Mosaic Beats Estimates, Shares Up - Analyst Blog


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Specialty chemicals player The Mosaic Company ( MOS ) posted forecast-topping numbers in the fourth quarter of fiscal 2012, raised dividend and its shares gained 5.13%.

The company's profits plunged almost 22% year over year to $507.3 million ($1.19 per share) due to lower phosphate pricing. On an adjusted basis (excluding one-time items), Mosaic's earnings of $1.25 per share surpassed the Zacks Consensus Estimate of $1.17.

For the full year, Mosaic's earnings came in at $4.42 per share, as against $5.62 a year ago. Adjusted earnings of $4.50 per share also came in ahead of the Zacks Consensus Estimate of $4.46.

Revenues in the quarter came in at $2,820.5 million, slightly down from last year but ahead of the Zacks Consensus Estimate of $2,577 million. For fiscal 2012, revenues jumped 12% year over year to $11,107.8 million, beating the Zacks Consensus Estimate of $10,812 million.

Segment Highlights

Phosphates: Mosaic's phosphate business generated revenues of $1.8 billion in the quarter, 5% lower than last year. The decline was a result of lower phosphate prices, which fell to $494 per ton in the fourth quarter from $574 last year. As a result, the segment's gross margin fell to 18% from 25% last year. The segment sales volumes were 2.9 million tons in the quarter, marginally up from 2.8 million tons last year.

Outlook: Mosaic expects its phosphates business to sell 2.5 to 2.8 million tons in the first quarter of fiscal 2013. The company also expects an improvement in average selling price, which is expected to be in the range of $510 to $535 per ton. However, it expects the segment's gross margin to remain flat in the first quarter on the back of an increase in the price of ammonia and a shift in product mix towards more blends due to seasonality.

Potash: The company's potash business turned in a strong performance in the quarter, as revenues rose 6% from last year to $1 billion. Although sales volumes in the fourth quarter declined to 2 million tons from 2.2 million tons in the year-ago period, a bump in average selling prices enabled the segment to post a jump in revenues.

The segment's sales were hindered to the tune of 100,000 tons due to a Canadian rail strike, but an increase in the average selling price to $455 per ton from $404 a year ago cushioned the decline in sales volumes. However, higher costs and lower operating rates led to a decline in the gross margin, which fell to 59% from 63% last year.

Outlook: Mosaic expects sales from the potash segment to be in the range of 1.8 to 2.2 million tons in the first quarter. However, it expects the average price to drop in the range of $415 to $440 per ton due to seasonal price declines in North America and an increase in international sales.

Financial Position

Mosaic generated $1.2 billion of cash from operations in the fourth quarter, up from $973 million last year. The increase was driven by a decrease in North American phosphate inventory and a jump in customer prepayments. Cash and cash equivalents were $3.8 billion as on May 31, 2012, slightly down from $3.9 billion as on May 31, 2011.

Capital Expenditure

Mosaic's capital expenditure in the quarter was $449 million. The company is also progressing steadily on its brownfield potash expansion plans at the three mines in Saskatchewan, Canada. Mosaic expects to spend $1.5 to $1.8 billion in fiscal 2013 on these projects as well as on measures that will improve operating efficiency.

Dividend Raised

Prompted by the strong liquidity position, Mosaic's Board has decided to double the annual dividend to $1 per share. The increase in dividend will be implemented with the next regularly declared dividend on July 19, 2012.

Mosaic, which competes with Potash Corp. of Saskatchewan, Inc. ( POT ), currently holds a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating.

MOSAIC CO/THE (MOS): Free Stock Analysis Report
POTASH SASK (POT): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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