Potash shares drop after company cuts forecast

Shares of Potash Corp. of Saskatchewan Inc. fell Monday, days after the Canadian fertilizer company slashed its third-quarter and full-year 2009 profit forecast.

The company said Friday it lowered the forecast because of lagging sales volume, and that demand continued to be slow and fertilizer distributors had limited their restocking orders.

Potash lowered its 2009 profit estimate to a range of $3.25 to $3.75 per share, lower than a $4.16 per share consensus estimate of analysts on Wall Street. In July, the company predicted $4 to $5 per share for the year.

The company also lowered its third-quarter estimate to the low end of a range of 80 cents to $1.20 per share. Analysts surveyed by Thomson Reuters expect 93 cents per share.

On Monday, Citi Investment Research analyst P.J. Juvekar wrote in a client note that his firm was lowering its 2009 estimates for Potash by 55 cents, to $3.70 per share, on weak volumes. Its 2010-11 estimates remain largely unchanged, however.

He noted that Potash had significantly cut its 2009 earnings guidance for the third time this year on weaker-than-expected potash volumes.

Last week, Citi downgraded fertilizer stocks because of a late harvest that may reduce the fall application of fertilizer and lower farm profitability, among other factors.

"Buyers are waiting, producer inventories are at historic highs, and retailers are living hand-to-mouth," Juvekar wrote.

Potash shares sank $5.86, or 6 percent, to $91.28 in morning trading.