Potash Corp.’s (POT - Analyst Report) profits for fourth-quarter 2014 jumped on higher margins from all of its segments, strong potash sales volumes and better nitrogen and phosphate pricing. The bottom line was also supported by higher contributions from the company’s offshore investments.

The fertilizer giant posted earnings of 49 cents per share in the quarter, a roughly 88% surge from 26 cents per share earned a year ago. Earnings also topped the Zacks Consensus Estimate of 46 cents. Profit jumped 77% year over year to $407 million.

For 2014, the company logged earnings of $1.82 per share, down around 11% from $2.04 reported a year ago. Adjusted earnings of $1.80 per share fell just shy of the Zacks Consensus Estimate of $1.81.

Revenues for the quarter jumped roughly 23% year over year to $1,902 million, beating the Zacks Consensus Estimate of $1,660 million.

Gross margin shot up around 62% to $746 million in the quarter from $460 million recorded ia year ago on the back of higher contributions from all segments.

For the full year, revenues slipped around 3% year over year to $7,115 million, but came ahead of the Zacks Consensus Estimate of $6,404 million.

Segment Review

Potash: Sales volumes jumped 42% year over year to a record 2.5 million tons in the reported quarter. Sales volumes in North America fell modestly in the quarter. Offshore sales volumes were up 80% year over year on higher demand across all major markets. Average realized potash price was $284 per ton, essentially flat year over year as higher North American and offshore prices were offset by higher proportion of sales to lower-priced markets.

Nitrogen: Sales volumes rose 0.9% year over year to 1.5 million tons. Maintenance turnaround at the company’s Lima facility and higher natural gas curtailments in Trinidad limited its ability to sell more tons in the quarter. Average realized prices for nitrogen products increased 24% to $405 per ton, supported by higher ammonia pricing.

Phosphate: Sales volumes of 0.8 million tons was down 15% year over year owing to reduced tons of production. Average realized phosphate price, however, rose 16% year over year to $528 per ton, partly due to higher liquid fertilizers pricing.

Financials

Potash Corp. exited the quarter with cash and cash equivalents of $215 million, down 66% year over year. Long-term debt rose roughly 8% year over year to $3,213 million.

Cash flow from operating activities for the reported quarter was up 9% from the year ago quarter to $713 million.

Potash Corp.’s board has approved a roughly 9% raise in its quarterly dividend to 38 cents per share from 35 cents per share.

Guidance
 
Potash Corp., which is among the biggest players in the fertilizer industry along with Agrium (AGU - Analyst Report), Mosaic (MOS - Analyst Report) and CF Industries (CF - Analyst Report), said that it has entered 2015 with a moderately positive view on its business as sluggish economic growth in markets outside of the U.S. continues to affect the global outlook.

The company expects global potash shipments to slow from record level of more than 61 million tons achieved in 2014. It expects global potash shipment to be between 58 and 60 million tons this year.

For the potash business, the company sees sales volumes of 9.2-9.7 million tons and gross margin of $1.5-$1.8 billion for 2015. Higher operational capability at New Brunswick and Saskatchewan facilities is expected to offer the company with the flexibility to respond to market opportunities.

For nitrogen, the company expects fewer supply-related disruptions, reduced global energy prices and modestly softer agricultural fundamentals to result in a more tempered pricing environment this year. Assuming continued gas supply restrictions at its Trinidad facility, Potash Corp. expects nitrogen sales volumes to be in line with 2014. However, it expects nitrogen gross margin to be below the record level achieved in 2014 due to the soft pricing environment.

For phosphate, the company expects better market conditions to lead to improved results in this segment. Despite reduced production capability due to the closing of its Suwannee River chemical plant, a shift to high-margin products coupled with an anticipated improvement in pricing are expected to boost gross margin. The combined gross margin for nitrogen and phosphate is expected in the range of $1.1-$1.3 billion in 2015, flat year over year.

For 2015, the company expects earnings to be in the range of $1.90 to $2.20 per share. For the first quarter, earnings are expected to be 45 cents to 55 cents per share. The current Zacks Consensus Estimate for the first quarter and 2015 are 49 cents and $2.07, respectively.

Capital spending for 2015 is expected to be around $1.2 billion in 2015, higher than $1.1 billion spent in 2014.

Potash Corp. is a Zacks Rank #3 (Hold) stock.