Listed: TSX, NYSE
Symbol: POT
Key Highlights
- Second-quarter earnings of $0.24
per share,1 including a previously disclosed
$0.08 per share income tax provision
recovery
- Cash provided by operating activities of $328 million
- Canpotex sales entitlement increased to approximately 55
percent beginning the second half of 2017, following successful
Rocanville capacity audit
- Expect merger of equals with Agrium to close late in the third
quarter of 2017
- Full-year 2017 guidance maintained at $0.45-$0.65 per share, including merger-related
costs of $0.06 per share
CEO Commentary
"In the second quarter, we continued to
benefit from stronger potash market conditions and our improved
cost position in this nutrient," said PotashCorp President and
Chief Executive Officer Jochen Tilk.
"Robust potash demand – especially in offshore markets, where
Canpotex2 achieved its second highest first-half
shipment total – supported a constructive market and is expected to
carry through the remainder of the year. We anticipate more subdued
nitrogen and phosphate markets in the second half to offset
strength in potash and, as a result, have maintained our full-year
earnings guidance range.
"During the second quarter, we safely and
successfully completed our capacity audit at Rocanville. The results exceeded our
expectations as nameplate capacity reached 6.5 million tonnes,
increasing our Canpotex sales entitlement to approximately 55
percent effective July 1. This result
is a significant accomplishment that would not have been possible
without the steadfast commitment of our Rocanville employees to safe and efficient
production. With our lowest cost operation now ramped up, we are on
track to reduce potash cost of goods sold by $10 per tonne this year.
"We continued to work through regulatory and
integration planning processes related to our merger with
Agrium3 and we expect the transaction to close late in
the third quarter of 2017. We also announced that following the
expected closure, the newly formed company will be named
Nutrien.4 We are excited for the opportunities of the
combined company and the value Nutrien can provide to all of its
stakeholders," said Tilk.
SASKATOON, July 27, 2017 /CNW/ - Potash Corporation of
Saskatchewan Inc. (PotashCorp) reported second-quarter earnings of
$0.24 per share ($201 million), which included an $0.08 per share income tax provision recovery,
bringing the first-half total to $0.42 per share ($350
million). Results for both the quarter and the first six
months surpassed the $0.14 per share
($121 million) and $0.23 per share ($196
million) earned in the respective periods of 2016.
Gross margin for the quarter ($255 million) and first six months ($523 million) exceeded 2016 levels ($243 million and $477
million, respectively), as higher potash contributions more
than offset weaker nitrogen and phosphate prices. Despite higher
earnings in the second quarter and first six months of 2017, cash
from operating activities of $328
million and $551 million
trailed last year's totals, primarily due to changes in accounts
receivable and the non-cash impact of our income tax provision
recovery.
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 $51
million to our second-quarter earnings, bringing first-half
totals to $97 million. Totals for
both the second quarter and first half exceeded the respective
amounts generated last year, which also included a dividend from
Sinofert Holdings Limited (Sinofert) in China. The market value of our investments in
these four publicly traded companies was approximately $4.8 billion, or $6
per PotashCorp share, at market close on July 26, 2017.
Market Conditions
Global potash markets continued to
improve through the second quarter as agronomic need and
affordability supported demand, especially offshore, and
contributed to modestly higher prices. In North America, a good spring application
season led to healthy shipment levels – although below the
particularly robust second quarter of 2016 – and reduced inventory
throughout the supply chain. Offshore imports to the US reached
record levels through the first half, resulting in lower domestic
producer sales volumes.
In nitrogen, the startup of new global capacity
had a negative impact on market fundamentals during the quarter.
Notwithstanding strong consumption in most key regions, new supply
outpaced growth in demand and pressured prices. As this supply
transition unfolded, US urea prices fell to multi-year lows while
ammonia and UAN were pushed to their lowest prices of the year.
Despite strong demand in Latin America, global phosphate markets
remained subdued in the second quarter, largely due to increased
supply and lower shipments to India. In this environment, prices for most
phosphate fertilizer products declined slightly. While prices for
feed and industrial products were modestly higher than in the first
quarter, they remained well below prior-year levels, due primarily
to increased supply from offshore producers.
Potash
Potash gross margin of $213 million for the second quarter and
$373 million for the first six months
of 2017 reflected increased prices, reduced per-tonne costs and
higher offshore sales volumes. Results in both periods were well
above the respective totals of $123
million and $211 million
generated in 2016.
Sales volumes for both the quarter (2.4 million
tonnes) and first half (4.5 million tonnes) exceeded those for the
comparable periods in 2016 (2.1 million tonnes and 3.9 million
tonnes, respectively). While North American volumes were 23 percent
lower than in the comparatively strong second quarter of 2016,
offshore shipments increased by 34 percent, led by strong demand in
Brazil. The majority of Canpotex's
volumes for the quarter were sold to Latin America (40 percent) and Other Asian
markets outside of China and
India (40 percent), while
India and China accounted for 10 percent and 3 percent,
respectively.
Our average realized potash price of $174 per tonne for the second quarter reflected a
continued recovery in global spot prices and exceeded the
$154 per tonne realized in the same
period last year ($169 per tonne in
2016's second quarter excluding PotashCorp's share of Canpotex's
Prince Rupert project exit
costs).
Manufactured cost of goods sold for the quarter
averaged $82 per tonne – including
$23 per tonne of depreciation – down
from $91 per tonne in the same period
last year due to a greater share of production from our lower-cost
mines, particularly Rocanville.
Nitrogen
Weaker nitrogen prices and higher US natural
gas costs resulted in gross margin of $68
million for the quarter and $165
million for the first six months, trailing last year's
comparable periods by 48 percent and 30 percent, respectively. Our
US operations accounted for 51 percent of our nitrogen gross margin
for the quarter, with our Trinidad
operations providing the remainder.
Sales volumes of 1.6 million tonnes for the
quarter were 6 percent higher than those in the same period of
2016, largely due to stronger fertilizer demand. For the first
half, shipments of 3.2 million tonnes were relatively flat compared
to 2016.
Our average realized price of $223 per tonne during the quarter declined from
$244 per tonne in the same period
last year as increased global supply weighed on benchmark pricing,
pulling down realizations for nearly all our products.
Cost of goods sold for the quarter averaged
$182 per tonne, up from $160 per tonne in 2016's second quarter, driven
primarily by higher US natural gas costs.
Phosphate
In phosphate, weaker prices more than offset
the benefit of lower input costs, resulting in negative gross
margin of $26 million for the second
quarter and negative $15 million for
the first half of 2017. Both totals trailed those of the prior year
and included non-cash notable charges of $28
million for the quarter and $32
million for the first half of 2017, which were lower than
the comparative periods in 2016.
Sales volumes of 0.6 million tonnes for the
quarter were higher than the 0.5 million tonnes sold in the prior
year's second quarter, mainly due to stronger North American
agriculture demand, while first-half deliveries of 1.2 million
tonnes were flat when compared to the same period in 2016.
Our average realized phosphate price for the
quarter was $407 per tonne, down from
$485 per tonne in the same period
last year as prices for nearly all products decreased – most
notably, liquid fertilizers.
Cost of goods sold was $452 per tonne for the second quarter, lower than
$506 per tonne in the same period of
2016, primarily due to lower input costs and non-cash notable
charges.
Financial
Provincial mining and other taxes for the
quarter totaled $44 million, higher
than the $26 million in last year's
corresponding period, predominantly due to higher potash
prices.
A $68 million
non-cash income tax provision recovery relating to provincial tax
changes that will be realized in future years led to an overall
income tax recovery for the second quarter of $62 million, compared to a $24 million income tax expense realized in 2016's
second quarter.
Potash Market Outlook
We expect strong potash demand
to continue in the second half of 2017 and have increased our
anticipated global shipment range to 62-65 million tonnes for 2017,
well above the 60 million tonnes shipped last year.
In North
America, we had a very successful summer fill program and
are now fully committed through the end of September. We believe
supportive crop prices and the need to replenish soil nutrients
will support consumption through the remainder of the year and
continue to anticipate total demand to this market of 9.3-9.8
million tonnes, similar to 2016.
In Latin
America, supportive crop economics are expected to maintain
a positive demand environment for the remainder of 2017. Following
robust first-half deliveries, we now expect record full-year
shipments of 12.0-12.5 million tonnes.
With recently settled contracts in China – including those with Canpotex – we
expect strong deliveries in the second half of 2017. We now
estimate demand for the full year in the range of 15.5-16.5 million
tonnes, above 2016 levels, as nutrient affordability and a move to
balanced fertility continue to drive robust consumption.
In India, we
anticipate that a good monsoon, agronomic need and increased
acreage will offset the impact of lower subsidies. Following strong
first-half shipments, we now expect deliveries of 4.0-4.5 million
tonnes for the year, above 2016 levels.
In Other Asian markets, we expect healthy palm
oil prices, improved moisture conditions and favorable economics
for other key crops to support demand for the remainder of 2017. We
maintain our estimated shipment range of 9.0-9.5 million tonnes for
the full year, higher than last year's total.
Financial Outlook
Taking the above
market factors into consideration, we have raised the bottom end of
our guidance range for potash sales volumes (9.0-9.4 million
tonnes) and increased the range for potash gross margin
($650-$850 million). Our estimates
include the benefit of the Rocanville capacity audit results, which
increased our Canpotex sales entitlement to approximately 55
percent for the second half of 2017.
In nitrogen, we expect recent capacity additions
to continue to pressure prices and alter trade flows, keeping
margins below those of 2016. In phosphate, we anticipate that
challenging market fundamentals will continue to impact prices and
our profitability. Given these considerations, we have lowered the
top end of our combined nitrogen and phosphate gross margin range
and now estimate $150-$300 million in
2017.
With lower annual earnings forecast in the US, we
now anticipate an income tax recovery and have adjusted our
effective income tax rate to a negative range of 3-6 percent.
We now expect higher provincial mining and other
taxes in the range of 19-22 percent of potash gross margin for
2017, primarily due to an increased profit tax forecast resulting
from lower estimated capital depreciation.
Income from equity investments is now anticipated
in the range of $170-$190 million,
above the previous guidance range, largely due to the strength of
SQM earnings.
Due to the recent strength of the Canadian
dollar, we have revised our full-year foreign exchange rate
assumption to CDN$1.32 per US
dollar.
Based on these factors, we have maintained our
full-year 2017 earnings guidance of $0.45-$0.65 per share, including merger-related
costs now expected to be $0.06 per
share.
All annual guidance numbers – including those
noted above – are outlined in the table below.
2017
Guidance
|
Annual earnings per
share
|
$0.45-$0.65
|
Potash sales
volumes
|
9.0-9.4 million
tonnes
|
Potash gross
margin
|
$650-$850
million
|
Nitrogen and
phosphate gross margin
|
$150-$300
million
|
Capital
expenditures*
|
~$600
million
|
Effective tax
rate
|
Negative 3-6
percent
|
Provincial mining and
other taxes**
|
19-22
percent
|
Selling and
administrative expenses
|
$220-$230
million
|
Finance
costs
|
$225-$235
million
|
Income from equity
investments***
|
$170-$190
million
|
Annual foreign
exchange rate assumption
|
CDN$1.32 per
US$
|
Annual EPS
sensitivity to foreign exchange
|
US$ strengthens vs.
CDN$ by $0.02 = +$0.01 EPS
|
Annual EPS
sensitivity to potash prices
|
Increases by $20 per
tonne = +$0.14 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. Canpotex Limited
(Canpotex), the offshore marketing company for PotashCorp and two
other Saskatchewan potash
producers.
3. Agrium Inc. (Agrium)
4. Nutrien
Ltd. (Nutrien)
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
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.
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
applicable 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,"
"forecast," "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 the completion of the proposed merger of
equals with Agrium, 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 our actual results
or events to differ materially from those expressed in
forward-looking statements including, but not limited to, the
following: our proposed merger of equals transaction with Agrium,
including the failure to satisfy all required conditions, including
required regulatory approvals, or to satisfy or obtain waivers with
respect to all other closing conditions in a timely manner and on
favorable terms or at all; the occurrence of any event, change or
other circumstances that could give rise to the termination of the
arrangement agreement; certain costs that we may incur in
connection with the proposed merger of equals; certain restrictions
in the arrangement agreement on our ability to take action outside
the ordinary course of business without the consent of Agrium; the
effect of the announcement of the proposed merger of equals on our
ability to retain customers, suppliers and personnel and on our
operating future business and operations generally; risks related
to diversion of management time from ongoing business operations
due to the proposed merger of equals; failure to realize the
anticipated benefits of the proposed merger of equals and to
successfully integrate Agrium and PotashCorp; the risk that our
credit ratings may be downgraded or there may be adverse conditions
in the credit markets; any significant impairment of the carrying
value of certain assets; 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 and petrochemical markets; changes in
competitive pressures, including pricing pressures; risks and
uncertainties related to any operating and workforce changes made
in response to our industry and the markets we serve, including
mine and inventory shutdowns; adverse or uncertain economic
conditions and changes in credit and financial markets; economic
and political uncertainty around the world; changes in capital
markets; the results of sales contract negotiations within major
markets; unexpected or adverse weather conditions; risks related to
reputational loss; the occurrence of a major safety incident;
inadequate insurance coverage for a significant liability; our
inability to obtain relevant permits for our operations;
catastrophic events or malicious acts, including terrorism; certain
complications that may arise in our mining process, including water
inflows; risks and uncertainties related to our international
operations and assets; our ownership of non-controlling equity
interests in other companies; our prospects to reinvest capital in
strategic opportunities and acquisitions; risks associated with
natural gas and other hedging activities; security risks related to
our information technology systems; imprecision in reserve
estimates; costs and availability of transportation and
distribution for our raw materials and products, including railcars
and ocean freight; changes in, and the effects of, government
policies and regulations; earnings and the decisions of taxing
authorities which could affect our effective tax rates; increases
in the price or reduced availability of the raw materials that we
use; our ability to attract, develop, engage and retain skilled
employees; strikes or other forms of work stoppage or slowdowns;
rates of return on, and the risks associated with, our investments
and capital expenditures; timing and impact of capital
expenditures; the impact of further innovation; adverse
developments in pending or future legal proceedings or government
investigations; and violations of our governance and compliance
policies. 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, 2016 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 27, 2017 at 1:00 pm Eastern Time.
Telephone
Conference:
|
Dial-in
numbers:
|
|
- From Canada
and the US
|
1-866-438-1126
|
|
- From
Elsewhere
|
1-778-328-1919
|
|
|
|
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
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Sales (Note
2)
|
$
|
1,120
|
$
|
1,053
|
$
|
2,232
|
$
|
2,262
|
Freight,
transportation and distribution
|
(116)
|
(118)
|
(249)
|
(251)
|
Cost of goods
sold
|
(749)
|
(692)
|
(1,460)
|
(1,534)
|
Gross
Margin
|
255
|
243
|
523
|
477
|
Selling and
administrative expenses
|
(48)
|
(55)
|
(98)
|
(108)
|
Provincial mining and
other taxes
|
(44)
|
(26)
|
(78)
|
(57)
|
Share of earnings of
equity-accounted investees
|
49
|
30
|
88
|
49
|
Dividend
income
|
4
|
16
|
12
|
16
|
Impairment of
available-for-sale investment
|
-
|
(10)
|
-
|
(10)
|
Other (expenses)
income (Note 3)
|
(16)
|
1
|
(26)
|
(9)
|
Operating
Income
|
200
|
199
|
421
|
358
|
Finance
costs
|
(61)
|
(54)
|
(120)
|
(106)
|
Income Before
Income Taxes
|
139
|
145
|
301
|
252
|
Income taxes (Note
4)
|
62
|
(24)
|
49
|
(56)
|
Net
Income
|
$
|
201
|
$
|
121
|
$
|
350
|
$
|
196
|
|
|
|
|
|
Net Income per
Share
|
|
|
|
|
|
Basic
|
$
0.24
|
$ 0.14
|
$
0.42
|
$ 0.23
|
|
Diluted
|
$
0.24
|
$ 0.14
|
$
0.42
|
$ 0.23
|
|
|
|
|
|
Dividends Declared
per Share
|
$
|
0.10
|
$
|
0.25
|
$
|
0.20
|
$
|
0.50
|
|
|
|
|
|
Weighted Average
Shares Outstanding
|
|
|
|
|
|
Basic
|
840,060,000
|
839,285,000
|
839,959,000
|
838,202,000
|
|
Diluted
|
840,124,000
|
839,786,000
|
840,111,000
|
839,028,000
|
|
|
|
|
|
|
(See Notes to the
Condensed Consolidated Financial Statements)
|
Potash Corporation
of Saskatchewan Inc.
|
Condensed
Consolidated Statements of Comprehensive Income
(Loss)
|
(in millions of US
dollars)
|
(unaudited)
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30
|
June
30
|
(Net of related
income taxes)
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Net
Income
|
$
|
201
|
$
|
121
|
$
|
350
|
$
|
196
|
Other comprehensive
income (loss)
|
|
|
|
|
|
Items that will not
be reclassified to net income:
|
|
|
|
|
|
|
Net actuarial loss on
defined benefit plans (1)
|
-
|
(103)
|
-
|
(103)
|
|
Items that have been
or may be subsequently reclassified to net
income:
|
|
|
|
|
|
|
Available-for-sale
investments (2)
|
|
|
|
|
|
|
|
Net fair value gain
(loss) during the period
|
60
|
(104)
|
93
|
(103)
|
|
|
Cash flow
hedges
|
|
|
|
|
|
|
|
Net fair value (loss)
gain during the period
(3)
|
(2)
|
9
|
(7)
|
3
|
|
|
|
Reclassification to
income of net loss (4)
|
11
|
13
|
19
|
28
|
|
|
Other
|
-
|
1
|
3
|
2
|
Other
Comprehensive Income (Loss)
|
69
|
(184)
|
108
|
(173)
|
Comprehensive
Income (Loss)
|
$
|
270
|
$
|
(63)
|
$
|
458
|
$
|
23
|
|
|
|
|
|
(1) Net of
income taxes of $NIL (2016 - $60) for the three and six months
ended June 30, 2017.
|
(2)
Available-for-sale investments are comprised of shares in Israel
Chemicals Ltd. ("ICL"), Sinofert Holdings Limited ("Sinofert") and
other.
|
(3) Cash
flow hedges are comprised of natural gas derivative instruments and
treasury lock derivatives and were net of income taxes of $1
(2016 - $(5)) for the three months ended June 30, 2017 and $4
(2016 - $(2)) for the six months ended June 30, 2017.
|
(4) Net of
income taxes of $(6) (2016 - $(8)) for the three months ended June
30, 2017 and $(11) (2016 - $(16)) for the six months ended
June 30, 2017.
|
|
(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
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
Net income
|
$
|
201
|
$
|
121
|
$
|
350
|
$
|
196
|
Adjustments to
reconcile net income to cash provided by
|
|
|
|
|
|
operating activities
(Note 5)
|
151
|
259
|
295
|
465
|
Changes in non-cash
operating working capital (Note 5)
|
(24)
|
44
|
(94)
|
(49)
|
Cash provided by
operating activities
|
328
|
424
|
551
|
612
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
Additions to
property, plant and equipment
|
(128)
|
(211)
|
(261)
|
(457)
|
Other assets and
intangible assets
|
(2)
|
(9)
|
(1)
|
(9)
|
Cash used in
investing activities
|
(130)
|
(220)
|
(262)
|
(466)
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
Finance costs on
long-term debt obligations
|
-
|
(2)
|
(1)
|
(4)
|
(Repayment of)
proceeds from short-term debt obligations
|
(81)
|
68
|
(60)
|
404
|
Dividends
|
(82)
|
(206)
|
(164)
|
(519)
|
Issuance of common
shares
|
-
|
5
|
1
|
25
|
Cash used in
financing activities
|
(163)
|
(135)
|
(224)
|
(94)
|
Increase in Cash
and Cash Equivalents
|
35
|
69
|
65
|
52
|
Cash and Cash
Equivalents, Beginning of Period
|
62
|
74
|
32
|
91
|
Cash and Cash
Equivalents, End of Period
|
$
|
97
|
$
|
143
|
$
|
97
|
$
|
143
|
|
|
|
|
|
Cash and cash
equivalents comprised of:
|
|
|
|
|
|
Cash
|
$
|
28
|
$
|
31
|
$
|
28
|
$
|
31
|
|
Short-term
investments
|
69
|
112
|
69
|
112
|
|
$
|
97
|
$
|
143
|
$
|
97
|
$
|
143
|
|
|
|
|
|
(See Notes to the
Condensed Consolidated Financial Statements)
|
|
|
|
|
Potash Corporation
of Saskatchewan Inc.
|
Condensed
Consolidated Statement of Changes in Shareholders'
Equity
|
(in millions of US
dollars)
|
(unaudited)
|
|
|
|
|
Accumulated Other
Comprehensive (Loss) Income
|
|
|
|
|
Net
unrealized
|
|
|
Total
|
|
|
|
|
|
gain on
|
Net (loss)
gain
|
|
Accumulated
|
|
|
|
|
|
available-
|
on
derivatives
|
|
Other
|
|
|
|
Share
|
Contributed
|
for-sale
|
designated
as
|
|
Comprehensive
|
Retained
|
Total
|
|
Capital
|
Surplus
|
investments
|
cash flow
hedges
|
Other
|
(Loss)
Income
|
Earnings
|
Equity
|
|
|
|
|
|
|
|
|
|
Balance - December
31, 2016
|
$
|
1,798
|
$
|
222
|
$
|
43
|
$
|
(60)
|
$
|
(8)
|
$
|
(25)
|
$
|
6,204
|
$
|
8,199
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
350
|
350
|
Other comprehensive
income
|
-
|
-
|
93
|
12
|
3
|
108
|
-
|
108
|
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
-
|
(167)
|
(167)
|
Effect of share-based
compensation
|
|
|
|
|
|
|
|
|
|
including issuance of
common shares
|
2
|
3
|
-
|
-
|
-
|
-
|
-
|
5
|
Shares issued for
dividend
|
|
|
|
|
|
|
|
|
|
reinvestment
plan
|
3
|
-
|
-
|
-
|
-
|
-
|
-
|
3
|
Balance - June 30,
2017
|
$
|
1,803
|
$
|
225
|
$
|
136
|
$
|
(48)
|
$
|
(5)
|
$
|
83
|
$
|
6,387
|
$
|
8,498
|
|
(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
|
2017
|
2016
|
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
97
|
$
|
32
|
|
|
Receivables
|
499
|
545
|
|
|
Inventories
|
845
|
768
|
|
|
Prepaid expenses and
other current assets
|
65
|
49
|
|
1,506
|
1,394
|
|
Non-current
assets
|
|
|
|
|
Property, plant and
equipment
|
13,190
|
13,318
|
|
|
Investments in
equity-accounted investees
|
1,178
|
1,173
|
|
|
Available-for-sale
investments
|
1,033
|
940
|
|
|
Other
assets
|
239
|
250
|
|
|
Intangible
assets
|
173
|
180
|
Total
Assets
|
$
|
17,319
|
$
|
17,255
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
|
Short-term debt and
current portion of long-term debt
|
$
824
|
$ 884
|
|
|
Payables and accrued
charges
|
664
|
772
|
|
|
Current portion of
derivative instrument liabilities
|
42
|
41
|
|
1,530
|
1,697
|
|
Non-current
liabilities
|
|
|
|
|
Long-term
debt
|
3,708
|
3,707
|
|
|
Derivative instrument
liabilities
|
42
|
56
|
|
|
Deferred income tax
liabilities
|
2,375
|
2,463
|
|
|
Pension and other
post-retirement benefit liabilities
|
475
|
443
|
|
|
Asset retirement
obligations and accrued environmental costs
|
640
|
643
|
|
|
Other non-current
liabilities and deferred credits
|
51
|
47
|
Total
Liabilities
|
8,821
|
9,056
|
|
|
|
Shareholders'
Equity
|
|
|
|
Share
capital
|
1,803
|
1,798
|
|
|
Unlimited
authorization of common shares without par value; issued and
outstanding 840,086,574 and 839,790,379 at June 30, 2017 and
December
31, 2016, respectively
|
|
|
|
Contributed
surplus
|
225
|
222
|
|
Accumulated other
comprehensive income (loss)
|
83
|
(25)
|
|
Retained
earnings
|
6,387
|
6,204
|
Total
Shareholders' Equity
|
8,498
|
8,199
|
Total Liabilities
and Shareholders' Equity
|
$
|
17,319
|
$
|
17,255
|
|
(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,
2017
(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 a crop nutrient
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 2016 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 2016 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 2017.
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. 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, 2017
|
|
|
Potash
|
Nitrogen
|
Phosphate
|
All
Others
|
Consolidated
|
|
Sales - third
party
|
$
|
461
|
$
|
384
|
$
|
275
|
$
|
-
|
$
|
1,120
|
Freight,
transportation and distribution - third party
|
(50)
|
(32)
|
(34)
|
|
(116)
|
Net sales - third
party
|
411
|
352
|
241
|
-
|
|
Cost of goods sold -
third party
|
(198)
|
(292)
|
(259)
|
|
(749)
|
Margin (cost) on
inter-segment sales (1)
|
-
|
8
|
(8)
|
-
|
-
|
Gross
margin
|
213
|
68
|
(26)
|
-
|
255
|
|
|
|
|
|
|
Items included in
cost of goods sold,
|
|
|
|
|
|
|
selling and
administrative or other expenses:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
(56)
|
(47)
|
(56)
|
(9)
|
(168)
|
|
|
|
|
|
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
|
plant and
equipment
|
36
|
40
|
51
|
1
|
128
|
|
(1)
Inter-segment net sales were $17.
|
|
Three Months Ended
June 30, 2016
|
|
Potash
|
Nitrogen
|
Phosphate
|
All
Others
|
Consolidated
|
|
|
|
|
|
|
Sales - third
party
|
$
|
393
|
$
|
383
|
$
|
277
|
$
|
-
|
$
|
1,053
|
Freight,
transportation and distribution - third party
|
(64)
|
(27)
|
(27)
|
-
|
(118)
|
Net sales - third
party
|
329
|
356
|
250
|
-
|
|
Cost of goods sold -
third party
|
(206)
|
(236)
|
(250)
|
-
|
(692)
|
Margin (cost) on
inter-segment sales (1)
|
-
|
10
|
(10)
|
-
|
-
|
Gross
margin
|
123
|
130
|
(10)
|
-
|
243
|
|
|
|
|
|
|
Items included in
cost of goods sold,
|
|
|
|
|
|
|
selling and
administrative or other expenses:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
(52)
|
(52)
|
(55)
|
(9)
|
(168)
|
|
|
Share of Canpotex's
(2) Prince Rupert
|
|
|
|
|
|
|
|
|
project exit
costs
|
(33)
|
-
|
-
|
-
|
(33)
|
|
|
|
|
|
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
|
plant and
equipment
|
74
|
65
|
45
|
27
|
211
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Inter-segment net sales were $17.
|
|
|
|
|
|
(2)
Canpotex Limited ("Canpotex").
|
|
|
|
|
|
|
Six Months Ended
June 30, 2017
|
|
Potash
|
Nitrogen
|
Phosphate
|
All
Others
|
Consolidated
|
|
|
|
|
|
|
Sales - third
party
|
$
|
890
|
$
|
759
|
$
|
583
|
$
|
-
|
$
|
2,232
|
Freight,
transportation and distribution - third party
|
(114)
|
(64)
|
(71)
|
|
(249)
|
Net sales - third
party
|
776
|
695
|
512
|
-
|
|
Cost of goods sold -
third party
|
(403)
|
(549)
|
(508)
|
|
(1,460)
|
Margin (cost) on
inter-segment sales (1)
|
-
|
19
|
(19)
|
|
-
|
Gross
margin
|
373
|
165
|
(15)
|
-
|
523
|
|
|
|
|
|
|
Items included in
cost of goods sold,
|
|
|
|
|
|
|
selling and
administrative or other expenses:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
(111)
|
(97)
|
(114)
|
(18)
|
(340)
|
|
|
|
|
|
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
|
plant and
equipment
|
81
|
73
|
102
|
5
|
261
|
|
|
|
|
|
|
(1)
Inter-segment net sales were $39.
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2016
|
|
|
Potash
|
Nitrogen
|
Phosphate
|
All
Others
|
Consolidated
|
|
|
|
|
|
|
Sales - third
party
|
$
|
774
|
$
|
811
|
$
|
677
|
$
|
-
|
$
|
2,262
|
Freight,
transportation and distribution - third party
|
(123)
|
(60)
|
(68)
|
-
|
(251)
|
Net sales - third
party
|
651
|
751
|
609
|
-
|
|
Cost of goods sold -
third party
|
(440)
|
(534)
|
(560)
|
-
|
(1,534)
|
Margin (cost) on
inter-segment sales (1)
|
-
|
20
|
(20)
|
-
|
-
|
Gross
margin
|
211
|
237
|
29
|
-
|
477
|
|
|
|
|
|
|
Items included in
cost of goods sold,
|
|
|
|
|
|
|
selling and
administrative or other expenses:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
(100)
|
(106)
|
(112)
|
(17)
|
(335)
|
|
|
Share of Canpotex's
Prince Rupert
|
|
|
|
|
|
|
|
|
project exit
costs
|
(33)
|
-
|
-
|
-
|
(33)
|
|
|
Termination benefit
costs
|
(32)
|
-
|
-
|
-
|
(32)
|
|
|
Impairment of
property, plant and equipment
|
-
|
-
|
(27)
|
-
|
(27)
|
|
|
|
|
|
|
Cash outflows for
additions to property,
|
|
|
|
|
|
|
|
plant and
equipment
|
165
|
134
|
88
|
70
|
457
|
|
|
|
|
|
|
(1)
Inter-segment net sales were $34.
|
|
|
|
|
|
3. Other (Expenses) Income
|
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
|
|
|
|
|
June
30
|
June
30
|
|
|
|
|
|
|
2017
|
2016
|
2017
|
2016
|
Foreign exchange
loss
|
|
|
|
|
|
$
|
(9)
|
$
|
(2)
|
$
|
(8)
|
$
|
(19)
|
Proposed Transaction
costs (Note 7)
|
|
|
|
|
|
(14)
|
-
|
(23)
|
-
|
Other
income
|
|
|
|
|
|
7
|
3
|
5
|
10
|
|
|
|
|
|
|
$
|
(16)
|
$
|
1
|
$
|
(26)
|
$
|
(9)
|
4. Income Taxes
A separate estimated average annual effective tax rate was
determined for each taxing jurisdiction and applied individually to
the pre-tax income of each jurisdiction.
|
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30
|
June
30
|
|
2017
|
2016
|
2017
|
2016
|
Income tax (recovery)
expense
|
$
|
(62)
|
$
|
24
|
$
|
(49)
|
$
|
56
|
Actual effective tax
rate on ordinary earnings
|
7%
|
17%
|
9%
|
21%
|
Actual effective tax
rate including discrete items
|
-44%
|
16%
|
-16%
|
22%
|
Discrete tax
adjustments that impacted the tax rate
|
$
|
(71)
|
$
|
(4)
|
$
|
(76)
|
$
|
-
|
|
|
|
|
|
Significant items to
note include the following:
|
|
|
|
|
•The actual effective
tax rate on ordinary earnings for the three and six months ended
June 30, 2017 decreased compared to the same periods last year
primarily due to significantly lower forecasted annual earnings in
the United States.
|
•In the second
quarter of 2017, a discrete deferred tax recovery of $68 was
recorded as a result of a Saskatchewan income tax rate
decrease.
|
5. Consolidated Statements of Cash Flow
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30
|
June
30
|
|
2017
|
2016
|
2017
|
2016
|
Reconciliation of
cash provided by operating activities
|
|
|
|
|
Net income
|
$
|
201
|
$
|
121
|
$
|
350
|
$
|
196
|
Adjustments to
reconcile net income to cash provided by
|
|
|
|
|
|
operating
activities
|
|
|
|
|
|
|
Depreciation and
amortization
|
168
|
168
|
340
|
335
|
|
|
Impairment of
property, plant and equipment
|
-
|
-
|
-
|
27
|
|
|
Net distributed
(undistributed) earnings of equity-accounted
|
|
|
|
|
|
|
|
investees
|
35
|
61
|
(2)
|
44
|
|
|
Impairment of
available-for-sale investment
|
-
|
10
|
-
|
10
|
|
|
Share-based
compensation
|
2
|
3
|
7
|
5
|
|
|
Recovery of deferred
income tax
|
(82)
|
(7)
|
(96)
|
(1)
|
|
|
Pension and other
post-retirement benefits
|
18
|
13
|
33
|
28
|
|
|
Asset retirement
obligations and accrued environmental costs
|
3
|
9
|
2
|
25
|
|
|
Other long-term
liabilities and miscellaneous
|
7
|
2
|
11
|
(8)
|
|
|
Subtotal of
adjustments
|
151
|
259
|
295
|
465
|
|
|
|
|
|
|
Changes in
non-cash operating working capital
|
|
|
|
|
|
Receivables
|
23
|
186
|
38
|
145
|
|
Inventories
|
(9)
|
(51)
|
(58)
|
(43)
|
|
Prepaid
expenses and other current assets
|
(9)
|
5
|
(14)
|
3
|
|
Payables and accrued
charges
|
(29)
|
(96)
|
(60)
|
(154)
|
|
Subtotal of changes
in non-cash operating working capital
|
(24)
|
44
|
(94)
|
(49)
|
Cash provided by
operating activities
|
$
|
328
|
$
|
424
|
$
|
551
|
$
|
612
|
|
|
|
|
|
Supplemental cash
flow disclosure
|
|
|
|
|
|
Interest
paid
|
$
|
74
|
$
|
64
|
$
|
103
|
$
|
93
|
|
Income taxes
paid
|
$
|
38
|
$
|
35
|
$
|
53
|
$
|
46
|
6. Share-Based Compensation
During the three and six months ended June 30, 2017, the company issued stock options
and performance share units ("PSUs") to eligible employees under
the 2016 Long-Term Incentive Plan ("LTIP"). Information on stock
options and PSUs is summarized below:
|
|
LTIP
|
Expense for all
employee share-based compensation plans
|
|
|
Units Granted
in 2017
|
Units
Outstanding as at
June 30, 2017
|
Three Months
Ended
June
30
|
Six Months
Ended
June
30
|
|
|
|
|
2017
|
2016
|
2017
|
2016
|
Stock
options
|
|
1,482,829
|
4,511,906
|
$
|
2
|
$
|
5
|
$
|
5
|
$
|
6
|
Share-settled
PSUs
|
|
555,918
|
959,700
|
1
|
2
|
2
|
2
|
Cash-settled
PSUs
|
|
857,774
|
1,538,826
|
-
|
2
|
2
|
4
|
|
|
|
|
$
|
3
|
$
|
9
|
$
|
9
|
$
|
12
|
Grant date fair value per unit for stock options and
share-settled PSUs granted during the first quarter of 2017 was
$4.36 and $19.93, respectively.
Stock Options
Under the LTIP, stock options generally vest and become
exercisable on the third anniversary of the grant date, subject to
continuous employment or retirement, and have a maximum term of 10
years. The weighted average fair value of stock options granted was
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
|
$
|
18.71
|
Expected annual
dividend per share
|
$
|
0.40
|
Expected
volatility
|
29%
|
Risk-free interest
rate
|
1.67%
|
Expected life of
options
|
5.7
years
|
Performance Share Units
PSUs granted under the LTIP in 2017 vest based on the
achievement of performance metrics, over three years, comprising 1)
the relative ranking of the company's total shareholder return
compared with a specified peer group using a Monte Carlo simulation
option pricing model and 2) the outcome of the company's cash flow
return on investment compared with its weighted average cost of
capital. Compensation cost is measured based on 1) the grant date
fair value of the units, adjusted for the company's best estimate
of the outcome of non-market vesting conditions(1) at
the end of each period for share-settled PSUs and 2) period-end
fair value of the awards for cash-settled PSUs. PSUs granted under
the LTIP settle in shares for grantees who are subject to the
company's share ownership guidelines and in cash for all other
grantees.
(1)
The company's cash flow return on investment compared with its
weighted average cost of capital is a non-market vesting condition
as performance is not tied to the company's share price or relative
share price.
|
7. Proposed Transaction with Agrium Inc.
On September 11, 2016, the company
entered into an Arrangement Agreement with Agrium Inc. ("Agrium")
pursuant to which the company and Agrium have agreed to combine
their businesses (the "Proposed Transaction") in a merger of equals
transaction to be implemented by way of a plan of arrangement under
the Canada Business Corporations Act. On November 3, 2016, the Proposed Transaction was
overwhelmingly approved by shareholders of both companies. On
November 7, 2016, the Ontario
Superior Court of Justice issued a final order approving the
Proposed Transaction. Upon the closing of the Proposed Transaction,
the new parent company will be named Nutrien Ltd. ("Nutrien"). The
Proposed Transaction is currently anticipated to be completed in
the third quarter of 2017 and is subject to customary closing
conditions, including remaining regulatory approvals.
Upon the closing of the Proposed Transaction, the company and
Agrium will become indirect, wholly owned subsidiaries of Nutrien.
PotashCorp shareholders will own approximately 52 percent of
Nutrien, and Agrium shareholders will own approximately 48
percent.
Potash Corporation
of Saskatchewan Inc.
|
Selected Financial
Data
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
June
30
|
Six Months
Ended
June
30
|
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Potash Sales
(tonnes - thousands)
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
North
America
|
651
|
850
|
1,510
|
1,628
|
|
|
Offshore
|
1,709
|
1,272
|
3,029
|
2,277
|
|
Manufactured
Product
|
2,360
|
2,122
|
4,539
|
3,905
|
|
|
|
|
|
Potash Net
Sales
|
|
|
|
|
|
(US $
millions)
|
|
|
|
|
|
|
Sales
|
$
|
461
|
$
|
393
|
$
|
890
|
$
|
774
|
|
|
Freight,
transportation and distribution
|
(50)
|
(64)
|
(114)
|
(123)
|
|
|
Net
Sales
|
$
|
411
|
$
|
329
|
$
|
776
|
$
|
651
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
North
America
|
$
|
135
|
$
|
167
|
$
|
298
|
$
|
305
|
|
|
Offshore
|
276
|
160
|
474
|
340
|
|
Other miscellaneous
and purchased product
|
-
|
2
|
4
|
6
|
|
Net Sales
|
$
|
411
|
$
|
329
|
$
|
776
|
$
|
651
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
Average Realized
Sales Price per Tonne
|
|
|
|
|
|
|
North
America
|
$
|
208
|
$
|
196
|
$
|
198
|
$
|
187
|
|
|
Offshore
|
$
|
161
|
$
|
125
|
$
|
156
|
$
|
149
|
|
|
Average
|
$
|
174
|
$
|
154
|
$
|
170
|
$
|
165
|
|
Cost of Goods Sold
per Tonne
|
$
|
(82)
|
$
|
(91)
|
$
|
(86)
|
$
|
(108)
|
|
Gross Margin per
Tonne
|
$
|
92
|
$
|
63
|
$
|
84
|
$
|
57
|
|
|
|
|
|
|
|
|
Potash Corporation
of Saskatchewan Inc.
|
Selected Financial
Data
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
June
30
|
Six Months
Ended
June
30
|
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Average Natural Gas
Cost in Production per MMBtu
|
$
|
3.59
|
$
|
3.26
|
$
|
3.62
|
$
|
3.35
|
Nitrogen Sales
(tonnes - thousands)
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
Ammonia
(1)
|
602
|
543
|
1,148
|
1,144
|
|
|
Urea
|
293
|
261
|
613
|
567
|
|
|
Solutions/Nitric
acid/Ammonium nitrate
|
699
|
703
|
1,400
|
1,460
|
|
Manufactured
Product
|
1,594
|
1,507
|
3,161
|
3,171
|
|
|
|
|
|
|
Fertilizer sales
tonnes (1)
|
672
|
547
|
1,292
|
1,213
|
|
Industrial/Feed sales
tonnes
|
922
|
960
|
1,869
|
1,958
|
|
Manufactured
Product
|
1,594
|
1,507
|
3,161
|
3,171
|
|
|
|
|
|
Nitrogen Net
Sales
|
|
|
|
|
|
(US $
millions)
|
|
|
|
|
|
|
Sales - third
party
|
$
|
384
|
$
|
383
|
$
|
759
|
$
|
811
|
|
|
Freight,
transportation and distribution - third party
|
(32)
|
(27)
|
(64)
|
(60)
|
|
|
Net sales - third
party
|
352
|
356
|
695
|
751
|
|
|
Inter-segment net
sales
|
17
|
17
|
39
|
34
|
|
|
Net Sales
|
$
|
369
|
$
|
373
|
$
|
734
|
$
|
785
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
Ammonia
(2)
|
$
|
181
|
$
|
177
|
$
|
340
|
$
|
365
|
|
|
Urea
|
69
|
71
|
158
|
157
|
|
|
Solutions/Nitric
acid/Ammonium nitrate
|
105
|
119
|
216
|
252
|
|
Other miscellaneous
and purchased product (3)
|
14
|
6
|
20
|
11
|
|
Net Sales
|
$
|
369
|
$
|
373
|
$
|
734
|
$
|
785
|
|
|
|
|
|
|
Fertilizer net sales
(2)
|
$
|
158
|
$
|
147
|
$
|
301
|
$
|
302
|
|
Industrial/Feed net
sales
|
197
|
221
|
413
|
473
|
|
Other miscellaneous
and purchased product (3)
|
14
|
5
|
20
|
10
|
|
Net Sales
|
$
|
369
|
$
|
373
|
$
|
734
|
$
|
785
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
Average Realized
Sales Price per Tonne
|
|
|
|
|
|
|
Ammonia
|
$
|
302
|
$
|
325
|
$
|
297
|
$
|
318
|
|
|
Urea
|
$
|
236
|
$
|
274
|
$
|
258
|
$
|
278
|
|
|
Solutions/Nitric
acid/Ammonium nitrate
|
$
|
150
|
$
|
169
|
$
|
154
|
$
|
173
|
|
|
Average
|
$
|
223
|
$
|
244
|
$
|
226
|
$
|
244
|
|
|
Fertilizer average
price per Tonne
|
$
|
236
|
$
|
267
|
$
|
233
|
$
|
248
|
|
|
Industrial/Feed
average price per Tonne
|
$
|
214
|
$
|
230
|
$
|
221
|
$
|
242
|
|
|
Average
|
$
|
223
|
$
|
244
|
$
|
226
|
$
|
244
|
|
Cost of Goods Sold
per Tonne
|
$
|
(182)
|
$
|
(160)
|
$
|
(176)
|
$
|
(172)
|
|
Gross Margin per
Tonne
|
$
|
41
|
$
|
84
|
$
|
50
|
$
|
72
|
|
|
|
|
|
(1)
Includes inter-segment ammonia sales (tonnes -
thousands)
|
40
|
39
|
95
|
79
|
(2)
Includes inter-segment ammonia net sales
|
$
|
17
|
$
|
17
|
$
|
39
|
$
|
34
|
(3)
Includes inter-segment other miscellaneous and purchased product
net sales
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
Potash Corporation
of Saskatchewan Inc.
|
Selected Financial
Data
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30
|
June
30
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Phosphate Sales
(tonnes - thousands)
|
|
|
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
|
|
|
|
Fertilizer
|
|
348
|
|
274
|
|
716
|
|
711
|
|
|
Feed and
Industrial
|
|
242
|
|
238
|
|
513
|
|
518
|
|
Manufactured
Product
|
|
590
|
|
512
|
|
1,229
|
|
1,229
|
|
|
|
|
|
|
|
|
|
Phosphate Net
Sales
|
|
|
|
|
|
|
|
|
|
(US $
millions)
|
|
|
|
|
|
|
|
|
|
|
Sales
|
$
|
275
|
$
|
277
|
$
|
583
|
$
|
677
|
|
|
Freight,
transportation and distribution
|
|
(34)
|
|
(27)
|
|
(71)
|
|
(68)
|
|
|
Net Sales
|
$
|
241
|
$
|
250
|
$
|
512
|
$
|
609
|
|
|
|
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
|
|
|
|
Fertilizer
|
$
|
117
|
$
|
108
|
$
|
253
|
$
|
299
|
|
|
Feed and
Industrial
|
|
123
|
|
140
|
|
257
|
|
307
|
|
Other miscellaneous
and purchased product
|
|
1
|
|
2
|
|
2
|
|
3
|
|
Net Sales
|
$
|
241
|
$
|
250
|
$
|
512
|
$
|
609
|
|
|
|
|
|
|
|
|
|
Manufactured
Product
|
|
|
|
|
|
|
|
|
|
Average Realized
Sales Price per Tonne
|
|
|
|
|
|
|
|
|
|
|
Fertilizer
|
$
|
337
|
$
|
397
|
$
|
354
|
$
|
421
|
|
|
Feed and
Industrial
|
$
|
507
|
$
|
587
|
$
|
501
|
$
|
592
|
|
|
Average
|
$
|
407
|
$
|
485
|
$
|
415
|
$
|
493
|
Cost of Goods Sold
per Tonne
|
$
|
(452)
|
$
|
(506)
|
$
|
(428)
|
$
|
(471)
|
Gross Margin per
Tonne
|
$
|
(45)
|
$
|
(21)
|
$
|
(13)
|
$
|
22
|
|
|
|
|
|
|
|
|
|
Potash Corporation
of Saskatchewan Inc.
|
Selected
Additional Data
|
(unaudited)
|
|
|
|
|
Exchange Rate
(Cdn$/US$)
|
|
|
|
|
|
|
|
2017
|
2016
|
|
|
|
|
|
December
31
|
|
|
|
1.3427
|
June 30
|
|
|
1.2977
|
1.3009
|
Second-quarter
average conversion rate
|
|
|
1.3478
|
1.2996
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30
|
June
30
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Production
|
|
|
|
|
Potash production
(KCl Tonnes - thousands)
|
2,813
|
2,273
|
5,242
|
4,503
|
Potash shutdown weeks
(1)
|
4
|
6
|
12
|
13
|
Nitrogen production
(N Tonnes - thousands)
|
728
|
789
|
1,499
|
1,560
|
Ammonia operating
rate
|
81%
|
89%
|
83%
|
88%
|
Phosphate production
(P2O5 Tonnes - thousands)
|
349
|
297
|
714
|
708
|
Phosphate
P2O5 operating rate
|
73%
|
62%
|
75%
|
74%
|
|
|
|
|
|
Shareholders
|
|
|
|
|
PotashCorp's total
shareholder return
|
-4%
|
-3%
|
-8%
|
-1%
|
|
|
|
|
|
Customers
|
|
|
|
|
Product tonnes
involved in customer complaints (thousands)
|
17
|
37
|
31
|
62
|
|
|
|
|
|
Community
|
|
|
|
|
Taxes and royalties
($ millions) (2)
|
80
|
81
|
174
|
159
|
|
|
|
|
|
Employees
|
|
|
|
|
Annualized employee
turnover rate
|
4%
|
4%
|
4%
|
4%
|
|
|
|
|
|
Safety
|
|
|
|
|
Total recordable
injury rate (3)
|
0.85
|
0.69
|
0.90
|
0.91
|
|
|
|
|
|
Environment
|
|
|
|
|
Environmental
incidents (4)
|
3
|
3
|
5
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30
|
December
31
|
As at
|
|
|
2017
|
2016
|
|
|
|
|
|
Number of
employees
|
|
|
|
|
|
Potash
|
|
|
2,281
|
2,331
|
|
Nitrogen
|
|
|
834
|
823
|
|
Phosphate
|
|
|
1,522
|
1,515
|
|
Other
|
|
|
457
|
461
|
|
Total
|
|
|
5,094
|
5,130
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents weeks of full production shutdown; excludes the impact
of any periods of reduced operating rates and planned routine
annual maintenance shutdowns and announced workforce
reductions.
|
(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
recordable injuries for every 200,000 hours worked for all
PotashCorp employees, contractors and others on site. Calculated as
the total recordable injuries multiplied by 200,000 hours worked
divided by the actual number of hours worked.
|
(4) Number
of incidents, includes reportable quantity releases, permit
non-compliance and Canadian reportable releases. Calculated as:
reportable quantity releases (a release whose quantity equals or
exceeds the US Environmental Protection Agency's notification level
and is reportable to the National Response Center (NRC)) + permit
non-compliance (an exceedance of a federal, state, provincial or
local permit condition or regulatory limit) + Canadian reportable
releases (an unconfined spill or release into the
environment).
|
Potash Corporation of Saskatchewan Inc.
Selected Non-IFRS Financial Measures and Reconciliations and
Supplemental Information
(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.
The company uses both IFRS and certain non-IFRS measures to
assess operational performance and as a component of employee
remuneration. Management believes these non-IFRS measures provide
useful supplemental information to investors in order that they may
evaluate PotashCorp's financial performance using the same measures
as management. Management believes that, as a result, the investor
is afforded greater transparency in assessing the financial
performance of the company. These non-IFRS financial measures
should not be considered as a substitute for, nor superior to,
measures of financial performance prepared in accordance with
IFRS.
A. EBITDA, ADJUSTED EBITDA AND
ADJUSTED EBITDA MARGIN
Set forth below is a reconciliation of "EBITDA" and "adjusted
EBITDA" to net income and "adjusted EBITDA margin" to net income as
a percentage of sales, the most directly comparable financial
measures calculated and presented in accordance with IFRS.
|
Three Months
Ended
|
Six Months
Ended
|
|
June
30
|
June
30
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net
income
|
$
|
201
|
$
|
121
|
$
|
350
|
$
|
196
|
Finance
costs
|
|
61
|
|
54
|
|
120
|
|
106
|
Income
taxes
|
|
(62)
|
|
24
|
|
(49)
|
|
56
|
Depreciation and
amortization
|
|
168
|
|
168
|
|
340
|
|
335
|
EBITDA
|
$
|
368
|
$
|
367
|
$
|
761
|
$
|
693
|
Share of Canpotex's
Prince Rupert project exit costs
|
|
-
|
|
33
|
|
-
|
|
33
|
Termination benefit
costs
|
|
-
|
|
-
|
|
-
|
|
32
|
Impairment of
property, plant and equipment
|
|
-
|
|
-
|
|
-
|
|
27
|
Impairment of
available-for-sale investment
|
|
-
|
|
10
|
|
-
|
|
10
|
Proposed Transaction
costs
|
|
14
|
|
-
|
|
23
|
|
-
|
Adjusted
EBITDA
|
$
|
382
|
$
|
410
|
$
|
784
|
$
|
795
|
|
|
|
|
|
|
|
|
|
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, termination benefit costs, certain
impairment charges and Proposed Transaction costs. PotashCorp uses
EBITDA as a supplemental financial measure of its operational
performance. Management believes EBITDA and adjusted EBITDA to be
important measures as they exclude the effects of items that
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, the charges
associated with impairments, termination costs or Proposed
Transaction costs. 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
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Sales
|
$
|
1,120
|
$
|
1,053
|
$
|
2,232
|
$
|
2,262
|
Freight,
transportation and distribution
|
|
(116)
|
|
(118)
|
|
(249)
|
|
(251)
|
Net
sales
|
$
|
1,004
|
$
|
935
|
$
|
1,983
|
$
|
2,011
|
|
|
|
|
|
|
|
|
|
Net income as a
percentage of sales
|
|
18%
|
|
11%
|
|
16%
|
|
9%
|
Adjusted EBITDA
margin
|
|
38%
|
|
44%
|
|
40%
|
|
40%
|
Adjusted EBITDA margin is calculated as adjusted EBITDA divided
by net sales (sales less freight, transportation and distribution).
Management believes comparing adjusted EBITDA to net sales earned
(net of costs to deliver product) is an important indicator of
efficiency. In addition to the limitations given above in using
adjusted EBITDA as compared to net income, adjusted EBITDA margin
as compared to net income as a percentage of sales is also limited
in that freight, transportation and distribution costs are incurred
and valued independently of sales; adjusted EBITDA also includes
earnings from equity investees whose sales are not included in
consolidated sales. Management evaluates these items individually
on the consolidated statements of income.
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
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cash flow prior to
working capital changes
|
$
|
352
|
$
|
380
|
$
|
645
|
$
|
661
|
Changes in non-cash
operating working capital
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
23
|
|
186
|
|
38
|
|
145
|
|
Inventories
|
|
(9)
|
|
(51)
|
|
(58)
|
|
(43)
|
|
Prepaid expenses and
other current assets
|
|
(9)
|
|
5
|
|
(14)
|
|
3
|
|
Payables and accrued
charges
|
|
(29)
|
|
(96)
|
|
(60)
|
|
(154)
|
Changes in
non-cash operating working capital
|
|
(24)
|
|
44
|
|
(94)
|
|
(49)
|
Cash provided by
operating activities
|
$
|
328
|
$
|
424
|
$
|
551
|
$
|
612
|
Additions to
property, plant and equipment
|
|
(128)
|
|
(211)
|
|
(261)
|
|
(457)
|
Other assets and
intangible assets
|
|
(2)
|
|
(9)
|
|
(1)
|
|
(9)
|
Changes in non-cash
operating working capital
|
|
24
|
|
(44)
|
|
94
|
|
49
|
Free cash
flow
|
$
|
222
|
$
|
160
|
$
|
383
|
$
|
195
|
|
|
|
|
|
|
|
|
|
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.
C. ITEMS INCLUDED IN GROSS
MARGIN
|
Three Months Ended
June 30, 2017
|
|
|
Potash
|
|
Nitrogen
|
|
Phosphate
|
|
Consolidated
|
Gross
margin
|
$
|
213
|
$
|
68
|
$
|
(26)
|
$
|
255
|
No items included in
the above to note.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2016
|
|
|
Potash
|
|
Nitrogen
|
|
Phosphate
|
|
Consolidated
|
Gross
margin
|
$
|
123
|
$
|
130
|
$
|
(10)
|
$
|
243
|
Items included in the
above:
|
|
|
|
|
|
|
|
|
|
Share of Canpotex's
Prince Rupert project exit costs
|
|
(33)
|
|
-
|
|
-
|
|
(33)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2017
|
|
|
Potash
|
|
Nitrogen
|
|
Phosphate
|
|
Consolidated
|
Gross
margin
|
$
|
373
|
$
|
165
|
$
|
(15)
|
$
|
523
|
No items included in
the above to note.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2016
|
|
|
Potash
|
|
Nitrogen
|
|
Phosphate
|
|
Consolidated
|
Gross
margin
|
$
|
211
|
$
|
237
|
$
|
29
|
$
|
477
|
Items included in the
above:
|
|
|
|
|
|
|
|
|
|
Share of Canpotex's
Prince Rupert project exit costs
|
|
(33)
|
|
-
|
|
-
|
|
(33)
|
|
Termination benefit
costs
|
|
(32)
|
|
-
|
|
-
|
|
(32)
|
|
Impairment of
property, plant and equipment
|
|
-
|
|
-
|
|
(27)
|
|
(27)
|
SOURCE Potash Corporation of Saskatchewan Inc.