Mosaic reports stellar quarter; earnings up nearly six-fold; EPS up 493 percent

The Mosaic Co. reported a nearly six-fold increase in net income, to $394.0 million ($.89 per diluted share) on sales of $2.19 billion for the second quarter ending Nov. 30, 2007, versus the year-ago $65.9 million ($.15 per share) on sales of $1.52 billion. Net sales of phosphate, potash, and offshore were up 61, 23, and 29 percent, respectively.

“Our second quarter results demonstrate that Mosaic is leveraging the robust agricultural economy and delivering record results,” said Jim Prokopanko, Mosaic president and CEO. “Our unprecedented operating cash flows have allowed us to prepay $1 billion of long-term debt over an eight-month period and we are on track to deliver strong results in fiscal 2008 and beyond.”

The average DAP price during the quarter was $417/mt, up from the year-ago $243/mt. Actual phosphate sales volumes were off 1 percent, to 2.28 million mt from 2.3 million mt. Key phosphate ingredient prices – ammonia and sulfur – also saw increases. Ammonia was $316/mt, up from $309/mt, while sulfur was $102/lt from $66/lt.

The average quarterly potash price was $171/mt, up from the year-ago $142/mt. Volumes were up slightly, at 2.02 million mt from 1.95 million mt.

Six-month net income was $699.5 million ($1.57 per share) on sales of $4.2 billion, versus the year-ago $174.9 million ($.40 per share) and $2.81 billion.

“The market environment remains extraordinary. Agricultural commodity prices continue to increase to unprecedented levels, resulting in robust farm economics and nutrient demand prospects. Mosaic’s leadership position in phosphates, combined with our exceptional potash business and our focus on effective operational execution, offers a unique value proposition for crop nutrition customers and investors,” added Prokopanko. He also noted that IFA is projecting a 20 million nutrient mt of new global fertilizer demand, or 13 percent between the years 2006-2008.

Mosaic estimates its DAP FOB plant price for the third quarter (December 2007-February 2008) to be $470-$480/mt. However, DAP costs are also expected to be up, mainly due to much higher sulfur prices. This past week Mosaic and others reported another round of huge DAP increases, so any sulfur hike apparently is being passed on to DAP consumers. Prokopanko told analysts that phosphates are poised to be the strongest of the three nutrients.

Mosaic estimates its third-quarter potash prices at $190-$200/mt. Still higher potash prices are expected in 2008, as sellers seek to prod China to pay higher prices in line with other buyers.

Mosaic expects third-quarter sales volumes for phosphates and offshore to be below the second quarter and in line with seasonal patterns. For the fiscal year, it expects phosphates sales to be within 8.6-9.1 million and potash between 8.5-9 million, in line with previous guidance.

Mosaic also announced that it has eliminated its nitrogen business as a separate reportable segment. Nitrogen has been a relatively small entity compared to Mosaic’s other businesses. It will now be included within the Corporate/Eliminations/Other segment.