Potash (POT): Employee Strike Impact May Be Offset By Soaring Potash Prices

The United Steelworkers have commenced a strike after four days of mediation
did not resolve key contract issues. Unionized employees at Potash’s (POT) Allan Division, Cory Division and Patience Lake Division began striking 6:30 p.m. (EST) August 7th. The affected facilities represent approximately 30% of POT’s total annual potash output and about 5% of global demand.

Sounds like a major short-term problem, right? Not for uber-POT bull RBC. The bank is not yet concerned and refuses to adjust their financial forecast. Rising potash prices, they say, could solve everything:

Based on our assumptions, we estimate that the strike could result in a negative EPS impact of up to $0.06 for each week of strike action in 2008. The estimated earnings impact could be partially offset if potash prices increase due to the strike as less than one-third of PotashCorp’s production is affected by the strike.

At this time, we are maintaining our EPS estimates pending greater clarity on the potential length of the strike and the potential impact on potash prices.

We’ll revisit POT and RBC next week and see if the bank is willing to adjust their sky-high $375 target.

RBC maintains OUTPERFORM on Potash (POT), target $375.

See Also:
Potash (POT): “Weakness Represents Excellent Buying Opportunity”
Potash (POT) Target To $375 On Capacity Expansions

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