The Mosaic Co., Plymouth, Minn., reported second-quarter net earnings attributable to Mosaic of $68 million ($0.18 per diluted share) on net sales of $2.2 billion, compared to the year-ago $97.3 million ($0.28 per share) and $1.75 billion, respectively. Second-quarter EPS included a negative impact of $0.22 per share from notable items, primarily related to non-cash currency translation charges and costs related to the Vale Fertilizantes acquisition, partially offset by discrete tax benefits. Adjusted earnings per share during the second quarter of 2018 were $0.40, ahead of both last year and the first quarter of 2018.
Second-quarter adjusted EBITDA was $461 million and first-half $833 million.
“In fact, we have paid down $500 million in debt this year, which brings us closer to our through-cycle balance sheet targets. As we look ahead, our capital priorities remain unchanged: maintain a strong balance sheet, sustain our assets, invest to grow the business, and return excess to shareholders,” said Joc O’Rourke, president and CEO.
“We are seeing positive developments in potash and phosphate markets, and we expect the momentum to continue. Strong operational performance across our three business units and constructive market developments are driving improved earnings and cash flow. We are making excellent progress on the transformational initiatives at Mosaic Fertilizantes, and are well positioned to benefit from today’s improved business environment,” he continued.
Mosaic increased its full-year adjusted EBITDA guidance to $1.80-$1.95 billion from $1.7-$1.9 billion, and its adjusted EPS guidance to $1.45-$1.80 from $1.20-$1.60.
Mosaic said it has paid down an additional $200 million of long-term debt subsequent to the quarter end, reaching its full-year 2018 debt retirement target of $500 million.
Wall Street reacted well to the news. Mosaic shares closed up 5.32 percent to $31.70 on Aug. 7.
Six-month net earnings attributable to Mosaic were $110.2 million ($0.29 per share) on net sales of $4.14 billion, up from the year-ago $96.4 million ($0.27 per share) and $3.33 billion, respectively.
Phosphate second-quarter gross margins were $154 million on sales of $1.1 billion, up from the year-ago $76 million and $975 million, respectively. Margins were primarily driven by higher average sales prices, as well as operational improvements that lowered controllable operating costs. These were partially offset by higher sulfur costs and a $6 million notable item related to an inventory cost refinement.
Mosaic said higher phosphate prices that resulted from the company’s idling of its Plant City, Fla., plant more than offset lower sales volumes of 2.3 million mt, down from the year-ago 2.6 million mt. Adjusted gross margin per mt was $70, up from $29/mt. The company noted that it achieved record MicroEssentials sales volumes during the quarter.
Phosphate third-quarter sales volumes are projected at 2.1-2.4 million mt, with adjusted gross margin of $75-$85/mt. Full-year sales volumes are put at 8.3-8.9 million mt, narrowed from the earlier 8.2-9 million mt. Year-to-date was 4.2 million mt. The company is now projecting 2018 global phosphate shipments of 70 million mt, up from 2017’s 69.2 million mt.
Mosaic said higher phosphate prices are expected to more than offset higher raw material costs. The company expects to report another quarter of strong premium product sales volumes.
Potash second-quarter gross margins were $132 million on net sales of $569 million, up from the year-ago $110 million and $468 million, respectively. Improved margins were primarily driven by higher average sales prices, partially offset by increased costs of goods in inventory from the impact of the first quarter’s weather and logistics-related containment issues. MOP cash costs, including brine management costs, were $85/mt, up from year-ago levels, primarily as a result of a negative impact from the stronger Canadian dollar compared with a year-ago and timing of turnarounds. The current gross margins also included a $4 million notable item due to the refinement of inventory costs.
Potash sales volumes rose to 2.4 million mt from 2.2 million mt. Adjusted gross margin per mt was $58, up from $50/mt.
Potash third-quarter sales volumes are put at 2.2-2.5 million mt, with adjusted gross margins of $55-$65/mt. Full-year sales tonnage is seen at 8.3-8.9 million mt, narrowed from the previous 8.2-9 million mt. Year-to-date was 4.1 million mt. The company is now projecting 2018 global shipments at 66.9 million mt, up from 2017’s 65.6 million mt.
Mosaic expects the negative impact of planned turnarounds at its lowest cost mines, Esterhazy and Belle Plaine, to be mostly offset by higher prices. The company assumes minimal third-quarter sales to China. The company told analysts that it believes the annual India and China contracts to be less of a bellwether going forward.
Mosaic Fertilizantes second-quarter gross margin was $53 million on net sales of $713 million, up from the year-ago $25 million and $467 million, respectively. Gross margin was negatively impacted by $11 million related to the trucker strike in May and $27 million from a turnaround and related idle plant expenses. Second-quarter sales volumes were 1.8 million mt, up from the year-ago 1.3 million mt, while adjusted gross margin was $29/mt, up from the year-ago $19/mt. The company said the trucker strike reduced sales volumes by an estimated 300,000 mt.
The company said it has delivered Mosaic Fertilizantes synergy targets with $56 million in gross synergies realized year-to-date.
Mosaic Fertilizantes third-quarter sales volumes are put at 3.2-3.6 million mt, with adjusted gross margin of $35-$45/mt. Full-year volumes are seen as 8.7-9.5 million mt, with year-to-date reported at 3.4 million.
Higher selling prices and weaker local currency are expected to more than offset the third-quarter planned turnaround at the Uberaba facility. The company noted that risks to both volume and margin guidance are primarily associated with the Brazil government’s published minimum freight rates related to the May trucker strike. The company has embedded a negative 300,000 mt impact in full-year sales volumes assumptions as a results of these freight rates.
Mosaic told analysts that Brazil is expected to surpass the U.S. in total soybean production for the first time this year, and that this fits well with Mosaic’s P&K.