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Mosaic 2Q earnings up despite slow start

The Mosaic Co. reported increased net earnings for the second quarter ending Nov. 30, 2006, to $65.9 million ($.15 per diluted share ) on sales of $1.52 billion, versus the year-ago $55 million ($.13 per share) and $1.50 billion, respectively. “The second quarter got off to a slow start as a result of a delayed fall season but ended on a bright note, with an increase in sales volumes in November,” said Mosaic President and CEO Jim Prokopanko. Likewise, he said sales have continued strong into the third quarter, with good supply/demand fundamentals for nitrogen and phosphates in particular.

Despite the increase in net earnings, Mosaic saw second-quarter declines in gross margin and operating earnings due to lower selling prices in phosphates and potash and higher production costs, partially offset by unrealized mark-to-market derivative gains of $.9 million versus year-ago losses in that category of $7.5 million.

Results were also up for the first half at $174.9 million ($.40 per share) on sales of $2.8 billion, versus the year-ago $131.1 million ($.30 per share) and $2.9 billion, respectively.

Mosaic told analysts it sees a 10-11 percent increase in phosphate and potash sales for the fertilizer year ending in June 2007.

Two bright spots are the biofuels industry and India, which the company said is “on fire,” due partly to low foodstocks. High soybean prices have also renewed optimism for better conditions in Brazil.

Responding to inquiries whether Potash Corp. of Saskatchewan Inc. is the only potash producer that can add incremental capacity in the next three-five years, Mosaic said it could as well, with the potential to add 200,000 mt/y at Colonsay and 500,000 mt/y at Belle Plaine through 2012.

As for the new inflow at Esterhazy, the company said its goal is to get back to traditional levels of inflow in months, if not weeks.

Overall fiscal 2007 guidance remains the same with respect to volumes – 8.5-9.3 million mt of phosphate and 7.7-8.1 million mt of potash.

Mosaic told analysts that 2008 could even be better than 2007 if the creeks don’t rise.

Net Sales $/m 2Q-06 2Q-05 YTD-06 YTD-05
Phosphates 763.9 735.8 1,553.5 1,592.3
Potash 352.1 330.2 642.2 597.9
Nitrogen 25.8 35.2 46.9 59.4
Offshore 499.9 467.8 803.8 807.8
Total 1,522.0 1,497.5 2,810.6 2,901.1

Operating Earnings

Net Sales $/m 2Q-06 2Q-05 YTD-06 YTD-05
Phosphate 5.1 41.1 88.0 148.0
Potash 78.2 111.3 139.0 209.8
Nitrogen 2.9 5.0 2.8 5.3
Offshore 4.5 (5.8) .9 (14.0)
Total 90.7 139.3 222.3 331.3

Agrium posts 4Q loss due to write-down

Agrium Inc. reported a net loss of $62 million ($.47 per diluted share) on sales of $944 million during the fourth quarter ending Dec. 31, 2006. Agrium was in the loss column due to a $100 million charge taken on its phosphate assets in late 2006 (GM Jan. 1, p. 1). Excluding the write-down, earnings would have been $33 million ($.25 per share). Agrium had year-ago net earnings of $54 million ($.40 per share) on sales of $817 million.

For the year ending in December, Agrium reported net earnings of $33 million ($.25 per share) on sales of $4.37 billion, versus 2005’s $283 million ($2.12 per share) and sales of $3.49 billion. Agrium said the reduction in year-over-year results was due to lower nitrogen and potash sales prices, plus lower production and sales from the Vanscoy potash, Redwater phosphate, and Kenai nitrogen facilities.

During the fourth quarter, Agrium noted that from its Wholesale operations, it sold a non-core oil and gas property in the Canadian Artic and recorded a $13 million gain on the sale.

Agrium has adjusted its reporting for its Wholesale business, now reporting North and South America as one business. It is also now referring to its Specialty Products segment as Advanced Technologies.

In the Wholesale business, Agrium said international sales volumes and gross profit were off significantly due entirely to lower sales from Kenai. It noted that Profertil increased fourth-quarter sales volumes by 10 percent, though it noted that urea sales into the Argentina market are subject to price controls of $300/mt to growers, with this possibly applying for all of 2007. Agrium said it was able to delay a turnaround of Profertil until after the Argentine spring season was over in the fourth quarter. A turnaround was started Jan. 20, and the facility is expected to restart Feb. 5.

Saying it is the best agricultural outlook in many years, Agrium President and CEO Mike Wilson said the only major risk he could foresee for this year is weather. The company noted that urea and UAN imports into the U.S. for the current fertilizer year are down 35-40 percent, and ammonia is down 10 percent compared to year-ago figures. Agrium saw increased combined North and South American seed sales during the fourth quarter (up 26 percent) and for the year (up 18 percent) as good bellwethers for the coming season.

Agrium expects to make a decision on whether to proceed with a new nitrogen plant in Egypt early in the second quarter. The company will likely decide on another expansion at its Vanscoy potash mine late in the year, while any decision on a new greenfield project for Manitoba would be further down the road. The company is weighing whether to put its next ESN expansion at its Carseland facility or actually at a location within the market area. ESN sales have now expanded beyond the Western U.S. to Western Canada and the Midwest.

Other
Wholesale 4Q-06 Net Sales 4Q-06 Gross Profit 4Q-05 Net Sales 4Q-05 Gross Profit
Nitrogen 344 65 414 76
Phosphate 61 4 83 10
Potash 49 24 57 34
Net Sales 537 97 554 120
Retail
Fertilizer 246 47 161 33
Chemicals 81 49 76 41
Other 57 29 30 16
Total 384 125 267 90
Adv. Tech 36 7
Year 2006 Year 2005
Wholesale Net Sales Gross Profit Net Sales Gross Profit
Nitrogen 1,376 291 1,622 479
Phosphate 298 27 319 59
Potash 213 98 255 157
Net Sales 2,269 435 2,196 695
Retail
Fertilizer 1,065 217 626 141
Chemicals 591 154 458 130
319 124 158 76
Total 1,975 495 1,242 347
Adv. Tech 101 19

Terra, Kemira UK deal under trade review

Sioux City-Terra Industries Inc. and Kemira GrowHow Oyj have announced that the UK Office of Fair Trading has referred their planned joint venture to the Competition Commission. This review could take six months. The two announced in October their plan to create a jv to operate the fertilizer and associated process chemicals businesses of both companies in the UK. Both businesses produce ammonium nitrate, which is the main nitrogen fertilizer consumed in the UK. Terra said that due to the complex nature of the case, it was not surprised by the OFT decision.

Yara seeks arbitration with Acron

Oslo-Yara International ASA has confirmed that it has sought arbitration in Stockholm with Russia’s Acron. The two share ownership of Nordic Rus Holding ?Çô 49 percent for Yara, 51 percent Acron. Nordic oversees Yara/Acron interests in the Russian firm Apatit; Yara’s interest in Apatit is 8.2 percent. Yara says Acron has treated Nordic Rus as a wholly-owned subsidiary and exercised influence over Apatit with no regard for Yara’s requests or interest. After repeated attempts to get Acron to change, Yara said it was compelled to seek arbitration.

Simplot worker severely injured

Smoky Canyon, Idaho-An Afton, Wyo., man was severely injured Jan. 29 in an accident at the J.R. Simplot Co.’s Smoky Canyon Mine in Southeast Idaho near the Wyoming border. Jedd Nield, 51, is in intensive care at the University of Utah Medical Center in Salt Lake City. Nield was operating drilling equipment at the open pit phosphate mine. A U.S. Mine Safety Health Administration team is investigating the accident. Operations have been suspended in immediate proximity to the scene and will not resume until the investigation is complete. Simplot safety experts are also conducting an internal investigation to determine what went wrong.

Magellan NH3 pipeline results off

Tulsa-Operating margins were off for Magellan Midstream Partners LP’s ammonia pipeline business in the fourth quarter and year ending Dec. 31, 2006. Fourth-quarter margins were $300,000 on sales of $4.8 million and volumes of 189,000 st, compared to the year-ago $4.6 million, $5.9 million, and 226,000 st, respectively. Magellan said the quarter was negatively impacted by high integrity costs and an October 2006 pipeline release that reduced volumes and increased environmental costs. For the year, margins were down to $2.5 million on sales of $16.5 million and volumes of 726,000 st, versus 2005’s $7.7 million, $15.8 million, and 713,000 st. Magellan-wide, the company saw a boost in earnings for both the quarter and year. Fourth-quarter net income was $59.4 million on sales of $316.1 million, up from $37.6 million and $309.2 million, respectively. For the year, net income was $195.7 million on sales of $1.22 billion, versus 2005’s $159.5 million and $1.14 billion, respectively.

Fertilizer restrictions going statewide in Florida

Tallahassee-Florida is poised to become the second state to impose state-wide restrictions on fertilizer for non-agriculture uses. The Florida Dept. of Agriculture and Consumer Services expects to adopt new rules for fertilizing yards, parks, golf courses, sports fields, cemeteries, subdivision common areas, and other nonagricultural grass areas in April. Minnesota already has restrictions on the books, but only phosphorus is covered. Florida Ag Commissioner Charles Bronson indicated in his announcement that all fertilizer products labeled for use on urban turf, sports turf, and lawns will have to be limited to the amount of nitrogen and phosphorus needed to support healthy turf maintenance – only no- or low-phosphorus will be allowed by the state edict. In essence, the agency wants to limit a single fertilizer application on 1,000 square feet of lawn to no more than a quarter-pound of phosphorus and a half-pound of nitrogen. Over a year’s time, the combined amounts would be limited to a half-pound of phosphorus and 5 pounds of nitrogen for 1,000 square feet of grass. The proposed rule is proceeding through the rulemaking process, and Bronson said that he expects it to become effective sometime this spring. It was developed by Bronson’s department with input from the Florida Dept. of Environmental Protection, the state’s water management districts, county environmental offices, fertilizer manufacturers, and concerned citizens. Spokesman Terence McElroy told Green Markets that the department doesn’t have the authority to check at the user level for compliance, but “we can limit what’s being used by regulating what’s sold in the market.” At least one Florida producer, Harrell’s at Lakeland, said it was equipped to provide products that comply with the edict. Scotts announced last year that it was starting to add low- and no-phosphorous fertilizers to its lines. Florida state law already requires that all directions for use on fertilizer products must be approved by the agriculture department. During the 2005-06 fiscal year, the department approved labeling for more than 1,200 brands of specialty fertilizers, many of which are used on urban turf and lawns.

Turkey litter from power plant to yield fertilizer

Benson, Minn.-A newly formed LLC expects to start this spring producing fertilizer from the ash generated by burning turkey litter as boiler fuel for an innovative 50-megawatt power plant. Both plants are completing construction in a large industrial park on the edge of town, and Randy Tersteec, president of North American Fertilizer, told Green Markets that limited production will begin in April and grow to 80,000 tons per year. The power plant being built by Fibrominn LLC will be the first of its kind in the U.S., although parent company Fibrowatt has three already in operation in the United Kingdom. It will burn 700,000 tons of turkey litter per year, which is available in such abundance in west/central Minnesota that it’s actually a problem for growers. Tersteec said the ash will be transported via conveyor to the North American plant just southwest of Fibrominn, where it will undergo conditioning with additional moisture, be put in storage for a while, and then ground and screened for uniformity. The combustion process will eliminate the nitrogen, explained Tersteec, but uniquely the final product will be an 0-17-13 fertilizer plus micronutrients such as sulfur and zinc, which he believes will be ideal for row crop farmers. “If they’re spreading four tons of litter per acre now,” he claimed, “they’ll get the same nutrients in 400 pounds of our product.” Tersteec reported that initially the fertilizer will be marketed through the dealer network already in place. “For the startup phase we are just looking at the agriculture market, and our intent is not to sell directly to farmers,” he noted, “but residential and landscape sales will be looked at in the future. And if customers are willing to take it in non-granulated form, it would cost substantially less than other commercial fertilizers.”

Feds join with industry in tank car study

Washington, D.C.-The Federal Railroad Administration (FRA) has signed a Memorandum of Cooperation (MOC) with Dow Chemical Company, Union Pacific Railroad, and the Union Tank Car Company to develop new railcar technology to enhance the strength and safety of hazardous materials tank cars. The Next Generation Rail Tank Car Project will help FRA establish design standards that the agency hopes to implement in 2008. “Our goal is to jump beyond incremental design changes,” said FRA Administrator Joseph Boardman. “We and our partners are looking to apply the latest research and advanced technology to provide increased safety for rail shipments posing the greatest safety risk.” According to FRA, the agreement provides for extensive information sharing and cooperation between ongoing FRA and industry safety research programs for rail shipments of hazardous commodities such as toxic-by-inhalation hazards and high risk gases and liquids. This includes efforts to strengthen the structural integrity of tank cars by examining types of materials and the outer shell thickness, as well as research into insulation materials between the outer shell and inner tank. In addition, FRA said it is evaluating technology such as pushback couplers, energy absorbers, and anti-climbing devices designed to prevent a derailment of the tank car by keeping it upright and on the tracks after an accident. To date, FRA has held two public meetings in cooperation with the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration to receive comments on the design and operation of hazardous materials tank cars, and anticipates holding a third meeting in early 2007.

TSA releases final TWIC rule; TFI reviewing

Washington, D.C.-The Transportation Security Administration and the U.S. Coast Guard have released the final rule for the Transportation Worker Identification Credential (TWIC) Implementation in the Maritime Sector; Hazardous Materials Endorsement for a Commercial Driver’s License. The final rule was posted on the TSA Website. The Fertilizer Institute said it is working with its Security Task Force to review the rule, which is several hundred pages long, and to analyze its effect on the fertilizer industry. TFI said the proposed rule required any individual entering the secure area of a Maritime Transportation Security Act of 2002 regulated facility to possess a government-issued TWIC. TFI submitted comments on the proposed rule (GM Aug. 14, p. 12) and is still determining whether these were accepted by TSA and the USCG in the final rule. TFI said on Jan. 4 that the final rule would be published in the Federal Register in the next few days. Although it will go into effect within 60 days of the Federal Register notice, TFI said the date of implementation and enrollment will vary for each Caption of the Port (COPT) zone. The enrollment process for each COTP zone will be announced at least 90 days in advance by separate notices in the Federal Register, TFI said. The latest date by which facilities, vessels, and mariners can expect to be required to comply will be 20 months after publication in the Federal Register.