The Mosaic Co. reported net earnings of $1.02 billion ($2.29 per diluted share) for the second quarter ending Nov. 30, 2010. This includes an after tax gain of $570 million, or $1.28 per share, on the sale of its interests in Fosfertil S.A. These results compare with net earnings of $107.8 million ($.24 per share) for the second quarter ending Nov. 30, 2009.
Net sales for the quarter were $2.67 billion, up from the year-ago $1.7 billion.
Mosaic cited significantly higher phosphate selling prices and potash sales volumes for the improved results, partially offset by higher sulfur and ammonia prices.
“Mosaic is on pace for an outstanding year in fiscal 2011,” said Jim Prokopanko, Mosaic president and CEO. “Our second quarter results reflect strong global phosphate and potash demand. Market conditions are excellent and we are beginning calendar 2011 against a backdrop of expected record phosphate and potash demand, lower producer inventories, and a very lean global distribution pipeline. It’s a great time to be the world’s leading producer of phosphate and potash.”
Second-quarter phosphate operating income was $402.3 million on sales of $1.97 billion, versus the year-ago $29 million on sales of $1.33 billion. Total tons sold were 3.67 million mt, up 10 percent from the year-ago 3.34 million mt. The average DAP price was $461/mt, up from $287/mt. The average ammonia price was up 50 percent at $361/mt from the year-ago $241/mt, while sulfur was up 163 percent to $134/lt from the year-ago $51/lt.
Second-quarter potash operating income was $251.5 million on sales of $699 million, compared to the year-ago $150.6 million on sales of $414.3 million. Total potash tons sold were 1.8 million mt, up 75 percent from the year-ago 1.03 million mt. The average MOP price was off 11 percent, to $331/mt from $370/mt.
Six-month net income was $1.32 billion ($2.96 per share) on sales of $4.86 billion, up from the year-ago $208.4 million ($.47 per share) on sales of $3.17 billion.
Six-month phosphate operating income was $580.3 million on sales of $3.55 billion, versus the year-ago $75.5 million on sales of $2.52 billion. Total tons sold were up 8 percent, to 6.75 million mt from the year-ago 6.23 million mt. The average DAP price was up 58 percent to $447/mt from the year-ago $283/mt. While ammonia prices were up 50 percent to $376/mt from the year-ago $250/mt, sulfur was up 249 percent, to $143/lt from the year-ago $41/lt.
Six-month potash operating income was $469.5 million on sales of $1.32 billion, compared to the year-ago $249.9 million on sales of $747.6 million. Total tons sold were up 91 percent, to 3.48 million mt from the year-ago 1.82 million mt. The average MOP price was off 9 percent compared to a year ago, to $331/mt from $363/mt.
Mosaic gives corn, soy projections
“In the U.S., we expect a real contest for acreage this spring,” said Prokopanko. “Our analysis indicates that markets will need to bid for 92-93 million acres of corn and 77-78 million acres of soybeans.” He said 2010-11 demand is expected to rival 2006-07.
“The fall application season was outstanding, and P and K shipments this spring are expected to exceed the five-year average and the totals last fall.”
Mosaic is also buoyed by low inventories. It noted that U.S. producers reported holding just 488,000 mt of DAP/MAP as of Nov. 30, 2010, an all-time record low. In addition, it said North American potash producers reported inventories of 1.6 million mt of MOP, half of the level a year earlier, and down more than 20 percent from a three-year average for this date.
Mosaic estimates global phosphate shipments climbed to a record level of 57 million mt in calendar 2010 and will increase to 59-61 million mt in 2011. It expects use in India to go up 5 percent in 2011/12 based on positive agricultural commodity prices.
Mosaic expects its own sales volumes in the third quarter will range from 2.4-2.7 million mt, and estimates a realized DAP price, FOB plant, of $510-$540/mt for the quarter. Phosphate rate of operations are expected to exceed 85 percent of capacity.
Asked about flat Central Florida phosphate prices, Senior Vice President, Commercial, Richard McLellan told analysts it is a traditional lull after the fall season. He expects prices to improve in January and February as people step back into the market and start making plans for either spring demand in the U.S. or fall demand in South America.
Asked about more phosphate production coming on line by Ma’aden in the next few years and eventually Morocco’s OCP, Prokopanko said that with the phosphate market growing at 2.5-3 million mt per year, those projects could match world demand.
Vice President of Market Analysis and Strategic Planning Dr. Michael Rahm added that Chinese DAP/MAP exports are expected to be off 1 million mt in 2011 – from 4.7 million mt – due to changes in export tariffs.
As for sulfur, Prokopanko sees near-term tightness, as increasing demand for phosphate will mean increasing demand for sulfur. Going forward, however, he thinks sulfur production will rise to meet increasing phosphate demand.
Mosaic estimates global MOP shipments rebounded 59 percent to 49.7 million mt in 2010, and will climb to 53-56 million mt in 2011. It expects increases in all major consuming nations.
Mosaic expects its own MOP sales volumes to be 1.9-2.1 million mt in the third quarter, with realized prices FOB plant of $330-$350/mt. Capacity is expected to exceed 90 percent.
Prokopanko expects China to start buying potash in January and India in April. He said China has low inventories and needs the product to ramp up food production.
Mosaic restarts South Fort Meade mining
Mosaic reported that mining a limited portion of its South Fort Meade phosphate mine resumed in early December as a result of a partial settlement of the legal dispute brought by environmentalists over the mining of wetlands at the site. Mosaic expects to be able to mine the site for four months and produce some 900,000 mt during that period.
Mosaic said a hearing in the case before the U.S. Court of Appeals for the Eleventh Circuit is expected in the first week of April. “We believe that the permit was exhaustively reviewed and validly issued by the Army Corps of Engineers, and we look forward to presenting our case,” Prokopanko told analysts. He said the company is determined to regain full access to the mine.
The company has been using phos rock from its stake in Peru for its phosphate production in Louisiana, supplementing with purchases from third parties. Imported rock has substantially now replaced Florida rock for the Louisiana operations.
Mosaic said the loss of South Fort Meade during the second quarter had about a $30 million cost penalty relative to what could have been had the mine run full-out. The company said this penalty is likely to grow in the second half to the extent that it has to purchase outside rock