March 30, 2012


Mosaic reveals US$300-million bet on potash market recoil


Mosaic announced a US$300-million wager in the potash market recovery from a slowdown, which saw sales volumes of the nutrient slump 41% in the latest quarter, fuelling a slashing in group earnings.


Even after mine cutbacks, which restricted output to 79% of capacity, the US-based fertiliser giant produced 1.82 million tonnes of potash in the December-to-February period.


This was 730,000 tonnes ahead of sales, which tumbled to 1.09 million tonnes, and allowed "a replenishment of low beginning inventories and positioning of product for an expected strong North American application season".


The rebuild of 730,000 tonnes is worth at least US$300 million at the average selling price of US$420-450 a tonne expected for the current quarter.


Jim Prokopanko, the Mosaic chief executive, said: "During the quarter, we positioned inventory to capture global demand as it emerges. We continue to expect near-record global shipments in 2012, and a very strong North American spring season."


Indeed, the group expects sales volumes to recover to 1.7-2.2 million tonnes during the March-to-May period, potentially matching the 2.2 million tonnes achieved the year before in what is seasonally a strong period.


Prokopanko blamed the sales slowdown in the December-to-February period, which dragged potash sector operating profits down 43% to US$233.9 million, on "risk aversion" which exaggerated a typical "seasonal lull".


"The potash segment's operating results reflect delayed purchases, as buyers remained cautious," he said.


A range of fertiliser groups have reported sales downturns since late last year, blamed on economic jitters and an autumn decline in crop prices.


Mosaic suffered the extra headwind of, in its phosphate division, higher costs, reflecting in part an outage at a Louisiana ammonia plant, besides a loss of production from a Florida mine, South Fort Meade, during a legal dispute, which was settled on Wednesday.


"While margins are expected to remain compressed through the end of this fiscal year, the beginning of fiscal 2013 should benefit from increased production at the South Fort Meade mine and lower spot prices on raw materials," Prokopanko said.


Group earnings tumbled to US$273.3 million, from US$542.1 million a year before, on revenues down 1.1% at US$2.19 billion.


Earnings per share were, at US$0.64, below Wall Street forecasts of a US$0.74-a-share result.


Mosaic shares closed 5.1% lower at US$55.27 in New York.

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