Update Potash of Saskatchewan (POT)

Potash of Saskatchewan (POT) has been telling investors for more than a month that it believes that demand is picking up and that prices for potash fertilizer would start to climb in the first quarter of 2010.

I guess the company really meant it.

Yesterday, March 11, after the close of trading Potash raised earnings guidance for the first quarter to a range of $1.30 to $1.50 a share. That is a huge leap from prior guidance of 70 cents to $1 a share set only on January 28. The Wall Street consensus had been for earnings of 94 cents a share. The company said it would make any revisions to guidance for the full year when it reported first quarter earnings on April 29.

The increase in guidance follows hard on the heels of news from Canpotex, the export arm of Canada’s fertilizer producers, that it was increasing export prices for potash. The price increase, effective immediately on all new sales, took prices to $415 a ton for standard and $430 a ton for granular grade.

In the January 28 guidance that accompanied fourth quarter earnings, the company had projected potash prices of just $365 a ton for 2010. At the time I called first quarter 2010 guidance laughably low. “The numbers don’t make a whole lot of sense except as a reaction by the company to seeing its guidance get smashed to the downside in quarter after quarter,” I wrote.

The jump to $415 to $430 a ton in March, however, is a bigger increase than I’d expected this early in the year. Read more