The Mosaic Co. reported record net earnings of $862.5 million ($1.93 per diluted share) on sales of $3.47 billion for the fourth quarter ending May 31, 2008, compared to the year-ago $202.6 million ($.46 per share) and $1.68 billion. Fiscal year 2008 ended with $2.08 billion ($4.67 per share) in net earnings on sales of $9.81 billion, up from the prior year $419.7 million ($.95 per share) and $5.77 billion, respectively.
“We delivered outstanding financial results by every measure and in every segment during fiscal 2008 and intend to build upon these results in fiscal 2009,” said Jim Prokopanko, Mosaic president and CEO. “The fundamental driver of our business – the need for more food – continues unabated. Through balanced application of crop nutrients, farmers increase yields and help produce more food for people around the world.”
Fourth-quarter phosphate operating earnings were $794.4 million on sales of $2.03 billion, up from the year-ago $234.3 million and $959.7 million, respectively. FY’08 operating income was $1.9 billion on sales of $5.7 billion, up from the prior year $311.2 million and $3.2 billion, respectively.
Fourth-quarter potash operating earnings were $331.3 million on sales of $860.5 million, up from the year-ago $162.2 million and $494.0 million. FY’08 operating earnings were $798.6 million on sales of $2.25 billion, compared to the prior year’s $368.2 million and $1.48 billion, respectively.
Strong demand and higher prices drove the record results. While actual phosphate sales volumes were up only 5 percent for the quarter and down 2 percent for the year, DAP prices were up 123 percent for the quarter and 94 percent for the year. Fourth-quarter phosphate volumes were 2.35 million mt versus the year-ago 2.24 million mt. FY’08 volumes were 9.08 million mt, up from the year-ago 8.9 million mt. The fourth quarter average DAP price was $754/mt, up from the year-ago $338/mt. The FY’08 average was $513/mt, up from the year-ago $264/mt.
Potash sales volumes were down 4 percent for the quarter and up 8 percent for the year. However, potash prices were up 118 percent for the quarter and 57 percent for the year. Fourth-quarter volumes were 2.36 million mt, down from the year-ago 2.46 million. FY 08 volumes were up, at 8.56 million mt from the prior year 7.9 million. The average fourth-quarter MOP price was $335/mt, up from the year-ago $154/mt. The FY’08 price was $226/mt, up from $144/mt.
Mosaic expects sales of phosphates to be 9.0-9.4 million mt and potash to be 8.2-8.6 million mt for FY ’09. Mosaic said its realized DAP price for the first quarter of FY’09 is an estimated $1,020-$1,080/mt, though there will be higher ammonia and sulfur prices. Its first quarter average MOP price is $460-$510/mt, with this being partially offset by higher Canadian resource taxes and royalties.
Mosaic Vice President of Market Analysis and Strategic Planning Michael Rahm told analysts that the outlook for core phosphate and potash businesses remains exceptionally strong. Rahm is not concerned over demand destruction in light of positive farmer economics. “The bottom line is that profitable farm economics are expected to keep nutrient demand growing at the higher rates of the last few years. I think it is fair to say the markets now are asking farmers to put the pedal to the metal, as they prepare for the fast approaching planting season in the Southern Hemisphere and for the spring 2009 planting season in the Northern Hemisphere.”
The company said it began FY’09 with very low potash inventories compared to the year-ago period. In addition, Mosaic is expecting China to import near record volumes of potash in 2009, as well as good demand from other major buyers, with the supply/demand balance extremely tight. Prokopanko said he would not be surprised if China leaves its 135 percent export duty in place due to its own domestic demand.
Mosaic said global demand for crop nutrients today is growing at double the rate of the last 10 years. The company cited forecasts by the International Fertilizer Industry Association that indicated demand is growing at a compound annual rate of 4.2 percent since 2006. This rate is more than double the rate of 1.7 percent from 1995-2005. Phosphate demand growth has accelerated from 1.9 percent to 3.8 percent per year, while potash demand growth has increased from 2.3 to 4.9 percent per year between these same two periods.
Rahm is currently eyeing 2009 corn acreage in the U.S. at 94-95 million acres.
Mosaic also outlined its expansion initiatives, saying it is aggressively pursuing plans to grow the potash business by more than 5 million mt of annual capacity over the next 12 years. The company currently has projects underway at its Colonsay and Belle Plaine potash facilities. Colonsay’s additional 300,000 mt/y capacity is expected to come online toward the end of 2009, followed by Belle Plaine. The proceeds from the $1.6 billion sale of Saskferco Inc. will go toward potash expansion.
Another investment includes the restart of certain sulfuric and phosphoric acid production at its South Pierce facility. Mosaic said this added production will allow it to more fully utilize the existing granulation capacity at the New Wales plant.
Mosaic also plans to expand production for its MicroEssentials product line. In addition, it plans an additional waste heat recovery system and a Riverview concentrate plant to reduce energy costs.