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Mosaic profit grows on higher volumes, shares rise

Jim Prokopanko, CEO of Mosaic Co.

Tibor Kolley/The Globe and Mail

U.S. fertilizer producer Mosaic Co. reported a 26 per cent rise in third-quarter profit, driven by higher potash and phosphate volumes and said it wants to buy back shares later this year.

Mosaic also said it expects a robust U.S. planting season, as farmers aim to maximize output to capitalize on high grain prices.

"Farmers are planning for an abundant crop," Chief Executive Jim Prokopanko said on a conference call with analysts. "If you're concerned that I'm on the verge of tearing up over birds chirping and seedlings reaching for the sun, we're not – solid economics lie at the heart of expectations for a big crop."

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Shares of the Plymouth, Minnesota-based company, which has a market value of about $25-billion (U.S.), rose 1.1 per cent to $59.30 in early trading on the New York Stock Exchange.

Net profit attributable to Mosaic in the third quarter rose to $344.6-million, or 81 cents per share, from $273.3-million, or 64 cents per share, a year earlier.

The results for the latest quarter included a negative impact from items, including anti-trust settlements and adjustments for asset retirement obligations amounting to 7 cents per share.

Net sales rose 2 per cent to $2.24-billion.

Analysts expected, on average, earnings per share of 88 cents and revenue of 2.29 billion, according to Thomson Reuters I/B/E/S.

Mosaic is the world's largest producer of finished phosphate products and a major miner of potash.

Mosaic, which this month announced a $1-billion, four-year investment in a phosphate production project in Saudi Arabia with Ma'aden and Saudi Basic Industries Corp JSC, also intends to buy back shares this year, said Chief Financial Officer Larry Stranghoener.

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About 129 million shares of Mosaic that are currently held by some shareholders of giant agribusiness company Cargill Inc., or about 30 per cent of Mosaic, will automatically convert to common shares starting in late November, unless they are sold earlier.

Tax restrictions on the shares expire in late May, after which Mosaic will look at buying back at least some of them, Stranghoener said.

The company is seeing strong demand in most of its markets and expects producer inventories to be drawn down in coming months, Prokopanko said. It expects global potash shipments in 2013 to be at the high end of its estimated range of 55 million to 57 million tonnes.

Mosaic said it expects to sell 2.3 million to 2.6 million tonnes of potash in the current quarter, ranging from $350 to $380 per tonne – down from the third quarter's $385 per tonne. It sold 1.8 million tonnes in the third quarter that ended Feb. 28, sharply higher over the year-earlier quarter.

The company expects average selling prices for phosphates to be flat in the current quarter, with sales volume ranging from 2.6 million to 2.9 million tonnes. It sold 2.6 million tonnes of phosphate in the third quarter.

Quarterly results were mostly in line with expectations, but guidance for weaker potash prices may be viewed negatively, Cowen Securities analyst Charles Neivert said in a note to clients.

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Key potash consumers China and India stayed out of the market for most of 2012's second half, bruising earnings for Mosaic, Potash Corporation of Saskatchewan and Agrium Inc., the three North American producers that export through Canpotex Ltd.

China agreed to a new supply contract with Canpotex on Dec. 31, midway through Mosaic's quarter, and a deal was announced with India on Feb. 7.

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