Market and product
Mosaic unveils $300m bet on potash market rebound
Mosaic unveiled a $300m bet in a rebound in the potash market from a slowdown which saw sales volumes of the nutrient plunge 41% in the latest quarter, fuelling a halving in group earnings.
Even after mine cutbacks, which restricted output to 79% of capacity, the US-based fertilizer giant produced 1.82m tonnes of potash in the December-to-February period.
This was 730,000 tonnes ahead of sales, which tumbled to 1.09m 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 $300m at the average selling price of $420-450 a tonne expected for the current quarter.
'Very strong spring'
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 1.7m-2.2m tonnes during the March-to-May period, potentially matching the 2.2m tonnes achieved the year before in what is seasonally a strong period.
'Risk aversion'
Mr Prokopanko blamed the sales slowdown in the December-to-February period, which dragged potash sector operating profits down 43% to $233.9m, on "risk aversion" which exaggerated a typical "seasonal lull".
Mosaic forecasts for March-to-May quarter Potash sales volumes: 1.7m-2.2m tonnes Potash price: $420-450 a tonne Potash operating rate: more than 70% of capacity Phosphate sales volumes: 2.3m-2.7m tonnes Phosphate price: $460-490 a tonne Phosphate operating rate: more than 80% of capacity |
A range of fertilizer 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," Mr Prokopanko said.
Below forecasts
Group earnings tumbled to $273.3m, from $542.1m a year before, on revenues down 1.1% at $2.19bn.
Earnings per share were, at $0.64, below Wall Street forecasts of a $0.74-a-share result.
Mosaic shares closed 5.1% lower at $55.27 in New York.
