The Mosaic Co., Plymouth, Minn., on Sept. 9 made three major announcements: the idling of its Louisiana phosphate operations, a $250 million stock repurchase, and plans to meet and exceed synergies at Mosaic Fertilizantes in Brazil.
Mosaic will idle its Louisiana phosphates operations, effective Oct. 1, to reduce production by approximately 500,000 mt in 2019. This includes the company’s ammonia plant, which feeds the phosphate operations.
Mosaic said the move is expected to accelerate the reduction of high phosphate fertilizer inventories. Mosaic continues to expect strong fall fertilizer application in North America, and expects a more balanced global supply-and-demand picture to emerge by 2020.
“Phosphate prices have declined further through the summer, with excess imports continuing to enter the U.S. on top of high channel inventories,” said President and CEO Joc O’Rourke. “We expect our move to idle production to tighten supply and rebalance the market. Mosaic will prioritize shipments to meet key customer needs through the idling period.”
DAP/MAP prices at NOLA firmed almost immediately, but industry skeptics wondered if this would only be temporary, until imports could take their place. Mosaic cut production some 300,000 mt in March (GM March 8, p. 1) and idled the Plant City, Fla., plant (2 million mt/y capacity) in late 2017, finally to announce its permanent closure this summer (GM June 21, p. 1). While prices did firm afterwards, imports eventually increased, particularly from Morocco and Russia.
Mosaic also plans to initiate $250 million in stock repurchases under its existing share repurchase authorization, which has $850 million of remaining capacity.
“Mosaic’s stock currently presents an exceptional opportunity to deploy capital,” said O’Rourke. “We believe that these repurchases are the best use of our capital in today’s environment, and we will continue to evaluate the amount we repurchase based on expected cash flow.”
In addition, Mosaic Fertilizantes, the company’s Brazil-based business unit, has implemented actions necessary to meet or exceed its previously announced synergy target of $275 million in 2019. It has also announced that it intends to drive an additional $200 million in annual value through ongoing business transformation efforts by the end of 2022.
“We believe taking these steps now will further enhance Mosaic’s ability to benefit from expected strong business conditions in 2020,” added O’Rourke.
Wall Street reacted well to the news. Mosaic shares closed on Sept. 10 at $21.38, up 6 percent from the prior day close. Mosaic shares have been on a roll, moving up 23 percent from Sept. 3’s $17.87 to close at $21.99 on Sept. 11. In the meantime, the company also announced on Sept. 5 that its Mosaic Fertilizantes phosphate mines had returned to full production (GM Sept. 6, p. 27).
As for the Louisiana idling, over 370 employees will be furloughed, according to The Advocate, receiving 70 percent of pay as well as benefits. Mosaic had not responded to inquiries at press time.