) profit for second-quarter 2014 slid as it saw a significant
decline in pricing for potash in the quarter. The Minnesota-based
fertilizer maker's profits tumbled around 42% year over year to
$248.4 million or 64 cents per share in the reported quarter from
$429.8 million or $1.01 a share a year ago.
Barring one-time items, earnings per share were 70 cents per share,
missing the Zacks Consensus Estimate by a couple of cents.
Revenues fell roughly 7% year over year to $2,440.2 million, but
managed to squeak past the Zacks Consensus Estimate of $2,398
million. Sales fell as a rise in the Phosphate segment was more
than offset by a decline in the Potash unit.
Separately, Mosaic noted that CEO Jim Prokopanko will return from
an earlier announced medical leave and resume his duties on Aug 4.
Its shares were inactive in
Revenues from Mosaic's larger Phosphate segment went up around 6%
year over year to $1.7 billion in the quarter as higher volumes
offset lower finished product prices. Average selling price fell
around 3% to $465 per ton in the quarter from $477 per ton last
year. The segment's gross margin rose around 2% to $284 million as
lower pricing was more than offset by a decline in raw material
costs and higher volumes. Segment sales volumes were up roughly 17%
year over year to 3.4 million tons.
Potash division's sales fell around 22% year over year to $762
million in the quarter as a 27% fall in prices more than offset
higher shipment volumes. Sales volumes were flat year over year at
2.5 million tons while selling price fell to $267 per ton from $366
per ton a year ago. Gross margin slid 36% year over year to $250
million, hurt by lower pricing and decreased operating rate.
Mosaic ended the quarter with cash and cash equivalents of $2.4
billion, down 4% sequentially. Long-term debt was flat sequentially
at $3 billion at the end of the quarter. Mosaic's capital
expenditure was $214 million in the reported quarter. Operating
cash flow fell 19% year over year to $796 million in the quarter.
Mosaic returned $550 million of cash to its shareholders during the
reported quarter. It has completed the repurchase of 52 million
shares, representing 12% of its outstanding shares at the end of
Looking ahead, Mosaic envisions strong demand for phosphates and
potash to drive phosphate margins and potash prices in the third
Mosaic expects sales volume for its phosphates business to be
between 3.3 million and 3.6 million tons in the third quarter
compared with 2.7 million tons achieved a year ago. Average selling
price for the quarter is expected to be in the band of $440 to $470
per ton. The segment's gross margin for the quarter is expected to
be in the mid to high teens. Operating rate is expected to approach
Mosaic foresees sales volume from its potash business in the range
of 1.8 million to 2 million tons in the third quarter versus 1.4
million tons a year ago. Average selling price for the quarter is
expected in the range of $275 to $295 per ton. The segment's gross
margin is expected to be in the high 20% to low 30% range.
Operating rate has been forecast in the low-70% range.
Mosaic, in Mar 2014, completed its takeover of CF Industries' (
) phosphate business for $1.4 billion. The acquisition will bring
Mosaic's annual phosphates capacity to roughly 11.5 million tons
and provide meaningful operational synergies. Mosaic is progressing
well with the integration of the acquired business and is on track
to achieve $40 million to $50 million in annual synergies
(before-tax) in 2015.
Moreover, Mosaic is also progressing towards completion of its
takeover of Archer Daniels Midland's (
) fertilizer distribution business and has received the anti-trust
clearance in Brazil for the acquisition. The buyout is expected to
accelerate Mosaic's existing growth plans in Brazil and expand its
annual distribution capability in one of the world's rapidly
growing agricultural regions.
Mosaic also noted that its phosphate joint venture project in Saudi
Arabia has secured project financing of $5 billion. The company
expects capital expenditure, including the Saudi Arabia project, to
be in the band of $1 billion to $1.2 billion for 2014. It also
remains focused on achieving $500 million in annual operating cost
savings over the next five years.
Mosaic is a Zacks Rank #3 (Hold) stock.
A better-ranked stock in the fertilizer space is Potash Corp. (
), sporting a Zacks Rank #2 (Buy).
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