Potash Corp to cut workforce by 18% as prices slump
Potash Corp of Saskatchewan Inc., the world's biggest fertilizer company, will slash its workforce by 18 percent as it struggles with slumping demand and weak prices for the crop nutrient.
"The need to become more globally competitive is what's behind all of these workforce reductions," Chief Executive Bill Doyle told Reuters in an interview.
"Our belief in the fundamentals of the business has not changed at all. This is simply an adjustment to the current and foreseeable market conditions."
Potash Corp has often acted as the swing producer in the global market, trimming production and putting workers on furlough when demand is weak. The severity of the permanent job cuts, especially in its core potash operations, indicates it is girding for a long-term slump in the potash market.
Potash Corp shares edged up 0.3 percent to $31.82 in premarket trading in New York.
Doyle said Potash Corp will not cut its dividend, which was raised in May, and has no immediate plans to scale down a share buyback program. The company also intends to complete the 10-year, $8-billion expansion of its Canadian potash mines, slated to wrap up in the next year.
Potash Corp reported its weakest quarter in three years in October and cut its full-year earnings forecast more than expected.
Potash prices have been sliding since mid-summer, when the biggest global producer, Russia's Uralkali OAO, quit its export partnership with Belaruskali of Belarus and said it would seek to maximize sales volume.
Doyle said he had "no idea" when or if Uralkali and Belaruskali will return to a strategy targeting higher prices and reverse what he has called "the single dumbest thing" he has ever seen.
The turmoil in the usually tightly controlled potash industry, dominated by Uralkali and North America's Canpotex Ltd export group, has caused buyers to head for the sidelines to await further price reductions.
"While the (job cuts) announcement blames soft demand in developing markets, we believe the real culprit is the BPC (Uralkali-Belaruskali) break-up and the resulting price declines in both (phosphate and potash)," BGC analyst Mark Gulley said in a note to clients.
Typically, potash demand grows 3 percent annually, but it has been flat since 2007 due to the recession, Doyle said.
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