Mosaic Stumbles on Weak Demand for Phosphates

Mosaic Co. (NYSE: MOS) reported fiscal first quarter 2013 diluted adjusted earnings per share (EPS) of $1.03 on revenue of $2.5 billion. In the same period a year ago, the fertilizer maker reported diluted EPS of $1.17 on revenue of $3.1 billion. First-quarter results compare to the Thomson Reuters consensus estimates for EPS of $1.16 and $2.66 billion in revenue.

Mosaic’s president and CEO said:

The long-term outlook for crop nutrition is outstanding, and Mosaic is well positioned as the world’s largest potash and phosphates producer. Drought and other weather-related issues in several of the world’s key agricultural regions severely impacted this year’s corn, soybean and wheat crops and provided a vivid reminder of just how tenuous global food security is.

Mosaic said second-quarter potash sales would range from 1.6 to 1.9 million metric tons at a price of $420 to $450 per metric ton. Phosphate sales for the second quarter are expected to total 3 to 3.4 million metric tons at a price of $520 to $550 per metric ton. Gross margins in the phosphate segment are forecast to be flat. Operating capacity is expected to be above 70% in the potash segment and above 80% in the phosphate segment during the second quarter. The company offered no guidance on earnings.

In the first quarter, potash sales totaled 1.9 million metric tons at an average selling price of $529 per metric ton and the company’s plants operated at 65% of capacity. Prices were slightly higher than forecast and production came in at the low end of the forecast range. Phosphate sales totaled 2.7 million metric tons in the first quarter at an average selling price of $529 per metric ton. Both figures were near the upper part of the forecast range and phosphate production ran at 81% of capacity.

Phosphate sales were down 30% year-over-year and the company attributed that to poor execution, longer maintenance shutdowns, hurricanes, and low water in the Mississippi River. Potash sales were up 10% year-over-year although gross margins fell from 51% to 48%. The lower margins were due to higher costs and lower run-rates.

Mosaic’s shares are down about 2% in premarket trading, at $56.80, in a 52-week range of $44.43 to $62.65. Thomson Reuters had a consensus analyst price target of $84.46 before today’s report.

Paul Ausick