Potash Corporation of Saskatchewan Inc. (TSX:POT)(NYSE:POT) is down more than 40% in the past 12 months and continues to test new lows.

Let’s take a look at the current situation to see if the bottom could be in sight.

Earnings woes

Weak fertilizer prices continue to take a toll on Potash Corp.’s bottom line.

The company reported Q2 2016 earnings of US$121 million, or US$0.14 per share. For the first six months of the year the company earned US$196 million, or US$0.23 per share.

Potash gross margins came in at US$123 million in Q2, down from US$417 million in the same period last year. Sales volumes fell 16%, and the company’s average realized potash sales price slid to US$154 per tonne, down from US$273 per tonne in Q2 2015.

Nitrogen gross margins also dropped significantly. The average realized sale price in Q2 was US$244 per tonne, down from US$334 per tonne in the same period last year.

Phosphate sales in the second quarter dropped 25% compared with Q2 last year.

Lowered guidance

The difficult market conditions forced Potash Corp. to lower its guidance for 2016. Earnings are now expected to be US$0.40-0.55 per share, a big drop from the previous target of US$0.60-0.80 released just a few months ago when the Q1 numbers came out.

Potash sales volumes are still expected to be 8.3-8.8 million tonnes, but prices have come down so far that margins are getting crushed.

Dividend cut

Management just slashed the quarterly dividend by 60% from US$0.25 per share to US$0.10. The move shouldn’t be a surprise for investors as it was quite evident after the Q1 report that the payout could be at risk.

The new distribution provides a yield of about 2.5%.

Is the bottom in sight?

Potash Corp. says brighter days should be on the horizon.

The recently settled contracts with India and China are expected to bring buyers off the sidelines as uncertainty about pricing is removed from the market.

Demand remains healthy, and global shipments of potash for 2016 are expected to be in line with the past two years at 58-61 million tonnes.

North American shipments through the second half of 2016 are expected to improve, driving full-year deliveries above the 2015 level and higher than previous guidance for 2016.

Latin American shipments cold also rise on better affordability. The Brazilian real has gained more than 20% against the U.S. dollar in the past six months.

Nonetheless, the market remains under pressure as battles for market share and abundant supply continue to put pressure on prices. In the near term, investors shouldn’t expect much relief.

Should you buy?

Management really missed the boat when it provided guidance at the end of Q1, so there is bit of a credibility issue right now.

However, the best time to buy a commodity stock is often during the worst part of a cyclical downturn, and the long-term outlook for global fertilizer demand is positive.

Potash Corp. is a low-cost producer and is near the end of a multi-year capital program, so the company is positioned well to benefit when the market finally recovers.

There isn’t a rush to buy the stock today, but contrarian types should keep Potash Corp. on the radar. Further weakness could present an opportunity for buy-and-hold investors.

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Fool contributor Andrew Walker owns shares of Potash Corp.