Mosaic Co. Reports Third Quarter Results

The Mosaic Co., Plymouth, MN, reported third quarter fiscal 2013 net earnings of $345 million, compared to $273 million a year ago. Earnings per diluted share were $0.81 in the quarter compared to $0.64 last year. The current year quarter included a $44 million, or $0.07 per share, negative impact from notable items. Operating earnings during the quarter were $419 million, roughly flat with $414 million a year ago. Mosaic’s net sales in the third quarter of fiscal 2013 were $2.24 billion, up from $2.19 billion last year, driven by higher potash and phosphate volumes.

“As we emerge from the traditionally slow third fiscal quarter, we are seeing strong demand and improving sentiment in most of our geographies,” said Jim Prokopanko, president and chief executive officer of Mosaic. “Global farm economics remain compelling, with continuing attractive commodity prices and low costs for critical crop inputs. Economic and demographic trends are extremely promising for Mosaic, and the Company’s long-term prospects are excellent.”

Mosaic’s gross margin for the third quarter of fiscal 2013 was $568 million, or 25% of net sales, compared to $522 million, or 24% of net sales, a year ago. The improvement in gross margin was primarily driven by higher potash volumes and lower phosphate raw material costs. Cash flow provided by operating activities in the third quarter of fiscal 2013 was $371 million compared to $405 million in the prior year. Capital expenditures totaled $398 million in the quarter. Mosaic’s total cash and cash equivalents were $3.3 billion and long-term debt was $1.0 billion as of Feb. 28, 2013.

“Following the signing of India and China contracts, which delivered better than expected demand from these two countries, we saw improving potash fundamentals and sentiment around the world,” said Prokopanko. “We expect producer inventories to be drawn down in coming months as North American dealers prepare for what is likely to be a very strong application season and Canpotex delivers against these base load contracts.”

Net sales in the Potash segment totaled $758 million for the third quarter, up 37% compared to $553 million a year ago, driven by significantly higher volumes, partially offset by lower prices. Gross margin was $308 million, or 41% of net sales, compared to $270 million, or 49% of net sales, a year ago. The year-over-year decline in gross margin rate is primarily driven by lower realized potash prices, an unrealized loss on derivatives, and higher depreciation and increased labor expenses as the Company prepares to bring on new production capacity. Additionally, the year-over-year change in gross margin rate was negatively impacted by approximately four percentage points due to the timing of Canpotex shipments. Operating earnings were $216 million, down eight percent, compared to $234 million in the prior year. The current quarter included a $42 million charge related to the settlement of the potash anti-trust litigation.

The third quarter average MOP selling price, FOB plant, was $385 per tonne, down from $453 per tonne from a year ago. The Potash segment’s total sales volumes for the third quarter were 1.8 million tonnes, compared to 1.1 million tonnes a year ago.

Potash production was 2.0 million tonnes, or 78% of operational capacity, up from 1.8 million tonnes last year.

“The supply and demand outlook for phosphates remains in balance,” Prokopanko said. “While we don’t expect India to come back to the market until later this year, recent price strengthening in Tampa exports reinforces our positive outlook. Over the long run, we maintain an optimistic view of phosphates, as evidenced by our recently announced joint venture with Ma’aden.”

Net sales in the Phosphates segment were $1.5 billion for the third quarter, down nine percent compared to last year, primarily driven by lower prices of finished product. Gross margin was $266 million, or 18% of net sales, compared to $259 million, or 16%, for the same period a year ago. The year over year improvement in gross margin rate was driven by lower raw material costs, partially offset by lower finished phosphate product prices. Operating earnings were $197 million, up four percent compared to $190 million last year.

The third quarter average DAP selling price, FOB plant, was $496 per tonne, compared to $536 per tonne a year ago. Phosphates segment total sales volumes were 2.6 million tonnes, flat with last year.

Phosphate rock production in Florida was 3.6 million tonnes in the quarter compared to 2.9 million tonnes last year, reflecting increased production at the South Fort Meade mine.

Mosaic’s North American finished phosphate production was 2.1 million tonnes, or 87% of operational capacity.

Selling, general and administrative expenses were $90 million for the third quarter, down slightly from $91 million a year ago.

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