Mosaic shares fall 2% following in line revenues

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Last Update: 04-Jan-13 07:33 ET

Mosaic (MOS $55.77 -1.20) reproted second quarter earnings of $1.05 per share, excluding a $0.42 tax benefit, $0.07 better than the Capital IQ Consensus of $0.98, while revenues fell 15.9% year/year to $2.54 billion versus the $2.56 bln consensus. Mosaic's gross margin for Q2 was $676 million, or 27 percent of net sales, compared to $881 million, or 29 percent of net sales, a year ago. Q2 operating earnings were $560 million, a decrease of 30 percent compared to $797 million a year ago. The decreases in gross margin and operating earnings were primarily driven by lower phosphate volumes and prices, partially offset by lower raw material costs. "In North and South America, we have been experiencing strong demand and sales underpinned by excellent application seasons. International shipments, however, were impacted by prolonged contract negotiations in India and China. With the settled China contract driving improved sentiment, we believe strong agricultural fundamentals will lead to strengthening crop nutrient markets." Guidance: Total sales volumes for the Potash segment are expected to range from 1.5 to 1.8 million tonnes for Q3. Mosaic's realized MOP price, FOB plant, for the third quarter of fiscal 2013 is estimated to be in a range of $370 to $400 per tonne, reflecting a substantially higher proportion of standard product. The segment gross margin percentage in the third fiscal quarter is expected to be lower than the second fiscal quarter due to lower realized average potash prices, in part due to a higher mix of standard product, and continued sub-optimal operating rates. The fiscal 2013 third quarter operating rate in the Potash segment is expected to be above 70 percent of operational capacity. Brine management expenses are expected to be in the range of $245-275 million for the full fiscal year 2013, reflecting the run-rate we have experienced in the first half of fiscal 2013. Total sales volumes for the Phosphates segment are expected to range from 2.5 to 2.8 million tonnes for Q3. Mosaic's realized DAP price, FOB plant, for the third quarter of fiscal 2013 is estimated to range from $485 to $515 per tonne. The segment gross margin in the third fiscal quarter is expected to be about flat with the second fiscal quarter. The Company's operating rate at its North American phosphate operations is expected to exceed 80 percent of operational capacity during the third quarter of fiscal 2013. "Our fiscal third quarter guidance reflects the lower Canpotex potash contract price in China and a higher proportion of international standard grade shipments. The China contract provides both base-load volume and a positive boost to market sentiment. Combined with strong market fundamentals, we believe 2013 will be a record year, with 55 to 57 million tonnes of global potash shipments, and 63 to 65 million tonnes of global phosphate shipments."