Potash Corp. Posts Record Q2 Earnings

The vote in favor of a strike by unionized workers at PotashCorp of Saskatchewan (POT) may lead to a production loss as the three potentially impacted facilities represented roughly 30% of the company’s production in 2007. However, the tight potash market means the financial impact from a work stoppage could be mitigated by higher prices for the commodity, according to RBC Capital Markets analyst Fai Lee.

Potash Corp. reported record quarterly profits on Thursday, with C$1.5-billion in earnings for the first six months of 2008.

Mr. Lee told clients that any labor disruption would be short-lived and therefore would not impact his positive long-term outlook on Potash Corp. He rates the shares at “outperform” with a $375 price target.

If the shares come under pressure as a result of the labor dispute, the analyst recommends investors pick some up. However, he suggested a hedge in buying other North American potash producers like Agrium Inc. (AGU). Mr. Lee rates Agrium at “outperform” with a $140 price target.

He said:

PotashCorp believes it has made a full, fair and responsible offer to the United Steelworkers and is hopeful that a settlement will be reached.

The analyst noted that the collective agreement for the three mines expired at the end of April. "However, it is prepared for any contingencies."

Comments

[DAD08:]

Cannot go wrong buying either AGU, POT, MOS, CF, or SQM on this steep pullback. One has to wonder if the possibility of a strike by mining workers at POT is already being priced into the current share price.....any positive new on the strike could be a potential catalyst for higher share prices.

2008 Jul 25 07:26 AM

[jakedeez:]

Anyone who hasn't, goto their website and listen to the conference call. There is no better way to get insight into the Ag sector.

2008 Jul 25 07:33 AM