POT: Potash Corp./Saskatchewan Message Board

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Non-Tech : POT: Potash Corp./Saskatchewan

POT 20.65

0.0%

Jan 2 3:00 PM EDT

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From: Dennis Roth	1/17/2008 7:49:58 AM
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Potash Corp. (POT): Potash inventory update - reiterate our Conviction Buy on POT - Goldman Sachs - 01/16/08 News Fundamentals in potash remain solid on strong demand despite the latest inventory data showing a modest increase in inventory in December - North American producers ending inventory was up nearly 0.5 mn tons to 1.6 millions tons. We believe a normal build late in the year in Canada and slower rail shipping through the holiday season were the main culprits. Our channel checks point to almost empty wholesaler and distributor inventories and a very tight market. Producers' inventory is 26% below the 5-year average. POT will report 4Q2007 earnings on January 24, 2008. Analysis With the current ag cycle driven by strong global demand for food, feed and fuel, we believe the strong fertilizer fundamentals will continue to lead to higher potash prices in the next 2 years. Producers currently have a series of price increases that will be implemented over the next 4 months in North America and prices are moving up globally. Contract negotiations have already started with China and we expect a long battle as global producers are attempting to bring China closer to global prices. As expected, China is balking at the proposed steep price increases and is indicating that they will use current inventory at hand in order to prolong the process. However, producers are not overtly concerned for now because they believe they can place products outside of China at higher spot prices and will prorate sales to China. Implications We reiterate our Conviction Buy in POT and our 12-month price target of $180 based 14X our 2009E EBITDA. We believe the greatest long-term opportunity for Potash lies in its growing potash capacity. With most global producers at full capacity and limited opportunity for expansion, POT is in the best position to supply capacity for growing potash demand. POT is gradually expanding its capacity from nearly 11 million tons of production capacity currently, POT will have 15.7 million tons by 2012. Risk to our price target is lower ag commodity prices.

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