Medium
Profitability
Unprofitable Potash
Practice this intermediate profitability case interview question in the Energy sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.
ProHub Comment
This is a classic profitability case testing the candidate's ability to isolate root causes through the framework of Price × Volume × Costs. The key insight is recognizing that product mix shifts, not individual price or cost changes, drove margin erosion. The case also introduces a strategic consideration about whether investing $810M to eliminate a freight discount is justified.
Estimated Time
26 minutes
Difficulty
Medium
Source
Queen's
10
/ 100
Your client is the Potash Corporation of Saskatchewan, which mines potash, phosphate, nitrogen and other fertilizer products. In the past year, sales volumes have hit an all-time high, but profits have slipped in the most recent quarter. What happened and how will you fix this?
Clarifying Information
- Potash is a potassium-rich salt that is mined from underground deposits formed from evaporated sea beds millions of years ago
- The client is the largest producer of fertilizer products in Canada
- Industry is highly fragmented (commoditized), no competitor large enough to have affected sales
- Company recently began switching to offshore potash (vs. North American potash) as it can be produced more cheaply
- Offshore potash is projected to grow 50% from 2012 to 2013
- Industry standard for potash is to have the customer pay their own freight with whomever they wish to have transport the product
- Due to higher freight costs customers face, the sale price of offshore potash is heavily discounted versus North American potash
- Prices and costs of individual products are unchanged
- Gross margins: Potash: $250/tonne, Nitrogen: $150/tonne and Phosphate: $100/tonne