Symbol: POT
Listed: TSX, NYSE
Key Highlights
-
Earnings of $0.38 per share1for third-quarter 2014; nine-month total of $1.33 per share
-
Third-quarter cash provided by operating activities of $574 million
-
Higher potash sales volumes for both the quarter and first nine months
-
Improved potash realizations (up $18 per tonne from second-quarter 2014)
-
Record nine-month nitrogen gross margin of $776 million
-
Full-year guidance now $1.75-$1.85 per share; previous range $1.70-$1.90
per share
SASKATOON, Oct. 23, 2014 /PRNewswire/ - Potash Corporation of Saskatchewan Inc.
(PotashCorp) reported third-quarter earnings of $0.38 per share ($317
million), bringing our total for the first nine months of 2014 to $1.33
per share ($1.1 billion). Although potash and nitrogen performance
improved over last year's third quarter, higher tax expenses and weaker
contributions from offshore equity investments weighed on results. On a
comparative basis, both the quarterly and nine-month amounts trailed
last year's totals of $0.41 per share ($356 million) and $1.77 per
share ($1.6 billion), respectively.
Gross margin increased to $589 million, significantly exceeding the $484
million generated during third-quarter 2013. For the first nine months,
gross margin of $1.9 billion trailed the $2.3 billion earned in the
same period last year - largely the result of lower potash prices and
weaker phosphate performance.
Cash from operating activities for both the quarter ($574 million) and
first nine months ($1.9 billion) were below last year's comparative
period amounts ($616 million and $2.6 billion). With declining capital
expenditures, free cash flow2 for both periods surpassed 2013 totals.
Lower contributions from our offshore investments were the result of
reduced potash earnings at these companies. 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
$24 million to our third-quarter earnings and brought the nine-month
total to $179 million. These amounts were well below the 2013
comparative period totals of $85 million and $251 million, respectively
- with the nine-month total including a dividend from Sinofert Holdings
Limited (Sinofert) in China. The market value of our investments in all
four of these publicly traded companies equated to approximately $4
billion, or $5 per PotashCorp share, at market close on October 22,
2014.
"We continue to see encouraging signs in each of our major potash
markets with a renewal of demand translating into higher sales
volumes," said PotashCorp President and Chief Executive Officer Jochen
Tilk. "Furthermore, we experienced another quarter of improved potash
pricing trends, which strengthened our earnings. Combined with internal
efforts to optimize our operations, these positive developments mark
important steps toward a stronger performance for our company."
Market Conditions
Unlike 2013, when global potash demand stalled due to market
uncertainty, this year's third quarter saw all key markets engaged.
This shift was most significant offshore, with greater demand in Asian
and Latin American markets leading to higher shipments from North
American producers. Purchasing activity in North America remained
healthy as dealers worked to position product in advance of anticipated
fall requirements.
Global potash shipments through the first nine months of 2014 were at
all-time highs. During the third quarter, typical maintenance downtime
further tightened market fundamentals and resulted in prices moving
higher in all major spot markets.
In nitrogen, strong global demand and supply constraints in key
exporting countries led to higher prices for ammonia. Improved
fundamentals contributed to higher prices for urea and UAN products
compared to the prior year, although greater supply availability in
urea caused prices to show signs of seasonal softness as the quarter
came to a close. Similarly, phosphate prices for third-quarter 2014
were stronger relative to the previous year, given healthier demand and
the influence of higher input and production costs.
Potash
Increased sales volumes raised our third-quarter potash gross margin to
$295 million, above the $228 million earned in 2013's same period.
Given that realized prices were higher through the first six months of
2013, our nine-month gross margin total of $990 million trailed the
$1.3 billion earned during the comparative period last year.
Our sales volumes continued to outpace prior-year levels, with total
shipments of 2.0 million tonnes for the quarter and 6.8 million tonnes
for the first nine months exceeding the comparative periods by 29
percent and 8 percent, respectively. For the quarter, the rebound was
most pronounced offshore where sales volumes were up 45 percent as the
comparative period in 2013 saw significantly more volatility and
uncertainty there than in the North American market. The majority of
Canpotex3 shipments were to Other Asian countries (38 percent) and Latin America
(32 percent), while India and China accounted for 14 percent and 9
percent respectively. In North America, sales volumes increased 9
percent from last year's comparative period as customers took
deliveries in anticipation of strong farmer demand to replenish crop
nutrients following an expected record harvest.
Our average realized potash price for the quarter was $281 per tonne,
trailing the $307 per tonne realized in last year's third quarter. This
decrease was the result of lower offshore prices as the sharp decline
through the final half of 2013 had yet to be fully reflected in
prior-period results. A greater proportion of sales to lower-priced
offshore markets also had a negative impact.
Improved operational efficiencies from our workforce realignment, as
well as higher production levels and a weaker Canadian dollar,
contributed to lower per-tonne cost of goods sold. While costs
reflected the usual seasonal increase due to our maintenance
turnarounds, they improved by $28 per tonne relative to the comparative
period in 2013 and $16 per tonne through the first nine months of 2014.
Nitrogen
In nitrogen, higher sales volumes and strong price realizations raised
gross margin for the quarter to $233 million. This surpassed the $178
million generated during the same period last year, raising our total
for the first nine months of 2014 to $776 million - the highest in our
history.
Improved production levels across all nitrogen facilities more than
offset losses from gas curtailments in Trinidad and raised
third-quarter sales volumes to 1.5 million tonnes, 8 percent above
third-quarter 2013. Nine-month totals reached 4.8 million tonnes,
exceeding the comparable period last year by 10 percent.
With key benchmark pricing at higher levels, our average realized price
for this year's third quarter ($356 per tonne) increased 6 percent
relative to the same period in 2013.
Cost of goods sold for the quarter was $209 per tonne, relatively flat
compared to the same period last year, as efficiencies from increased
production more than offset higher natural gas costs.
Phosphate
In phosphate, third-quarter and nine-month gross margin totals of $61
million and $135 million trailed the $78 million and $260 million
earned during the respective periods in 2013. Reduced production and
increased costs (including approximately $20 million in notable charges
during this year's third quarter) weighed on our results in this
nutrient.
The closure in July of our Suwannee River chemical plant, combined with
mechanical challenges at our White Springs facility, constrained the
number of tonnes available for sale. Our total third-quarter sales
volumes were 0.7 million tonnes, 21 percent below the comparative
period total in 2013, with production largely shifting away from
certain lower-margin fertilizer products. For the first nine months,
sales volumes of 2.3 million tonnes were below the 2.7 million tonnes
sold in 2013.
Our average realized phosphate price for third-quarter 2014 was $517 per
tonne, exceeding the $467 per tonne in last year's same period. This
increase was largely due to a greater proportion of our production
being allocated to higher-netback feed and industrial products, in
addition to improved prices for our fertilizer products because of
better market fundamentals.
Third-quarter cost of goods sold of $437 per tonne was higher than the
$384 per tonne during 2013's same period. Lower production levels
coupled with unfavorable adjustments to asset retirement obligations
($4 million), higher water treatment costs due to excessive rainfall
($8 million) and accelerated depreciation charges related to the
closure of Suwannee River ($5 million) were the primary factors.
Financial
Provincial mining and other taxes for the quarter totaled $52 million,
well above the $10 million recorded in third-quarter 2013, which
reflected significant adjustments to forecasted annual potash
production tax accruals given the rapidly changing market environment.
With a higher effective tax rate related to different income weightings
between jurisdictions and certain discrete tax adjustments, the $156
million income tax expense for the quarter significantly exceeded the
$116 million recognized in 2013's comparable period.
Market Outlook
As we move into the fourth quarter, we continue to see strong customer
engagement in all key potash markets. We anticipate global shipments
will surpass the upper end of our previous guidance, and now forecast
totals for 2014 to be in the range of 58-60 million tonnes. While
recent weakness in crop prices is expected to result in some reduction
to global crop acreage, we believe potash remains an affordable and
necessary investment for growers as they look to offset lower prices by
enhancing yields.
In North America, the fall application season is underway and product
demand remains strong. Given what we believe are especially low potash
inventories throughout the North American supply chain, distributors
are actively positioning product in advance of anticipated needs. Even
though dealers are taking these steps, we forecast that sales volumes
will slow through the fourth quarter, with the majority of PotashCorp's
shipments fulfilling previously committed summer-fill tonnes.
In Latin America, product for the key planting season is now largely in
place and we believe buyers have shifted their focus to Safrinha crop
requirements. Although customers continue to secure potash tonnage, we
expect shipments to this region will begin to reflect the typical
seasonal slowdown as the end of the year approaches. Even with this
expected slowdown, we believe annual Latin American demand will again
establish a record.
In both China and India we have seen encouraging potash consumption
trends, including increased demand for compound fertilizers with higher
potassium content. Canpotex continues to deliver product to both
markets under previous commitments and we anticipate shipments will
remain strong during the final quarter of 2014.
Potash demand in Other Asian countries (outside of China and India)
remains healthy. Stronger demand for standard product through the
second half of 2014 has translated into higher transacted prices in
recent tenders and is expected to be reflected in our realized prices
in early 2015.
Financial Outlook
As a result of these market conditions, we have increased our estimate
for potash annual sales volumes to 9.0-9.2 million tonnes.
Fourth-quarter shipments are expected to be heavily weighted towards
offshore contract markets and to result in lower average realizations.
We now anticipate potash gross margin will approximate $1.3-$1.4
billion.
We expect robust nitrogen fundamentals, especially for ammonia, will
continue through the balance of the year. While gas supply restrictions
at our Trinidad facility are now anticipated to exceed our previous
estimates, sales volumes are expected to outpace previous-year levels
and result in record nitrogen gross margin in 2014. In phosphate, we
anticipate relatively stable markets through the balance of the year.
Our sales volumes are expected to remain below those of fourth-quarter
2013 with the closure of our Suwannee River chemical plant. Given these
considerations, we now forecast our 2014 combined nitrogen and
phosphate gross margin will be in the range of $1.2-$1.3 billion.
We have revised our annual estimate for income from offshore investments
to a range of $205-$215 million to better align with projected earnings
and associated tax changes in Chile and Israel. The Chilean tax change
is also expected to impact our annual effective tax rate, which is now
anticipated to be in the range of 27-29 percent.
Based on these factors, we now expect our annual earnings range to be
$1.75-$1.85 per share. Other guidance numbers remain unchanged and are
outlined in the table below along with those noted above.
2014 Annual Guidance
|
Potash sales volumes
|
9.0-9.2 million tonnes
|
Potash gross margin
|
$1.3-$1.4 billion
|
Nitrogen and phosphate gross margin
|
$1.2-$1.3 billion
|
Capital expenditures
|
~$1.1 billion
|
Effective tax rate
|
27-29 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**
|
$205-$215 million
|
Earnings per share
|
$1.75-$1.85
|
* As a percentage of potash gross margin
** Includes income from dividends and share of equity earnings
Conclusion
"The potash market has exhibited strong growth this year, challenging
global supply and logistics," said Tilk. "We are working to ensure we
have the flexibility to respond to potash demand in 2015 - which we
expect to be another strong year. As we look ahead, our management team
is focused on enhancing the position and potential of PotashCorp for
the many stakeholders depending on our ongoing success."
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 October 23, 2014 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 Financial Position |
(in millions of US dollars except share amounts) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
| September 30, |
|
|
| December 31, |
As at
|
|
| 2014 |
|
|
| 2013 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
| $ | 152 |
|
|
$
|
628
|
|
|
Receivables
|
|
| 820 |
|
|
|
752
|
|
|
Inventories
|
|
| 690 |
|
|
|
728
|
|
|
Prepaid expenses and other current assets
|
|
| 58 |
|
|
|
81
|
|
|
| 1,720 |
|
|
|
2,189
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
| 12,428 |
|
|
|
12,233
|
|
|
Investments in equity-accounted investees
|
|
| 1,230 |
|
|
|
1,276
|
|
|
Available-for-sale investments (Note 2)
|
|
| 1,490 |
|
|
|
1,722
|
|
|
Other assets
|
|
| 351 |
|
|
|
401
|
|
|
Intangible assets
|
|
| 142 |
|
|
|
137
|
Total Assets | | $ | 17,361 |
|
|
$
|
17,958
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Short-term debt and current portion of long-term debt (Note 3)
|
| $ | 980 |
|
|
$
|
967
|
|
|
Payables and accrued charges
|
|
| 948 |
|
|
|
1,104
|
|
|
Current portion of derivative instrument liabilities
|
|
| 49 |
|
|
|
42
|
|
|
| 1,977 |
|
|
|
2,113
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
Long-term debt (Note 3)
|
|
| 3,212
|
|
|
|
2,970
|
|
|
Derivative instrument liabilities
|
|
| 107 |
|
|
|
129
|
|
|
Deferred income tax liabilities
|
|
| 2,150 |
|
|
|
2,013
|
|
|
Pension and other post-retirement benefit liabilities
|
|
| 422 |
|
|
|
410
|
|
|
Asset retirement obligations and accrued environmental costs
|
|
| 608 |
|
|
|
557
|
|
|
Other non-current liabilities and deferred credits
|
|
| 125 |
|
|
|
138
|
Total Liabilities | | | 8,601 |
|
|
|
8,330
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
Share capital
|
|
| 1,620 |
|
|
|
1,600
|
|
|
Unlimited authorization of common shares without par value; issued and
outstanding 829,695,745 and 856,116,325 at September 30, 2014 and
December 31, 2013, respectively
|
|
|
|
|
|
|
|
|
Contributed surplus
|
|
| 229 |
|
|
|
219
|
|
Accumulated other comprehensive income
|
|
| 495 |
|
|
|
673
|
|
Retained earnings
|
|
| 6,416 |
|
|
|
7,136
|
Total Shareholders' Equity | | | 8,760 |
|
|
|
9,628
|
Total Liabilities and Shareholders' Equity | | $ | 17,361 |
|
|
$
|
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 |
| Nine Months Ended |
|
| September 30 |
| September 30 |
|
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
|
|
|
Sales (Note 4)
|
| $ | 1,641 |
|
$
|
1,520
|
| $ | 5,213 |
|
$
|
5,764
|
Freight, transportation and distribution
|
|
| (141) |
|
|
(139)
|
|
| (465) |
|
|
(435)
|
Cost of goods sold
|
|
| (911) |
|
|
(897)
|
|
| (2,847) |
|
|
(2,999)
|
Gross Margin |
|
| 589 |
|
|
484
|
|
| 1,901 |
|
|
2,330
|
Selling and administrative expenses
|
|
| (49) |
|
|
(48)
|
|
| (172) |
|
|
(165)
|
Provincial mining and other taxes
|
|
| (52) |
|
|
(10)
|
|
| (175) |
|
|
(154)
|
Share of earnings of equity-accounted investees
|
|
| 20 |
|
|
57
|
|
| 85 |
|
|
174
|
Dividend income
|
|
| 7 |
|
|
31
|
|
| 100 |
|
|
85
|
Impairment of available-for-sale investment (Note 2)
|
|
| - |
|
|
-
|
|
| (38) |
|
|
-
|
Other income (expenses)
|
|
| 5 |
|
|
(9)
|
|
| 36 |
|
|
(21)
|
Operating Income |
|
| 520 |
|
|
505
|
|
| 1,737 |
|
|
2,249
|
Finance costs
|
|
| (47) |
|
|
(33)
|
|
| (142) |
|
|
(107)
|
Income Before Income Taxes |
|
| 473 |
|
|
472
|
|
| 1,595 |
|
|
2,142
|
Income taxes (Note 5)
|
|
| (156) |
|
|
(116)
|
|
| (466) |
|
|
(587)
|
Net Income |
| $ | 317 |
|
$
|
356
|
| $ | 1,129 |
|
$
|
1,555
|
|
Net Income per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
| $ | 0.38 |
|
$
|
0.41
|
| $ | 1.34 |
|
$
|
1.80
|
|
Diluted
|
| $ | 0.38 |
|
$
|
0.41
|
| $ | 1.33 |
|
$
|
1.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared per Share |
| $ | 0.35 |
|
$
|
0.35
|
| $ | 1.05 |
|
$
|
0.98
|
|
Weighted Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
| 829,506,000 |
|
|
866,108,000
|
|
| 840,837,000 |
|
|
865,707,000
|
|
Diluted
|
|
| 835,835,000 |
|
|
874,339,000
|
|
| 847,429,000 |
|
|
876,027,000
|
(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 |
|
| Nine Months Ended |
|
|
| September 30 |
|
| September 30 |
(Net of related income taxes) | |
|
| 2014 |
| 2013 |
|
|
| 2014 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
| $ | 317 |
$
|
356
|
|
| $ | 1,129 |
|
$
|
1,555
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that will not be reclassified to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gain on defined benefit plans (1)
|
|
|
| - |
|
-
|
|
|
| - |
|
|
150
|
|
Items that have been or may be subsequently reclassified to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale investments (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value loss during the period
|
|
|
| (229) |
|
(267)
|
|
|
| (194) |
|
|
(737)
|
|
|
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value loss during the period (3)
|
|
|
| (6) |
|
-
|
|
|
| (7) |
|
|
-
|
|
|
|
Reclassification to income of net loss (4)
|
|
|
| 7 |
|
6
|
|
|
| 20 |
|
|
25
|
|
|
Other
|
|
|
| (1) |
|
3
|
|
|
| 3 |
|
|
1
|
Other Comprehensive Loss |
|
|
| (229) |
|
(258)
|
|
|
| (178) |
|
|
(561)
|
Comprehensive Income |
|
| $ | 88 |
$
| 98
|
|
| $
| 951 |
|
$
|
994
|
(1) Net of income taxes of $NIL (2013 - $NIL) for the three months ended
September 30, 2014 and $NIL (2013 - $(87)) for the nine months ended
September 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 $3 (2013 - $NIL) for the three months
ended September 30, 2014 and $4 (2013 - $NIL) for the nine months ended
September 30, 2014.
|
(4) Net of income taxes of $(3) (2013 - $(4)) for the three months ended
September 30, 2014 and $(11) (2013 - $(14)) for the nine months ended
September 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 |
|
|
|
|
|
|
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, 2013 |
$
|
1,600
|
|
$
|
219
|
|
$
|
780
|
|
$
|
(105)
|
|
$
|
(2)
|
|
$
|
673
|
|
$
|
7,136
|
|
$
|
9,628
|
Net income
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,129
|
|
|
1,129
|
Other comprehensive (loss) income
|
|
-
|
|
|
-
|
|
|
(194)
|
|
|
13
|
|
|
3
|
|
|
(178)
|
|
|
-
|
|
|
(178)
|
Share repurchase
|
|
(53)
|
|
|
(2)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(976)
|
|
|
(1,031)
|
Dividends declared
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(873)
|
|
|
(873)
|
Effect of share-based compensation
including issuance of common shares
|
|
43
|
|
|
12
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
55
|
Shares issued for dividend
reinvestment plan
|
|
30
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
30
|
Balance - September 30, 2014 | $ | 1,620 |
| $ | 229 |
|
$
|
586
|
|
$
|
(92)
|
|
$
|
1
|
| $ | 495 |
| $ | 6,416 |
| $ | 8,760 |
(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 |
| Nine Months Ended |
| September 30 |
| September 30 |
|
| 2014 |
| 2013 |
|
| 2014 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
Net income
| $ | 317 |
$
|
356
|
| $ | 1,129 |
|
$
|
1,555
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to cash provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
| 161 |
|
149
|
|
| 519 |
|
|
489
|
|
Share-based compensation
|
| 3 |
|
4
|
|
| 22 |
|
|
25
|
|
Net distributed (undistributed) earnings of equity-accounted investees
|
| 54
|
|
(55)
|
|
| 51
|
|
|
(62)
|
|
Impairment of available-for-sale investment (Note 2)
|
| - |
|
-
|
|
| 38 |
|
|
-
|
|
Provision for deferred income tax
|
| 32 |
|
58
|
|
| 142 |
|
|
311
|
|
Pension and other post-retirement benefits
|
| 2 |
|
12
|
|
| 23 |
|
|
(10)
|
|
Asset retirement obligations and accrued environmental costs
|
| 7 |
|
(12)
|
|
| 16 |
|
|
(16)
|
|
Other long-term liabilities and miscellaneous
|
| 7 |
|
6
|
|
| 10 |
|
|
69
|
|
Subtotal of adjustments
|
| 266 |
|
162
|
|
| 821 |
|
|
806
|
|
|
|
|
|
|
|
|
|
|
|
| Changes in non-cash operating working capital |
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
| 24 |
|
96
|
|
| (80) |
|
|
162
|
|
Inventories
|
| 7 |
|
(12)
|
|
| 24 |
|
|
29
|
|
Prepaid expenses and other current assets
|
| (6) |
|
(17)
|
|
| 21 |
|
|
(4)
|
|
Payables and accrued charges
|
| (34) |
|
31
|
|
| (14) |
|
|
8
|
|
Subtotal of changes in non-cash operating working capital
|
| (9) |
|
98
|
|
| (49) |
|
|
195
|
Cash provided by operating activities |
| 574 |
|
616
|
|
| 1,901 |
|
|
2,556
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
| (303) |
|
(360)
|
|
| (726) |
|
|
(1,210)
|
Other assets and intangible assets
|
| (2) |
|
2
|
|
| (12) |
|
|
(8)
|
Cash used in investing activities |
| (305) |
|
(358)
|
|
| (738) |
|
|
(1,218)
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
|
Proceeds from long-term debt obligations
|
| - |
|
-
|
|
| 737 |
|
|
-
|
Repayment of and finance costs on long-term debt obligations
|
| - |
|
-
|
|
| (500) |
|
|
(254)
|
Proceeds from (repayment of) short-term debt obligations
|
| 55 |
|
113
|
|
| 14 |
|
|
(256)
|
Dividends
|
| (281) |
|
(290)
|
|
| (857) |
|
|
(700)
|
Repurchase of common shares
|
| - |
|
(166)
|
|
| (1,065) |
|
|
(166)
|
Issuance of common shares
|
| 2 |
|
10
|
|
| 32 |
|
|
31
|
Cash used in financing activities |
| (224) |
|
(333)
|
|
| (1,639) |
|
|
(1,345)
|
Increase (Decrease) in Cash and Cash Equivalents |
| 45 |
|
(75)
|
|
| (476) |
|
|
(7)
|
Cash and Cash Equivalents, Beginning of Period |
| 107 |
|
630
|
|
| 628 |
|
|
562
|
Cash and Cash Equivalents, End of Period | $ | 152 |
$
|
555
|
| $ | 152 |
|
$
|
555
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
Cash
| $ | 63 |
$
|
59
|
| $ | 63 |
|
$
|
59
|
|
Short-term investments
|
| 89 |
|
496
|
|
| 89 |
|
|
496
|
| $ | 152 |
$
|
555
|
| $ | 152 |
|
$
|
555
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosure
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
| $ | 40 |
$
|
23
|
| $ | 132 |
|
$
|
123
|
|
Income taxes paid
| $ | 122 |
$
|
6
|
| $ | 292 |
|
$
|
113
|
(See Notes to the Condensed Consolidated Financial Statements)
|
Potash Corporation of Saskatchewan Inc.
Notes to the Condensed Consolidated Financial Statements
For the Three and Nine Months Ended September 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 October 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)
|
Increase in fair value subsequent to recognition of impairment
|
|
|
11
|
|
|
|
11
|
|
|
|
11
|
|
|
-
|
Balance - September 30, 2014 |
| $ | 221 |
|
| $ | (358) |
|
| $ | 21 |
| $ | (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.
During the third quarter of 2014, the company classified as current the
$500 aggregate principal amount of 3.750 percent senior notes due
September 30, 2015.
4. 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 September 30, 2014 |
|
|
| Potash |
|
| Nitrogen |
|
| Phosphate |
|
| All Others |
|
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales - third party
|
| $ | 633 |
| $ | 562 |
| $ | 446 |
| $ | - |
| $ | 1,641 |
Freight, transportation and distribution - third party
|
|
| (64) |
|
| (30) |
|
| (47) |
|
| - |
|
| (141) |
Net sales - third party
|
|
| 569 |
|
| 532 |
|
| 399 |
|
| - |
|
|
|
Cost of goods sold - third party
|
|
| (274) |
|
| (314) |
|
| (323) |
|
| - |
|
| (911) |
Margin (cost) on inter-segment sales (1) |
|
| - |
|
| 15 |
|
| (15) |
|
| - |
|
| - |
Gross margin
|
|
| 295 |
|
| 233 |
|
| 61 |
|
| - |
|
| 589 |
Depreciation and amortization in cost of goods sold
|
|
| (48) |
|
| (42) |
|
| (66) |
|
| - |
|
| (156) |
Cash flows for additions to property, plant and equipment
|
|
| 138 |
|
| 94 |
|
| 65 |
|
| 6 |
|
| 303 |
(1) Inter-segment net sales were $25.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2013 |
|
|
| Potash |
|
| Nitrogen |
|
| Phosphate |
|
| All Others |
|
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales - third party
|
|
$
|
539
|
|
$
|
493
|
|
$
|
488
|
|
$
|
-
|
|
$
|
1,520
|
Freight, transportation and distribution - third party
|
|
|
(57)
|
|
|
(26)
|
|
|
(56)
|
|
|
-
|
|
|
(139)
|
Net sales - third party
|
|
|
482
|
|
|
467
|
|
|
432
|
|
|
-
|
|
|
|
Cost of goods sold - third party
|
|
|
(254)
|
|
|
(304)
|
|
|
(339)
|
|
|
-
|
|
|
(897)
|
Margin (cost) on inter-segment sales (1) |
|
|
-
|
|
|
15
|
|
|
(15)
|
|
|
-
|
|
|
-
|
Gross margin
|
|
|
228
|
|
|
178
|
|
|
78
|
|
|
-
|
|
|
484
|
Depreciation and amortization in cost of goods sold
|
|
|
(36)
|
|
|
(41)
|
|
|
(69)
|
|
|
-
|
|
|
(146)
|
Cash flows for additions to property, plant and equipment
|
|
|
259
|
|
|
40
|
|
|
56
|
|
|
5
|
|
|
360
|
(1) Inter-segment net sales were $31.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2014 |
|
|
| Potash |
|
| Nitrogen |
|
| Phosphate |
|
| All Others |
|
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales - third party
|
| $ | 2,051 |
| $ | 1,799 |
| $ | 1,363 |
| $ | - |
| $ | 5,213 |
Freight, transportation and distribution - third party
|
|
| (229) |
|
| (89) |
|
| (147) |
|
| - |
|
| (465) |
Net sales - third party
|
|
| 1,822 |
|
| 1,710 |
|
| 1,216 |
|
| - |
|
|
|
Cost of goods sold - third party
|
|
| (832) |
|
| (979) |
|
| (1,036) |
|
| - |
|
| (2,847) |
Margin (cost) on inter-segment sales (1) |
|
| - |
|
| 45 |
|
| (45) |
|
| - |
|
| - |
Gross margin
|
|
| 990 |
|
| 776 |
|
| 135 |
|
| - |
|
| 1,901 |
Depreciation and amortization in cost of goods sold
|
|
| (165) |
|
| (128) |
|
| (234) |
|
| - |
|
| (527) |
Cash flows for additions to property, plant and equipment
|
|
| 365 |
|
| 209 |
|
| 141 |
|
| 11 |
|
| 726 |
(1) Inter-segment net sales were $83.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, 2013 |
|
|
| Potash |
|
| Nitrogen |
|
| Phosphate |
|
| All Others |
|
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales - third party
|
|
$
|
2,399
|
|
$
|
1,781
|
|
$
|
1,584
|
|
$
|
-
|
|
$
|
5,764
|
Freight, transportation and distribution - third party
|
|
|
(196)
|
|
|
(78)
|
|
|
(161)
|
|
|
-
|
|
|
(435)
|
Net sales - third party
|
|
|
2,203
|
|
|
1,703
|
|
|
1,423
|
|
|
-
|
|
|
|
Cost of goods sold - third party
|
|
|
(858)
|
|
|
(1,018)
|
|
|
(1,123)
|
|
|
-
|
|
|
(2,999)
|
Margin (cost) on inter-segment sales (1) |
|
|
-
|
|
|
40
|
|
|
(40)
|
|
|
-
|
|
|
-
|
Gross margin
|
|
|
1,345
|
|
|
725
|
|
|
260
|
|
|
-
|
|
|
2,330
|
Depreciation and amortization in cost of goods sold
|
|
|
(137)
|
|
|
(121)
|
|
|
(214)
|
|
|
-
|
|
|
(472)
|
Cash flows for additions to property, plant and equipment
|
|
|
872
|
|
|
112
|
|
|
178
|
|
|
48
|
|
|
1,210
|
(1) Inter-segment net sales were $111.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. 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 |
|
|
|
| Nine Months Ended |
|
|
| September 30 |
|
|
|
| September 30 |
|
|
|
|
| 2014 |
|
|
|
| 2013 |
|
|
|
| 2014 |
|
|
|
| 2013 |
Income tax expense
|
|
| $ |
| 156 |
|
|
$
|
|
116
|
|
| $ |
| 466 |
|
|
$
|
|
587
|
Actual effective tax rate on ordinary earnings
|
|
|
|
| 28% |
|
|
|
|
25%
|
|
|
|
| 27% |
|
|
|
|
26%
|
Actual effective tax rate including discrete items
|
|
|
|
| 33% |
|
|
|
|
25%
|
|
|
|
| 29% |
|
|
|
|
27%
|
Discrete tax adjustments that impacted the tax rate
|
|
| $ |
| 25 |
|
|
$
|
|
-
|
|
| $ |
| 21 |
|
|
$
|
|
37
|
Significant items to note include the following:
-
The actual effective tax rate on ordinary earnings for the three and
nine months ended September 30, 2014 increased compared to the same
periods last year due to different income weightings between
jurisdictions.
-
In third-quarter 2014, a deferred tax expense of $11 was recorded as a
result of a Chilean income tax rate increase.
-
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 nine
months ended September 30, 2014 by 1 percent.
-
In the first nine months of 2013, a tax expense of $9 (recovery of $7 in
the third 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 |
| Nine Months Ended |
|
| September 30 |
| September 30 |
|
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Potash Sales (tonnes - thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
| 789 |
|
|
721
|
|
| 2,720 |
|
|
2,349
|
|
|
Offshore
|
|
| 1,221 |
|
|
843
|
|
| 4,126 |
|
|
3,986
|
|
Manufactured Product
|
|
| 2,010 |
|
|
1,564
|
|
| 6,846 |
|
|
6,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potash Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
| $ | 633 |
|
$
|
539
|
| $ | 2,051 |
|
$
|
2,399
|
|
|
Freight, transportation and distribution
|
|
| (64) |
|
|
(57)
|
|
| (229) |
|
|
(196)
|
|
|
Net Sales
|
| $ | 569 |
|
$
|
482
|
| $ | 1,822 |
|
$
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
| $ | 272 |
|
$
|
240
|
| $ | 866 |
|
$
|
923
|
|
|
Offshore
|
|
| 293 |
|
|
240
|
|
| 942 |
|
|
1,271
|
|
Other miscellaneous and purchased product
|
|
| 4 |
|
|
2
|
|
| 14 |
|
|
9
|
|
Net Sales
|
| $ | 569 |
|
$
|
482
|
| $ | 1,822 |
|
$
|
2,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average Realized Sales Price per MT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
| $ | 344 |
|
$
|
333
|
| $ | 318 |
|
$
|
393
|
|
|
Offshore
|
| $ | 240 |
|
$
|
285
|
| $ | 228 |
|
$
|
319
|
|
|
Average
|
| $ | 281 |
|
$
|
307
|
| $ | 264 |
|
$
|
346
|
| Cost of Goods Sold per MT |
| $ | (131) |
|
$
|
(159)
|
| $ | (117) |
|
$
|
(133)
|
| Gross Margin per MT |
| $ | 150 |
|
$
|
148
|
| $ | 147 |
|
$
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potash Corporation of Saskatchewan Inc. |
Selected Financial Data |
(unaudited) |
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
|
| September 30 |
| September 30 |
|
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Natural Gas Cost in Production per MMBtu
|
| $ | 5.49 |
|
$
|
4.96
|
| $ | 5.61 |
|
$
|
5.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nitrogen Sales (tonnes - thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonia (1) |
|
| 528 |
|
|
512
|
|
| 1,776 |
|
|
1,620
|
|
|
Urea
|
|
| 248 |
|
|
218
|
|
| 854 |
|
|
800
|
|
|
Solutions/Nitric acid/Ammonium nitrate
|
|
| 773 |
|
|
700
|
|
| 2,211 |
|
|
1,978
|
|
Manufactured Product
|
|
| 1,549 |
|
|
1,430
|
|
| 4,841 |
|
|
4,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fertilizer sales tonnes (1) |
|
| 571 |
|
|
463
|
|
| 1,699 |
|
|
1,361
|
|
Industrial/Feed sales tonnes
|
|
| 978 |
|
|
967
|
|
| 3,142 |
|
|
3,037
|
|
Manufactured Product
|
|
| 1,549 |
|
|
1,430
|
|
| 4,841 |
|
|
4,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nitrogen Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales - third party
|
| $ | 562 |
|
$
|
493
|
| $ | 1,799 |
|
$
|
1,781
|
|
|
Freight, transportation and distribution - third party
|
|
| (30) |
|
|
(26)
|
|
| (89) |
|
|
(78)
|
|
|
Net sales - third party
|
|
| 532 |
|
|
467
|
|
| 1,710 |
|
|
1,703
|
|
|
Inter-segment net sales
|
|
| 25 |
|
|
31
|
|
| 83 |
|
|
111
|
|
|
Net Sales
|
| $ | 557 |
|
$
|
498
|
| $ | 1,793 |
|
$
|
1,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonia (2) |
| $ | 269 |
|
$
|
239
|
| $ | 875 |
|
$
|
899
|
|
|
Urea
|
|
| 100 |
|
|
82
|
|
| 364 |
|
|
347
|
|
|
Solutions/Nitric acid/Ammonium nitrate
|
|
| 182 |
|
|
158
|
|
| 526 |
|
|
489
|
|
Other miscellaneous and purchased product (3) |
|
| 6 |
|
|
19
|
|
| 28 |
|
|
79
|
|
Net Sales
|
| $ | 557 |
|
$
|
498
|
| $ | 1,793 |
|
$
|
1,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fertilizer net sales (2) |
| $ | 193 |
|
$
|
155
|
| $ | 640 |
|
$
|
566
|
|
Industrial/Feed net sales
|
|
| 357 |
|
|
324
|
|
| 1,125 |
|
|
1,169
|
|
Other miscellaneous and purchased product (3) |
|
| 7 |
|
|
19
|
|
| 28 |
|
|
79
|
|
Net Sales
|
| $ | 557 |
|
$
|
498
|
| $ | 1,793 |
|
$
|
1,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average Realized Sales Price per MT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ammonia
|
| $ | 509 |
|
$
|
468
|
| $ | 493 |
|
$
|
555
|
|
|
Urea
|
| $ | 402 |
|
$
|
376
|
| $ | 426 |
|
$
|
433
|
|
|
Solutions/Nitric acid/Ammonium nitrate
|
| $ | 236 |
|
$
|
226
|
| $ | 238 |
|
$
|
247
|
|
|
Average
|
| $ | 356 |
|
$
|
335
|
| $ | 365 |
|
$
|
395
|
|
|
Fertilizer average price per MT
|
| $ | 339 |
|
$
|
335
|
| $ | 377 |
|
$
|
416
|
|
|
Industrial/Feed average price per MT
|
| $ | 365 |
|
$
|
335
|
| $ | 358 |
|
$
|
385
|
|
|
Average
|
| $ | 356 |
|
$
|
335
|
| $ | 365 |
|
$
|
395
|
| Cost of Goods Sold per MT |
| $ | (209) |
|
$
|
(212)
|
| $ | (207) |
|
$
|
(232)
|
| Gross Margin per MT |
| $ | 147 |
|
$
|
123
|
| $ | 158 |
|
$
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes inter-segment ammonia sales (tonnes - thousands)
|
|
| 41 |
|
|
57
|
|
| 141 |
|
|
136
|
(2) Includes inter-segment ammonia net sales
|
| $ | 25 |
|
$
|
29
|
| $ | 81 |
|
$
|
79
|
(3) Includes inter-segment other miscellaneous and purchased product net
sales
|
| $ | - |
|
$
|
2
|
| $ | 2 |
|
$
|
32
|
|
Potash Corporation of Saskatchewan Inc. |
Selected Financial Data |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
| Nine Months Ended |
|
|
|
|
| September 30 |
|
|
|
| September 30 |
|
|
|
|
| 2014 |
|
|
|
| 2013 |
|
|
|
| 2014 |
|
|
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phosphate Sales (tonnes - thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fertilizer
|
|
|
|
| 445 |
|
|
|
|
634
|
|
|
|
| 1,486 |
|
|
|
|
1,859
|
|
|
Feed and Industrial
|
|
|
|
| 280 |
|
|
|
|
279
|
|
|
|
| 862 |
|
|
|
|
887
|
|
Manufactured Product
|
|
|
|
| 725 |
|
|
|
|
913
|
|
|
|
| 2,348 |
|
|
|
|
2,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phosphate Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(US $ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
| $ |
| 446 |
|
|
$
|
|
488
|
|
| $ |
| 1,363 |
|
|
$
|
|
1,584
|
|
|
Freight, transportation and distribution
|
|
|
|
| (47) |
|
|
|
|
(56)
|
|
|
|
| (147) |
|
|
|
|
(161)
|
|
|
Net Sales
|
|
| $ |
| 399 |
|
|
$
|
|
432
|
|
| $ |
| 1,216 |
|
|
$
|
|
1,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fertilizer
|
|
| $ |
| 201 |
|
|
$
|
|
250
|
|
| $ |
| 656 |
|
|
$
|
|
835
|
|
|
Feed and Industrial
|
|
|
|
| 174 |
|
|
|
|
176
|
|
|
|
| 526 |
|
|
|
|
568
|
|
Other miscellaneous and purchased product
|
|
|
|
| 24 |
|
|
|
|
6
|
|
|
|
| 34 |
|
|
|
|
20
|
|
Net Sales
|
|
| $ |
| 399 |
|
|
$
|
|
432
|
|
| $ |
| 1,216 |
|
|
$
|
|
1,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufactured Product
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average Realized Sales Price per MT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fertilizer
|
|
| $ |
| 452 |
|
|
$
|
|
395
|
|
| $ |
| 441 |
|
|
$
|
|
449
|
|
|
Feed and Industrial
|
|
| $ |
| 621 |
|
|
$
|
|
631
|
|
| $ |
| 610 |
|
|
$
|
|
640
|
|
|
Average
|
|
| $ |
| 517 |
|
|
$
|
|
467
|
|
| $ |
| 503 |
|
|
$
|
|
511
|
| Cost of Goods Sold per MT |
|
| $ |
| (437) |
|
|
$
|
|
(384)
|
|
| $ |
| (449) |
|
|
$
|
|
(420)
|
| Gross Margin per MT |
|
| $ |
| 80 |
|
|
$
|
|
83
|
|
| $ |
| 54 |
|
|
$
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potash Corporation of Saskatchewan Inc. |
Selected Additional Data |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Rate (Cdn$/US$) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| |
|
| 2014 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
|
|
|
|
|
|
|
|
1.0636
|
September 30
|
|
|
|
|
|
|
|
| 1.1208 |
|
|
1.0285
|
Third-quarter average conversion rate
|
|
|
|
|
|
|
|
| 1.0832 |
|
|
1.0376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
|
| September 30 |
|
| September 30 |
|
|
| 2014 |
|
| 2013 |
|
| 2014 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
|
|
|
|
|
|
Potash production (KCl Tonnes - thousands)
|
|
| 1,453 |
|
|
1,150
|
|
| 6,169 |
|
|
5,852
|
Potash shutdown weeks (1) |
|
| 9 |
|
|
12
|
|
| 14 |
|
|
32
|
Nitrogen production (N Tonnes - thousands)
|
|
| 787 |
|
|
705
|
|
| 2,450 |
|
|
2,155
|
Phosphate production (P2O5 Tonnes - thousands)
|
|
| 431 |
|
|
533
|
|
| 1,259 |
|
|
1,553
|
Phosphate P2O5 operating rate |
|
| 83% |
|
|
90%
|
|
| 74% |
|
|
87%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
PotashCorp's total shareholder return
|
|
| -8% |
|
|
-17%
|
|
| 8% |
|
|
-21%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
|
|
|
|
|
|
|
|
|
|
|
Product tonnes involved in customer complaints (thousands)
|
|
| 9 |
|
|
4
|
|
| 24 |
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community |
|
|
|
|
|
|
|
|
|
|
|
|
Taxes and royalties ($ millions) (2) |
|
| 190 |
|
|
83
|
|
| 559 |
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees |
|
|
|
|
|
|
|
|
|
|
|
|
Annualized turnover rate (excluding retirements) (3) |
|
| 7% |
|
|
5%
|
|
| 12% |
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Safety |
|
|
|
|
|
|
|
|
|
|
|
|
Total site recordable injury rate (per 200,000 work hours) (4) |
|
| 1.32 |
|
|
1.35
|
|
| 1.20 |
|
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environment |
|
|
|
|
|
|
|
|
|
|
|
|
Environmental incidents (5) |
|
| 8 |
|
|
3
|
|
| 19 |
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
|
| December 31, |
As at
|
|
|
|
|
|
|
|
| 2014 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of employees (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Potash
|
|
|
|
|
|
|
|
| 2,488 |
|
|
2,912
|
|
Nitrogen
|
|
|
|
|
|
|
|
| 796 |
|
|
789
|
|
Phosphate
|
|
|
|
|
|
|
|
| 1,361 |
|
|
1,637
|
|
Other
|
|
|
|
|
|
|
|
| 417 |
|
|
449
|
|
Total
|
|
|
|
|
|
|
|
| 5,062 |
|
|
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) Total site includes PotashCorp employees, contractors and others on site
(as defined in our 2013 Annual Integrated Report).
|
(5) Total of reportable quantity releases, permit excursions and provincial
reportable spills (as defined in our 2013 Annual Integrated Report).
|
(6) Totals as at 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 |
|
|
|
| Nine Months Ended |
|
|
|
| September 30 |
|
|
|
| September 30 |
|
|
|
| 2014 |
|
|
|
| 2013 |
|
|
|
| 2014 |
|
|
|
| 2013 |
Net income |
| $ |
| 317 |
|
|
$
|
|
356
|
|
| $ |
| 1,129 |
|
|
$
|
|
1,555
|
Finance costs
|
|
|
| 47 |
|
|
|
|
33
|
|
|
|
| 142 |
|
|
|
|
107
|
Income taxes
|
|
|
| 156 |
|
|
|
|
116
|
|
|
|
| 466 |
|
|
|
|
587
|
Depreciation and amortization
|
|
|
| 161 |
|
|
|
|
149
|
|
|
|
| 519 |
|
|
|
|
489
|
EBITDA |
| $ |
| 681 |
|
|
$
|
|
654
|
|
| $ |
| 2,256 |
|
|
$
|
|
2,738
|
Impairment of available-for-sale investment
|
|
|
| - |
|
|
|
|
-
|
|
|
|
| 38 |
|
|
|
|
-
|
Adjusted EBITDA |
| $ |
| 681 |
|
|
$
|
|
654
|
|
| $ |
| 2,294 |
|
|
$
|
|
2,738
|
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 |
|
|
|
| Nine Months Ended |
|
|
|
|
| September 30 |
|
|
|
| September 30 |
|
|
|
|
| 2014 |
|
|
|
| 2013 |
|
|
|
| 2014 |
|
|
|
| 2013 |
Sales |
|
| $ |
| 1,641 |
|
|
$
|
|
1,520
|
|
| $ |
| 5,213 |
|
|
$
|
|
5,764
|
Freight, transportation and distribution
|
|
|
|
| (141) |
|
|
|
|
(139)
|
|
|
|
| (465) |
|
|
|
|
(435)
|
Net sales |
|
| $ |
| 1,500 |
|
|
$
|
|
1,381
|
|
| $ |
| 4,748 |
|
|
$
|
|
5,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income as a percentage of sales |
|
|
|
| 19% |
|
|
|
|
23%
|
|
|
|
| 22% |
|
|
|
|
27%
|
Adjusted EBITDA margin |
|
|
|
| 45% |
|
|
|
|
47%
|
|
|
|
| 48% |
|
|
|
|
51%
|
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 |
|
|
|
| Nine Months Ended |
|
|
|
|
| September 30 |
|
|
|
| September 30 |
|
|
|
|
| 2014 |
|
|
|
| 2013 |
|
|
|
| 2014 |
|
|
|
| 2013 |
Cash flow prior to working capital changes |
|
| $ |
| 583 |
|
|
$
|
|
518
|
|
| $ |
| 1,950 |
|
|
$
|
|
2,361
|
Changes in non-cash operating working capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
|
| 24 |
|
|
|
|
96
|
|
|
|
| (80) |
|
|
|
|
162
|
|
Inventories
|
|
|
|
| 7 |
|
|
|
|
(12)
|
|
|
|
| 24 |
|
|
|
|
29
|
|
Prepaid expenses and other current assets
|
|
|
|
| (6) |
|
|
|
|
(17)
|
|
|
|
| 21 |
|
|
|
|
(4)
|
|
Payables and accrued charges
|
|
|
|
| (34) |
|
|
|
|
31
|
|
|
|
| (14) |
|
|
|
|
8
|
Changes in non-cash operating working capital |
|
|
|
| (9) |
|
|
|
|
98
|
|
|
|
| (49) |
|
|
|
|
195
|
Cash provided by operating activities |
|
| $ |
| 574 |
|
|
$
|
|
616
|
|
| $ |
| 1,901 |
|
|
$
|
|
2,556
|
Additions to property, plant and equipment
|
|
|
|
| (303) |
|
|
|
|
(360)
|
|
|
|
| (726) |
|
|
|
|
(1,210)
|
Other assets and intangible assets
|
|
|
|
| (2) |
|
|
|
|
2
|
|
|
|
| (12) |
|
|
|
|
(8)
|
Changes in non-cash operating working capital
|
|
|
|
| 9 |
|
|
|
|
(98)
|
|
|
|
| 49 |
|
|
|
|
(195)
|
Free cash flow |
|
| $ |
| 278 |
|
|
$
|
|
160
|
|
| $ |
| 1,212 |
|
|
$
|
|
1,143
|
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.