Potash Corp of Saskatchewan Inc Net Income dropped on 74.6% in 2016 and Revenue dropped on 29.0%
26.01.2017 • About Potash Corp of Saskatchewan Inc (
$POT) • By InTwits
Potash Corp of Saskatchewan Inc reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Potash Corp of Saskatchewan Inc is a company in decline: 2016 revenue growth was -29.0%, 5 years revenue CAGR was -12.6%
- EBITDA Margin is declining: 28.7% in 2016 vs. 41.4% in 2015 vs. 45.4% in 2012
- Potash Corp of Saskatchewan Inc has high CAPEX intensity: 5 year average CAPEX/Revenue was 20.9%. At the same time it's in pair with industry average of 24.1%.
- CAPEX is quite volatile: 893 in 2016, 1,217 in 2015, 1,138 in 2014, 1,624 in 2013, 2,133 in 2012
- The company has potentially unprofitable business model: ROIC is at 3.8%
- It operates with high leverage: Net Debt/EBITDA is 3.6x while industry average is 0.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Potash Corp of Saskatchewan Inc ($POT) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 7,927 | 7,305 | 7,115 | 6,279 | 4,456 | -29.0% |
| Gross Profit | 3,410 | 2,790 | 2,647 | 2,269 | 830 | -63.4% |
| SG&A | 219 | 231 | 245 | 239 | 212 | -11.3% |
| EBITDA | 3,597 | 3,282 | 3,049 | 2,598 | 1,277 | -50.8% |
| Net Income | 2,079 | 1,785 | 1,536 | 1,270 | 323 | -74.6% |
Balance Sheet
|
|---|
| Cash | 562 | 628 | 215 | 91 | 32 | -64.8% |
| Short Term Debt | 615 | 967 | 1,032 | 517 | 884 | 71.0% |
| Long Term Debt | 3,466 | 2,970 | 3,213 | 3,710 | 3,707 | -0.1% |
Cash flow
|
|---|
| Capex | 2,133 | 1,624 | 1,138 | 1,217 | 893 | -26.6% |
Ratios
|
|---|
| Revenue growth | -9.0% | -7.8% | -2.6% | -11.7% | -29.0% | |
| EBITDA growth | -25.0% | -8.8% | -7.1% | -14.8% | -50.8% | |
| Gross Margin | 43.0% | 38.2% | 37.2% | 36.1% | 18.6% | -17.5% |
| EBITDA Margin | 45.4% | 44.9% | 42.9% | 41.4% | 28.7% | -12.7% |
| Net Income Margin | 26.2% | 24.4% | 21.6% | 20.2% | 7.2% | -13.0% |
| SG&A, % of revenue | 2.8% | 3.2% | 3.4% | 3.8% | 4.8% | 1.0% |
| CAPEX, % of revenue | 26.9% | 22.2% | 16.0% | 19.4% | 20.0% | 0.7% |
| ROIC | 20.9% | 16.8% | 15.2% | 12.6% | 3.8% | -8.8% |
| ROE | 23.4% | 18.3% | 16.7% | 14.8% | 3.9% | -10.9% |
| Net Debt/EBITDA | 1.0x | 1.0x | 1.3x | 1.6x | 3.6x | 2.0x |
Potash Corp of Saskatchewan Inc ($POT) key quoterly financial indicators
| mln. $ | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,209 | 1,053 | 1,136 | 1,058 | -27.4% | -39.2% | -25.7% | -21.9% |
| EBITDA | 326 | 367 | 321 | 283 | -55.4% | -53.7% | -45.9% | -41.3% |
| Net Income | 75 | 121 | 81 | 59 | -79.7% | -71.0% | -71.3% | -70.6% |
Balance Sheet
|
|---|
| Cash | 74 | 143 | 153 | 32 | -65.9% | -68.2% | 109.6% | -64.8% |
| Short Term Debt | 853 | 921 | 1,036 | 884 | 72.3% | 86.1% | 150.2% | 71.0% |
| Long Term Debt | 3,711 | 3,713 | 3,714 | 3,707 | 0.1% | 0.1% | 0.1% | -0.1% |
Ratios
|
|---|
| Gross Margin | 19.4% | 23.1% | 16.7% | 17.3% | -20.7% | -18.0% | -16.3% | -11.2% |
| EBITDA Margin | 27.0% | 34.9% | 28.3% | 26.7% | -16.9% | -10.9% | -10.5% | -8.8% |
| Net Income Margin | 6.2% | 11.5% | 7.1% | 5.6% | -16.0% | -12.6% | -11.3% | -9.3% |
Revenue and profitability
The company's Revenue dropped on 29.0%. Annual revenue decline showed slowdown in 16Q4 - revenue dropped on 21.9%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.71 pp from 2.9% to 3.6% in 2016.
Gross Margin dropped on 17.5 pp from 36.1% to 18.6% in 2016. SG&A as a % of Revenue increased slightly on 0.95 pp from 3.8% to 4.8% in 2016.
Net Income marign dropped on 13.0 pp from 20.2% to 7.2% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 20.0% in 2016. CAPEX/Revenue decreased on 2.2 pp from 22.2% in 2013 to 20.0% in 2016. Average CAPEX/Revenue for the last three years was 18.5%.Battling declining revenue the company invested a large share of EBITDA (69.9%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (3.84%) and ROE (3.90%). ROIC decreased on 8.8 pp from 12.6% to 3.8% in 2016. ROE dropped on 10.9 pp from 14.8% to 3.9% in 2016.
Leverage (Debt)
Debt level is 3.6x Net Debt / EBITDA and 3.6x Debt / EBITDA. Net Debt / EBITDA jumped on 2.0x from 1.6x to 3.6x in 2016. Debt increased on 8.6% while cash dropped on 64.8%.
Management team
Potash Corp of Saskatchewan Inc's CEO Jochen E Tilk is a founder and has spent 4 years at the company. The company's CFO is Wayne R Brownlee. Wayne R Brownlee has 19 years tenure at the company.
Appendix 1: Peers in Basic Materials
Below we provide Potash Corp of Saskatchewan Inc benchmarking against other companies in Basic Materials industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Avino Silver & Gold Mines Ltd ($ASM) | | 613.6% | 19.9% | -1.1% | 109.1% |
| Trevali Mining Corp ($TV) | | | | 12.9% | 86.4% |
| Geodrill Ltd ($GEO) | | -43.3% | -4.3% | 34.6% | 53.1% |
| Tahoe Resources Inc ($THO) | | | | 48.4% | 50.9% |
| Osisko Gold Royalties Ltd ($OR) | | | | 164.4% | 38.0% |
| |
|---|
| Median (82 companies) | 100.8% | -2.5% | 2.0% | -1.7% | 6.8% |
|---|
| Potash Corp of Saskatchewan Inc ($POT) | | -7.8% | -2.6% | -11.7% | -29.0% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Nevsun Resources Ltd ($NSU) | 89.9% | 94.8% | 95.5% | 82.3% | 79.7% |
| Labrador Iron Ore Royalty Corp ($LIF) | 80.2% | 80.2% | 80.2% | 80.3% | 80.3% |
| Lucara Diamond Corp ($LUC) | 42.5% | 57.4% | 66.7% | 60.9% | 65.6% |
| Trevali Mining Corp ($TV) | | | 49.0% | 59.3% | |
| Perseus Mining Ltd ($PRU) | 52.5% | 50.9% | 32.0% | 53.7% | 26.3% |
| |
|---|
| Median (94 companies) | 32.1% | 22.1% | 18.2% | 16.4% | 24.8% |
|---|
| Potash Corp of Saskatchewan Inc ($POT) | 43.0% | 38.2% | 37.2% | 36.1% | 18.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Labrador Iron Ore Royalty Corp ($LIF) | | | | 72.8% | 73.5% |
| Silver Wheaton Corp ($SLW) | 82.6% | 75.3% | 69.6% | 65.8% | 59.7% |
| Franco-Nevada Corp ($FNV) | 62.1% | 44.6% | 72.3% | 60.8% | 70.3% |
| Lucara Diamond Corp ($LUC) | 7.6% | 57.3% | 57.5% | 60.0% | 62.4% |
| Sandstorm Gold Ltd ($SSL) | 74.3% | 49.9% | 62.1% | 56.5% | 64.6% |
| |
|---|
| Median (100 companies) | 17.4% | 10.8% | 10.3% | 6.7% | 23.0% |
|---|
| Potash Corp of Saskatchewan Inc ($POT) | 45.4% | 44.9% | 42.9% | 41.4% | 28.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Largo Resources Ltd ($LGO) | | | | 567.6% | |
| Sandstorm Gold Ltd ($SSL) | 152.1% | 118.8% | 49.4% | 412.7% | 17.3% |
| Silver Wheaton Corp ($SLW) | 75.5% | 286.8% | 22.5% | 279.2% | 90.3% |
| Franco-Nevada Corp ($FNV) | 3.7% | 35.5% | 201.6% | 230.0% | 122.4% |
| Avino Silver & Gold Mines Ltd ($ASM) | 211.7% | 5.6% | 89.8% | 163.3% | |
| |
|---|
| Median (100 companies) | 28.1% | 27.4% | 17.8% | 16.6% | 17.5% |
|---|
| Potash Corp of Saskatchewan Inc ($POT) | 26.9% | 22.2% | 16.0% | 19.4% | 20.0% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Lucara Diamond Corp ($LUC) | -2.9% | 41.3% | 54.7% | 39.6% | 58.5% |
| Western Forest Products Inc ($WEF) | 9.0% | 25.1% | 15.7% | 16.4% | 25.1% |
| Geodrill Ltd ($GEO) | 8.6% | -3.5% | -9.3% | 3.6% | 20.3% |
| Supremex Inc ($SXP) | 14.1% | 18.5% | 16.5% | 23.4% | 19.3% |
| Canfor Pulp Products Inc ($CFX) | 4.9% | 13.2% | 21.3% | 24.1% | 17.0% |
| |
|---|
| Median (99 companies) | 4.9% | 0.1% | 1.2% | -3.8% | 4.8% |
|---|
| Potash Corp of Saskatchewan Inc ($POT) | 20.9% | 16.8% | 15.2% | 12.6% | 3.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Canam Group Inc ($CAM) | 4.2x | 2.6x | 3.2x | 1.8x | 13.9x |
| Taseko Mines Ltd ($TKO) | 7.4x | 5.9x | 10.2x | 5.9x | 11.0x |
| Methanex Corp ($MX) | 5.2x | 0.7x | 0.9x | 3.0x | 5.2x |
| Copper Mountain Mining Corp ($CUM) | 3.9x | 5.0x | 5.4x | 30.6x | 5.1x |
| Cameco Corp ($CCO) | 2.0x | 2.1x | 2.5x | 1.9x | 5.1x |
| |
|---|
| Median (57 companies) | 0.3x | 0.7x | 1.1x | 1.5x | 0.6x |
|---|
| Potash Corp of Saskatchewan Inc ($POT) | 1.0x | 1.0x | 1.3x | 1.6x | 3.6x |
