The Mosaic Co. reported that operating earnings during the second quarter ending Nov. 30, 2012, were $560 million, down from the year-ago $797 million. Mosaic said the decline was primarily driven by lower phosphate volumes and margins. Mosaic’s net sales in the second quarter were $2.5 billion, down from $3.0 billion last year, driven by lower phosphate and potash volumes and lower phosphate prices.
Second-quarter net income was actually up, at $629 million ($1.47 per diluted share) versus the year-ago $624 million ($1.40 per share). The current year quarter included a $179 million ($0.42 per share) benefit from a decrease in the amount of unrecognized tax benefits reported on the balance sheet. Gross margins were down at $676 million from the year-ago $881 million.
Six-month operating income was $1.17 billion on sales of $5.04 billion, down from the year-ago $1.53 billion and $6.1 billion, respectively. Six-month net income was $1.06 billion ($2.48 per share), versus the year-ago $1.15 billion ($2.58 per share).
Second-quarter Phosphate net sales were $1.8 billion, down 19 percent from the year-ago quarter, driven by lower sales volumes and prices of finished product. Sales volumes were impacted by lower shipments to the export market, offset by near record domestic shipments. Gross margin was $318 million, or 18 percent of net sales, compared to $476 million, or 22 percent, for the same period a year ago. The year-over-year decline in gross margin rate was primarily driven by lower finished phosphate prices and sales volumes, marginally offset by lower raw material costs. Sequentially, the flat gross margin rate reflects the impact of higher fixed cost absorption and higher selling prices, offset by higher ammonia costs. Operating earnings were $245 million, down 43 percent from the year-ago $432 million. Last year’s quarter included a $20 million benefit from insurance proceeds related to Mosaic’s Faustina plant.
The second-quarter average DAP selling price, FOB plant, was $544/mt, compared to the year-ago $611/mt. Phosphate total sales volumes were 3.0 million mt versus the year-ago 3.2 million mt, primarily driven by lower export sales, partially offset by an increase in domestic sales.
Phosphate rock production in Florida was 3.9 million mt compared to 2.7 million mt, reflecting the increased production at the South Fort Meade mine. Mosaic has built up rock inventory and has begun shipping Florida rock to use in the Louisiana production facilities, which is expected to result in lower consumed rock costs beginning in the fourth quarter of fiscal 2013. Mosaic’s North American finished phosphate production was 2.1 million mt, or 86 percent of operational capacity, flat with last year.
"The global phosphate market appears to be in balance, with steady demand and reported U.S. producer inventories at historic averages," said Jim Prokopanko, Mosaic president and CEO. "Domestically, we’ve seen very strong shipments for fall application. Additionally, low Mississippi River levels are presenting logistical difficulties and consequently creating a sense of urgency to ensure product availability for the spring. Internationally, customers continue to delay purchases to avoid price risk.”
Second-quarter Potash net sales totaled $780 million, down 7 percent from the year-ago $839 million, driven by lower export volumes and lower domestic and international MOP prices, partially offset by higher domestic volumes. Gross margin was $355.4 million, or 46 percent of net sales, compared to $394 million, or 47 percent of net sales, a year ago. Operating earnings were $316 million, down 12 percent from the year-ago $358 million.
The second-quarter average MOP selling price, FOB plant, was $443/mt, up slightly from a year ago, as generally lower crop nutrient prices were offset by a higher proportion of granular domestic shipments and higher pricin