Mosaic 4Q earnings off 83 percent, plans to sell Thai distribution business

The Mosaic Co. reported a 83 percent drop in net income for the fourth quarter ending May 31, 2009, to $146.9 million ($.33 per diluted share) on sales of $1.59 billion versus the year-ago $862.5 million ($1.93 per share) and $3.47 billion, respectively. Major factors included sales volume drops in both potash and phosphates–73 percent and 21 percent, respectively. In addition, the company had a loss and an inventory write-down in its offshore business and announced plans to sell its Thailand distribution business.

The fourth quarter potash volume drop included a 75 percent crop nutrient drop in North America, 79 percent international, and 42 percent nonagricultural. The average MOP selling price was up 61 percent to $540/mt from the year-ago $335/mt, while the average K-Mag price was up 98 percent to $369/st from $186/st.

Fourth quarter potash operating earnings were off 40 percent to $198.6 million on sales of $386.8 million versus the year-ago $331.3 million on sales of $860.5 million.

Mosaic is giving no projection on potash volumes for the first quarter 2010 (June-August) until market conditions normalize. It said recent transactions will increase buyer confidence and drive higher sales volumes, and while profit margins will decline due to lower prices, they will remain at historically attractive levels.

While the phosphate drop included a 38 percent crop nutrient decline in North America, and a feed phosphate drop of 43 percent, the one positive was international crop nutrient, which was down only 1 percent. The average DAP selling price was down 54 percent to $345/mt from the year-ago $754/mt.

Fourth quarter phosphate operating earnings were off 100 percent to $2.3 million on sales of $884.5 million from the year-ago $797.4 million on sales of $2.03 billion, respectively.

Central Florida ammonia prices were off 49 percent in the quarter to $292/mt from the year-ago $573/mt, while sulfur prices dropped 84 percent to $72/lt from $457/lt.

Mosaic expects first quarter 2010 phosphate volumes to be 1.9-2.2 million mt, with a realized DAP price FOB plant of $255-$295/mt. Mosaic says demand is rebounding in major markets around the world and sales volumes are improving. While profit margins are well below early year-ago levels, they are improving.

“Our optimism about the future of our business is unwavering,” said Jim Prokopanko, Mosaic president and CEO. “While near-term uncertainties remain, we have emerged from the market turmoil of the past year as a stronger competitor and are poised to capitalize on the positive trends we foresee in the potash and phosphates markets.”

Fourth quarter offshore earnings were in the loss column at $126.7 million on sales of $394.1 million versus the year-ago earnings of $101.5 million on sales of $695 million, respectively. Mosaic took a $64.9 million write-down on inventories for this business, mainly for high cost inventories in Brazil and Argentina.

Mosaic announced that it has decided to sell its Thailand distribution business, a well run business, but one that does not support its strategic objectives.

Buoyed by strong results in 2008, Mosaic’s fiscal year 2009 performance bested 2007. FY’09 net earnings were $2.35 billion ($5.27 per share) on sales of $10.3 billion versus the prior year’s $2.1 billion ($4.67 per share) on sales of $9.8 billion, respectively.

Full year potash earnings were up 77 percent to $1.41 billion on sales of $2.8 billion versus the prior year’s $798.6 million on sales of $2.25 billion. Phosphate earnings were off 43 percent to $1.1 billion on sales of $5.78 billion versus the year-ago $1.9 billion on sales of $5.7 billion. The offshore segment saw a loss of $191.4 million on sales of $2.35 billion versus the prior year earnings of $175.4 million on sales of $2.22 billion.

For the year, potash volumes were off 41 percent, led by North America crop nutrient, which was off 55 percent, international crop nutrient, off 38 percent, and nonagricultural, off 7 percent. The average MOP price was up 131 percent to $521/mt from $226/mt, while K-Mag was up 119 percent to $324/mt from $148/mt.

For the year, total phosphate volumes were off 31 percent, with North American crop nutrients off 40 percent, international 22 percent and feed 40 percent. The average DAP price for the year was up 42 percent to $728/mt from $513/mt.

Central Florida ammonia prices were up 31 percent to $531/mt from $404/mt, while sulfur was up 99 percent to $363/lt from $182/lt.