Potash Corp sees BPC breakup as short term
Potash Corp of Saskatchewan Chief Executive Bill Doyle said on Wednesday he doesn't expect the breakup of Belarusian Potash Co. (BPC) to last long, and he disputed predictions that the split would spur a steep potash price drop.
Doyle, who heads up the world's largest potash producer by capacity, was making his first public comments since Russia's Uralkali OAO exited BPC last week in a dispute with partner Belaruskali.
BPC's breakup and Uralkali's decision to maximize production spooked investors in the potash sector, where the two dominant players, BPC and North American potash export company Canpotex Ltd, have long matched supply to demand to support the crop nutrient's prices.
"My guess is (the breakup will last) shorter rather than longer, and the reason I say that is logic tends to prevail," Doyle said in a question-and-answer session streamed on the company's website. "I don't find too many people that self-destruct intentionally,"
Doyle said he does not see changes ahead for Canpotex and said there are no plans at Potash Corp to alter strategy. Potash Corp, Agrium Inc., and Mosaic Co. are the members of Canpotex.
Doyle dismissed Uralkali's prediction that prices could drop 25 percent to less than $300 per tonne as a result of its split from BPC and its push to ramp up production, saying that Potash Corp has seen no sign of that in the past week and doesn't expect to see it.
Emphasizing volume sales over price is not new to the potash industry, he said, going as far back as the 1970s, and the producers that do so "end up hurting themselves more than anyone else".
Shares of Potash Corp rose 1.1 percent $30.87 in Toronto and 0.6 percent to $29.58 in New York on Wednesday. The stock is down 22 percent in New York since BPC's breakup on July 30.
Standard & Poor's Ratings Services lowered its outlook on Potash Corp to "negative" from "stable" on Tuesday, reflecting the possibility that the potash sector could become more competitive in the short term. It left Potash's corporate credit rating unchanged at A-.
"We are not concerned," Doyle said, adding he doesn't expect issues around potash to affect other crop nutrients such as nitrogen and phosphate. "We have been through many bigger battles than this... No one is going to put this company out of business."
Potash Corp's dividend and share buyback program are not in jeopardy, Doyle said, and he expects Canpotex to eventually agree on a new potash supply contract with China's Sinofert Holdings Ltd.
The previous contract, which traditionally sets a floor price for globally traded potash, expired after the first half.
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