Mosaic Co. (NYSE: MOS), one of the world's largest producers of concentrated phosphate and potash, is scheduled to release financial results for the fiscal third quarter 2010 after the closing bell on Wednesday, March 31, 2010. Analysts, on average, expect the company to report earnings of 62 cents per share on revenue of $1.80 billion. In the year ago quarter, the company posted earnings of 13 cents per share on revenue of $1.38 billion.The Mosaic Company engages in the production and marketing of concentrated phosphate and potash crop nutrients for the agriculture industry worldwide. The company serves customers in more than 40 countries. It is leading producer of potash in North America, with nearly 40 percent market share. It is the second-largest global potash producer, with a global market share of 13%. Mosaic is also the world’s largest integrated phosphate producer. Its share of the world phosphate production is 13 percent while its share of the US production is 58 percent.
In the preceding fiscal second quarter, the Plymouth, Minnesota-based company reported that net income plunged 89% to $107.8 million or $0.24 per share, compared to $959.8 million or $2.15 per share, in the year-ago quarter. Quarterly revenue 43% to $1.71 billion from $3.01 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $0.35 per share on revenue of $1.68 billion. The company generated nearly $175 million in cash flow from operations this quarter despite weak potash shipments and lower selling prices throughout most of the quarter. Gross margin for the second quarter fell to 18% from 26% a year ago. The average second quarter diammonium phosphate selling price, FOB plant, was $287 per tonne, compared to $1,086 in the second quarter of last year.
The fertilizer industry was hit hard due to credit crisis as tight lending conditions hurt farmers’ ability to take on loans – preventing them not only from making capital expenditures on things like tractors and other machinery, but also hurting their ability to buy fertilizer.As a result fertilizer demand plummeted while prices crashed. However, demand for fertilizers seems likely to increase in 2010, as farmers replenish soils following two years of limited applications. The recovery in the global economy is expected to have a positive impact on the demand for phosphate and potash. Early this month, Canpotex, the exporter of Potash Corp., Mosaic and Agrium announced it was hiking its prices by $30 on potash sales which boosted prices above $400 a metric ton. Last month, another major potash exporter, Belarusian Potash Co., raised its prices by $25 a metric ton or 6% in Brazil and Asia.
"Phosphate demand is rebounding nicely, and we anticipate positive comparative volume trends over the balance of fiscal 2010. Although potash orders remained soft, sales activity picked up toward the end of the quarter and we see this trend continuing into calendar 2010," Jim Prokopanko, Mosaic's President and Chief Executive Officer said in January. He added that "prospects for phosphate and potash markets look increasingly positive at this point. We project a strong recovery in global demand and shipments this calendar year due to relatively high agricultural commodity prices, positive farm economics, and the need to restock a bare distribution channel."
The company expects Phosphates segment sales volumes for the third quarter to be in the range of 2.2 to 2.6 million tonnes. Historically, the company's shipments in its third fiscal quarter are the lowest due to seasonality. Mosaic expects third quarter realized DAP price, FOB plant, to be $310 to $350 per tonne.
Among other developments during the quarter, the fertilizer maker granted an option to Vale to purchase its minority stake in Fertilizantes Fosfatados and Fertifos Administracao e Participacao. Mosaic also granted Vale an option to purchase its Cubatao operations in Brazil.
The company's stock currently trades at a forward P/E (fye 31-May-11) of 16.15 and PEG Ratio (5 yr expected)of 2.86. In terms of stock performance, Mosaic shares are up 39% over the past year.
Full Disclosure: None.
