The Mosaic Co., Tampa, posted second-quarter net income attributable to the company of $47.4 million ($0.12 per share), beating the average analyst estimate of a $29.2 million loss (GM July 17, p. 1).
The results were up from the year-ago loss of $233.1 million ($0.60 per share), which included a $284 million noncash after-tax charge for the permanent closure of the company’s Plant City phosphate facility. Gross margin was $257 million, up from $227.2 million. Adjusted EBITDA was $383 million, up from $360 million.
Mosaic reported net sales of $2 billion, off from the year-ago $2.18 billion. Finished goods sales volume increased 16 percent over the prior year period.
“Mosaic’s results this quarter reflect the accelerated pace of our cost structure transformation, excellent execution throughout our production and supply chain functions, and strengthening markets,” said Joc O’Rourke, President and CEO. “We expect significant further cost progress in the years ahead.
“We’ve delivered strong results despite low market prices for our products, demonstrating the financial resilience earned through wide-ranging efficiency improvements, including reduction of costs across the company by over $1 billion over the past several years,” he added. “In addition, the company is on course to generate $700 million in additional transformation benefits over the 2019 base in the next 5 years.”
Wall Street rewarded Mosaic – shares closed up 13.5 percent on Aug. 4 to $15.53. Mosaic announced the news after markets closed on Aug. 3. Shares of other major fertilizer companies Nutrien Ltd. and CF Industries Holdings Inc. also went up.
Citi analyst P.J. Juvekar wrote that Mosaic’s robust phosphate volume bodes well for peer Nutrien. He added that the company’s comments on strengthening fertilizer/agriculture markets in the second-half is “broadly supportive for our ag coverage.”
BMO’s Joel Jackson said the company’s beat comes amid a backdrop where investors are trying to find more bullish signals for the stock. He noted that the worst seems to be behind Mosaic, though he remained concerned on the potash outlook, as it is expected to stay challenged for some time.
Scotiabank analyst Ben Isaacson predicted that “the market will re-rate the stock on the back of the well-rounded beat, slightly more favorable outlook, and solid execution at management controlling its controllables.”
Mosaic reported that through the second-quarter it received $189 million from both U.S. and non-U.S. tax refunds and the unwinding of interest rate swaps.
Mosaic said that second-quarter sales volumes were up for all three of its segments – Potash, Phosphate, and Mosaic Fertilizantes.
Second-quarter potash sales volumes were a record 2.6 million mt, up from the year-ago 2.2 million mt. Potash gross margin was $132 million on sales of $555 million, down from $181 million and $599 million, respectively. The average MOP selling price was $180/mt, down from $246/mt. However, cash costs for MOP production, including brine costs, were $65/mt, the lowest in over a decade.
Second-quarter phosphate gross margin was $18 million on net sales of $763 million, up from the year-ago negative $12 million on sales of $917 million. Gross margin per mt improved to $7/mt from negative $7/mt. Phosphate volumes were 2.2 million mt, level with year-ago, though average DAP selling prices were $287/mt down from $345/mt.
The company said a loss of production at Mosaic’s Miski Mayo joint venture mine in Peru, which was impacted by a government-mandated shutdown due to COVID0-19 in the second quarter, negatively impacted net sales by about $30 million and gross margin by $8 million. The mine has returned to production.
In other phosphate news, the U.S. International Trade Commission on Aug. 7 voted to continue investigations concerning phosphate fertilizer from Morocco and Russia. A preliminary decision on whether to continue the investigations was expected. Mosaic filed petitions seeking countervailing duties (CVD) against the two countries in June (GM June 26, p. 1).
The company said that it expects the U.S. International Trade Commission to announce the result of its preliminary injury investigation (GM June 26, p. 1) against Moroccan and Russian phosphates on or about Aug. 7.
Mosaic Fertilizantes reported gross margin of $101 million on net sales of $787 million, up from the year-ago $35 million and $833 million, respectively. The improved margins were attributed primarily to lower turnaround and idle costs and a significant currency benefit. The year-ago period was impacted by downtime due to actions to adapt to regulatory changes that impacted Brazilian phosphate tailings dams.
The segment recorded its best-ever second-quarter sales volumes at 2.6 million mt, up from 2.1 million mt. Average MAP selling prices were $314/mt, down from $446/mt.
Mosaic reported a loss for the six-month period at $155.6 million ($0.41 per share) on net sales of $3.84 billion, versus the year-ago loss of $102.3 million ($0.27 per share) and net sales of $4.08 billion. Gross margin was $298.4 million, down from $536.7 million. Adjusted EBITDA also down at $617 million from the year-ago $790 million.
Six-month potash sales volumes were 4.5 million mt versus the year-ago 4 million. Phosphates were 4.2 million mt versus 4 million mt, while Mosaic Fertilizantes were up 1 million mt, to 4.6 million mt from 3.6 million mt.