Canadian fertilizer giant Potash Corp. of Saskatchewan, Inc. (POT,POT.TO) announced that changes to potash taxation in conjunction with the Government of Saskatchewan's 2015-16 provincial budget are expected to decrease the company's 2015 pre-tax earnings by C$75 to C$100 million.
The impact reflects a significant change in the timing of the annual allowable deduction for expansion and maintenance capital expenditures and is most pronounced in 2015 - and to a lesser extent 2016 - as the company wind down its capital expansion projects and incur higher maintenance capital spending as a result of these expansions. A potash taxation review was also announced as part of the budget release.
"PotashCorp is disappointed in the announcement today. While we understand the difficult revenue situation facing the Government, we are nearing completion of a $6 billion investment in Saskatchewan which was based on the existing tax structure remaining in place. Changing the rules midstream impacts the ability of our shareholders to earn a fair return on their capital and undermines Saskatchewan's relative competitiveness," said President and CEO Jochen Tilk.
"We are focused on ensuring that any changes to the existing system continue providing benefits to the people of Saskatchewan, while also protecting the competitiveness of the industry and the long-term interests of our investors, employees and customers. A constructive and consultative review process is an important part of ensuring such an outcome, and it is our hope that the Government will pursue this avenue," Tilk said.
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