The Mosaic Co., Plymouth, Minn., reported third-quarter 2018 net earnings of $247.5 million ($0.64 per diluted share) on net sales of $2.93 billion, up from the year-ago $227.5 million ($0.65 per share) and $1.98 billion, respectively. Third-quarter adjusted EBITDA was $606 million, up from both the second-quarter and year-ago figures. Third-quarter diluted earnings per share included a negative impact of $0.11 per share from notable items, primarily related to discrete tax items and costs associated with the Vale Fertilizantes acquisition.
“We saw strong fundamentals in the third quarter, and that momentum is continuing,” said Joc O’Rourke, Mosaic president and CEO. “We’ve increased our full-year earnings guidance to reflect strong operational performance across business units, as well as improving market conditions. Our excellent progress on the transformational initiatives at Mosaic Fertilizantes is delivering tangible results to the bottom line.”
Wall Street rewarded Mosaic with a 10.6 percent uptick in share prices. The company closed Nov. 6 at $35.64, up from the prior day $32.22.
O’Rourke told analysts on Nov. 6 that several actions have tightened phosphate supplies, including its own idling of the Plant City, Fla., facility in late 2017, as well as slower-than-expected ramp-ups of new facilities and reduced exports from China, which have been attributed to more environmental regulation.
As for Plant City, Mosaic said it expects to be in a position to make a decision by year-end.
On the potash side, O’Rourke said supply disruptions by some competitors, as well as slow ramp-up of new supply combined with growing demand, drove prices higher by approximately $60/mt than year-ago levels.
The company told analysts while there has been a late start to the fall application season due to wet weather, that now that things have started to move and the company is “seeing very big volume movements.” The company said record crops removed much fertilizer from the soil that needs to be replaced.
Mosaic is now projecting full-year adjusted EBITDA of $1.90-$2 billion, up from $1.8-$1.95 billion. Full-year adjusted EPS is now seen at $1.80-$2.00, up from $1.45-$1.80, due to strong underlying business performance and lowered expected full-year tax rate.
The company said it has delivered Mosaic Fertilizantes synergy targets with $128 million in gross realized synergies year-to-date. It has raised its full-year 2018 synergy target to $140-$160 million, and expects to achieve the full $275 million target ahead of schedule.
Mosaic has also completed the commitment to repay $700 million of long-term debt, two years ahead of the initial 2020 target.
Third-quarter Phosphate gross margins were $180 million on sales of $1 billion, up from the year-ago $67 million and $779 million, respectively. The increase in margins was primarily driven by higher average sales prices and operational improvements that lowered controllable operating costs. Year-ago results include negative impacts from Hurricane Irma of 220,000 mt and $26 million, respectively. Sales volumes were up at 2.2 million mt with a gross mt margin of $80/mt, up from the year-ago 2.1 million and $32/mt, respectively.
Third-quarter Potash gross margins were $161 million on sales of $609 million, up from the year-ago $99 million and $474 million, respectively. Margins were positively impacted by higher average selling prices, partially offset by the timing of turnaround activities. Sales volumes were 2.4 million mt, up from 2.2 million mt, while gross margins per mt were $66/mt, up from $44/mt.
Third-quarter Mosaic Fertilizantes gross margins were $152 million on sales of $1.4 billion, up from the year-ago $52 million and $806 million, respectively. Margins were driven by the Vale Fertilizantes acquisition, as well as higher margins in the legacy distribution business. Sales volumes were 3.6 million mt, up from 2.2 million mt, while margins per mt were $42/mt versus $24/mt.
Nine-month net earnings were $357.7 million ($0.93 per share) on net sales of $7.07 billion, up from the year-ago $323.9 million ($0.92 per share) and $5.32 billion, respectively. Adjusted EBITDA was $1.4 billion, up 71 percent from the year-ago figure.
Going forward, Mosaic expects full-year Potash tons sold to be 8.6-9 million mt, Phosphates at 8.2-8.5 million mt, and Mosaic Fertilizantes at 8.9-9.2 million mt.
Fourth-quarter Potash sales are expected to be 2.2-2.5 million mt, Phosphate 1.7-2 million, and Mosaic Fertilizantes 1.9-2.2 million mt. The company expects higher fourth-quarter selling prices for Mosaic Fertilizantes to be partially offset by the recent strengthening of the Brazilian currency.