, the company
closed the issuance of $500 of 3.00
percent senior notes due April 1,
2025. The senior notes were issued under a US shelf
registration statement.
6. Share-Based Compensation
On May 12, 2015, the company's
shareholders approved the 2015 Performance Option Plan under which
the company may, after February 20,
2015 and before January 1,
2016, 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, 2015, options to purchase a
total of 3,474,900 common shares had been granted under the plan.
The weighted average fair value of options granted was $5.48 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
|
|
|
|
|
$
|
32.41
|
Expected annual
dividend per share
|
|
|
|
|
$
|
1.52
|
Expected
volatility
|
|
|
|
|
31%
|
Risk-free interest
rate
|
|
|
|
|
1.54%
|
Expected life of
options
|
|
|
|
|
5.5 years
|
Potash Corporation of Saskatchewan Inc.
|
Selected Financial Data
|
(unaudited)
|
|
|
Three Months Ended
|
Six Months Ended
|
|
June 30
|
June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Potash Sales (tonnes - thousands)
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
North
America
|
648
|
943
|
1,448
|
1,931
|
|
|
Offshore
|
1,864
|
1,582
|
3,413
|
2,905
|
|
Manufactured
Product
|
2,512
|
2,525
|
4,861
|
4,836
|
|
|
|
|
|
Potash Net Sales
|
|
|
|
|
|
(US $
millions)
|
|
|
|
|
|
|
Sales
|
$
|
748
|
$
|
747
|
$
|
1,486
|
$
|
1,418
|
|
|
Freight,
transportation and distribution
|
(59)
|
(79)
|
(123)
|
(165)
|
|
|
Net Sales
|
$
|
689
|
$
|
668
|
$
|
1,363
|
$
|
1,253
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
North
America
|
$
|
227
|
$
|
303
|
$
|
506
|
$
|
594
|
|
|
Offshore
|
460
|
362
|
848
|
649
|
|
Other miscellaneous
and purchased product
|
2
|
3
|
9
|
10
|
|
Net Sales
|
$
|
689
|
$
|
668
|
$
|
1,363
|
$
|
1,253
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
Average Realized Sales Price per MT
|
|
|
|
|
|
|
North
America
|
$
|
349
|
$
|
321
|
$
|
349
|
$
|
307
|
|
|
Offshore
|
$
|
247
|
$
|
229
|
$
|
249
|
$
|
223
|
|
|
Average
|
$
|
273
|
$
|
263
|
$
|
278
|
$
|
257
|
|
Cost of Goods Sold per MT
|
$
|
(105)
|
$
|
(102)
|
$
|
(103)
|
$
|
(111)
|
|
Gross Margin per MT
|
$
|
168
|
$
|
161
|
$
|
175
|
$
|
146
|
|
|
|
Potash Corporation of Saskatchewan Inc.
|
Selected Financial Data
|
(unaudited)
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
June 30
|
June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Average Natural Gas
Cost in Production per MMBtu
|
$
|
4.69
|
$
|
5.91
|
$
|
4.89
|
$
|
5.65
|
Nitrogen Sales (tonnes - thousands)
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
Ammonia
(1)
|
621
|
665
|
1,110
|
1,248
|
|
|
Urea
|
272
|
258
|
524
|
606
|
|
|
Solutions/Nitric
acid/Ammonium nitrate
|
739
|
740
|
1,307
|
1,438
|
|
Manufactured
Product
|
1,632
|
1,663
|
2,941
|
3,292
|
|
|
|
|
|
|
Fertilizer sales
tonnes (1)
|
583
|
551
|
971
|
1,128
|
|
Industrial/Feed sales
tonnes
|
1,049
|
1,112
|
1,970
|
2,164
|
|
Manufactured
Product
|
1,632
|
1,663
|
2,941
|
3,292
|
|
|
|
|
|
Nitrogen Net Sales
|
|
|
|
|
|
(US $
millions)
|
|
|
|
|
|
|
Sales - third
party
|
$
|
559
|
$
|
656
|
$
|
1,041
|
$
|
1,237
|
|
|
Freight,
transportation and distribution - third party
|
(27)
|
(28)
|
(50)
|
(59)
|
|
|
Net sales - third
party
|
532
|
628
|
991
|
1,178
|
|
|
Inter-segment net
sales
|
19
|
33
|
37
|
58
|
|
|
Net Sales
|
$
|
551
|
$
|
661
|
$
|
1,028
|
$
|
1,236
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
Ammonia
(2)
|
$
|
285
|
$
|
360
|
$
|
513
|
$
|
606
|
|
|
Urea
|
98
|
114
|
195
|
264
|
|
|
Solutions/Nitric
acid/Ammonium nitrate
|
161
|
180
|
295
|
344
|
|
Other miscellaneous
and purchased product (3)
|
7
|
7
|
25
|
22
|
|
Net Sales
|
$
|
551
|
$
|
661
|
$
|
1,028
|
$
|
1,236
|
|
|
|
|
|
|
Fertilizer net sales
(2)
|
$
|
204
|
$
|
234
|
$
|
337
|
$
|
447
|
|
Industrial/Feed net
sales
|
340
|
421
|
666
|
768
|
|
Other miscellaneous
and purchased product (3)
|
7
|
6
|
25
|
21
|
|
Net Sales
|
$
|
551
|
$
|
661
|
$
|
1,028
|
$
|
1,236
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
Average Realized Sales Price per MT
|
|
|
|
|
|
|
Ammonia
|
$
|
460
|
$
|
542
|
$
|
463
|
$
|
486
|
|
|
Urea
|
$
|
358
|
$
|
441
|
$
|
372
|
$
|
436
|
|
|
Solutions/Nitric
acid/Ammonium nitrate
|
$
|
218
|
$
|
243
|
$
|
226
|
$
|
239
|
|
|
Average
|
$
|
334
|
$
|
393
|
$
|
341
|
$
|
369
|
|
|
Fertilizer average
price per MT
|
$
|
350
|
$
|
424
|
$
|
347
|
$
|
396
|
|
|
Industrial/Feed
average price per MT
|
$
|
324
|
$
|
379
|
$
|
338
|
$
|
355
|
|
|
Average
|
$
|
334
|
$
|
393
|
$
|
341
|
$
|
369
|
|
Cost of Goods Sold per MT
|
$
|
(201)
|
$
|
(213)
|
$
|
(207)
|
$
|
(206)
|
|
Gross Margin per MT
|
$
|
133
|
$
|
180
|
$
|
134
|
$
|
163
|
|
|
|
|
|
(1) Includes
inter-segment ammonia sales (tonnes - thousands)
|
37
|
52
|
70
|
100
|
(2) Includes
inter-segment ammonia net sales
|
$
|
18
|
$
|
31
|
$
|
36
|
$
|
56
|
(3) Includes
inter-segment other miscellaneous and purchased product net
sales
|
$
|
1
|
$
|
2
|
$
|
1
|
$
|
2
|
|
|
|
Potash Corporation of Saskatchewan Inc.
|
Selected Financial Data
|
(unaudited)
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
June 30
|
June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Phosphate Sales (tonnes - thousands)
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
Fertilizer
|
383
|
539
|
754
|
1,041
|
|
|
Feed and
Industrial
|
296
|
310
|
576
|
582
|
|
Manufactured
Product
|
679
|
849
|
1,330
|
1,623
|
|
|
|
|
|
Phosphate Net Sales
|
|
|
|
|
|
(US $
millions)
|
|
|
|
|
|
|
Sales
|
$
|
424
|
$
|
489
|
$
|
869
|
$
|
917
|
|
|
Freight,
transportation and distribution
|
(38)
|
(51)
|
(79)
|
(100)
|
|
|
Net Sales
|
$
|
386
|
$
|
438
|
$
|
790
|
$
|
817
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
Fertilizer
|
$
|
184
|
$
|
245
|
$
|
378
|
$
|
455
|
|
|
Feed and
Industrial
|
192
|
187
|
371
|
352
|
|
Other miscellaneous
and purchased product
|
10
|
6
|
41
|
10
|
|
Net Sales
|
$
|
386
|
$
|
438
|
$
|
790
|
$
|
817
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
Average Realized Sales Price per MT
|
|
|
|
|
|
|
Fertilizer
|
$
|
480
|
$
|
455
|
$
|
501
|
$
|
437
|
|
|
Feed and
Industrial
|
$
|
647
|
$
|
603
|
$
|
644
|
$
|
605
|
|
|
Average
|
$
|
553
|
$
|
509
|
$
|
563
|
$
|
497
|
|
Cost of Goods Sold per MT
|
$
|
(450)
|
$
|
(457)
|
$
|
(468)
|
$
|
(455)
|
|
Gross Margin per MT
|
$
|
103
|
$
|
52
|
$
|
95
|
$
|
42
|
Potash Corporation of Saskatchewan Inc.
|
Selected Additional Data
|
(unaudited)
|
|
|
|
|
|
Exchange Rate (Cdn$/US$)
|
|
|
|
|
|
|
|
2015
|
2014
|
|
|
|
|
|
December
31
|
|
|
|
1.1601
|
June 30
|
|
|
1.2474
|
1.0676
|
Second-quarter
average conversion rate
|
|
|
1.2378
|
1.0997
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
June 30
|
June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Production
|
|
|
|
|
Potash production
(KCl Tonnes - thousands)
|
2,387
|
2,321
|
4,999
|
4,716
|
Potash shutdown weeks
(1)
|
5
|
3
|
5
|
5
|
Nitrogen production
(N Tonnes - thousands)
|
753
|
830
|
1,545
|
1,663
|
Phosphate production
(P2O5 Tonnes - thousands)
|
379
|
459
|
745
|
828
|
Phosphate
P2O5 operating
rate
|
80%
|
77%
|
78%
|
70%
|
|
|
|
|
|
Shareholders
|
|
|
|
|
PotashCorp's total
shareholder return
|
-3%
|
6%
|
-10%
|
17%
|
|
|
|
|
|
Customers
|
|
|
|
|
Product tonnes
involved in customer complaints (thousands)
|
3
|
2
|
21
|
15
|
|
|
|
|
|
Community
|
|
|
|
|
Taxes and royalties
($ millions) (2)
|
215
|
199
|
457
|
369
|
|
|
|
|
|
Employees
|
|
|
|
|
Percentage of senior
staff positions filled internally
|
81%
|
77%
|
78%
|
89%
|
|
|
|
|
|
Safety
|
|
|
|
|
Total site recordable
injury rate (per 200,000 work hours) (3)
|
0.85
|
1.27
|
0.88
|
1.16
|
|
|
|
|
|
Environment
|
|
|
|
|
Environmental
incidents (4)
|
5
|
6
|
10
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
December 31,
|
As at
|
|
|
2015
|
2014
|
|
|
|
|
|
Number of employees
|
|
|
|
|
|
Potash
|
|
|
2,633
|
2,534
|
|
Nitrogen
|
|
|
804
|
802
|
|
Phosphate
|
|
|
1,433
|
1,385
|
|
Other
|
|
|
439
|
415
|
|
Total
|
|
|
5,309
|
5,136
|
(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) Total site
includes PotashCorp employees, contractors and others on site (as
defined in our 2014 Annual
Integrated
Report).
|
(4) Total of
reportable quantity releases, permit excursions and provincial
reportable spills (as defined in our 2014
Annual Integrated
Report).
|
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, cash flows or financial position 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.
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
|
|
2015
|
2014
|
2015
|
2014
|
Net income
|
$
|
417
|
$
|
472
|
$
|
787
|
$
|
812
|
Finance
costs
|
50
|
48
|
99
|
95
|
Income
taxes
|
152
|
166
|
292
|
310
|
Depreciation and
amortization
|
173
|
182
|
345
|
358
|
EBITDA
|
$
|
792
|
$
|
868
|
$
|
1,523
|
$
|
1,575
|
Impairment of
available-for-sale investment
|
-
|
-
|
-
|
38
|
Adjusted EBITDA
|
$
|
792
|
$
|
868
|
$
|
1,523
|
$
|
1,613
|
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
|
|
2015
|
2014
|
2015
|
2014
|
Sales
|
$
|
1,731
|
$
|
1,892
|
$
|
3,396
|
$
|
3,572
|
Freight,
transportation and distribution
|
(124)
|
(158)
|
(252)
|
(324)
|
Net sales
|
$
|
1,607
|
$
|
1,734
|
$
|
3,144
|
$
|
3,248
|
|
|
|
|
|
Net income as a percentage of sales
|
24%
|
25%
|
23%
|
23%
|
Adjusted EBITDA margin
|
49%
|
50%
|
48%
|
50%
|
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 share
of earnings of equity-accounted 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
|
|
2015
|
2014
|
2015
|
2014
|
Cash flow prior to working capital
changes
|
$
|
665
|
$
|
765
|
$
|
1,216
|
$
|
1,367
|
Changes in non-cash
operating working capital
|
|
|
|
|
|
Receivables
|
29
|
54
|
85
|
(104)
|
|
Inventories
|
2
|
(3)
|
(60)
|
17
|
|
Prepaid expenses and
other current assets
|
11
|
9
|
3
|
27
|
|
Payables and accrued
charges
|
129
|
(37)
|
113
|
20
|
Changes in non-cash operating working
capital
|
171
|
23
|
141
|
(40)
|
Cash provided by operating activities
|
$
|
836
|
$
|
788
|
$
|
1,357
|
$
|
1,327
|
Additions to
property, plant and equipment
|
(294)
|
(199)
|
(522)
|
(423)
|
Other assets and
intangible assets
|
(10)
|
(8)
|
(15)
|
(10)
|
Changes in non-cash
operating working capital
|
(171)
|
(23)
|
(141)
|
40
|
Free cash flow
|
$
|
361
|
$
|
558
|
$
|
679
|
$
|
934
|
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.