Mosaic Company (The) (MOS)

MOS 
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The Mosaic Company (MOS)

Q1 2013 Earnings Call

October 2, 2012 09:00 am ET

Executives

Laura C. Gagnon – Vice President Investor Relations

James T. Prokopanko – President, Chief Executive Officer

James C. O'Rourke – Chief Operating Officer, Executive Vice President - Operations

Richard L. Mack Esq. – Executive Vice President, General Counsel, Corporate Secretary

Richard N. McLellan – Senior Vice President – Commercial

Mike Rahm – VP Market Analysis

Analysts

Vincent Andrews – Morgan Stanley & Co. LLC

Ben Isaacson – Scotiabank GBM

Jeffrey Zekauskas – JPMorgan

Don Carson – Susquehanna Financial Group

Jacob Bout – CIBC World Markets

David Begleiter – Deutsche Bank Securities

Kevin Mccarthy – BofA Merrill Lynch

Mark Connelly – Credit Agricole Securities

Matthew Cowen – Barclays

Michael Piken – Cleveland Research

Bill Carroll – UBS

Presentation

Operator

Good morning ladies and gentlemen and welcome to the Mosaic Company’s First Quarter Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. After the Company completes their prepared remarks, the lines will be open to take your questions.

Your host for today’s call is Laura Gagnon, Vice President Investor Relations of the Mosaic Company. Ms. Gagnon?

Laura C. Gagnon

Thank you. And welcome to our First Quarter Fiscal Year 2013 Earnings Call. Presenting today will be Jim Prokopanko, President and Chief Executive Officer; and Larry Stranghoener, Executive Vice President and Chief Financial Officer. We also have members of the senior leadership team available to answer your questions. We also have – Larry will discuss key drivers of the segment results as well as provide insight into future expectations. The presentation slides we are using during the call are available on our website at mosaicco.com.

We will be making forward-looking statements during this conference call the statements include but are not limited to statements about future financial and operating results. They are based on managements’ beliefs and expectations as of today’s date October 2, 2012 and are subject to significant risks and uncertainties.

Actual results may differ materially from projected results. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release issued this morning and in our reports filed with the SEC.

Now, I’d like to turn it over to Jim.

James T. Prokopanko

Good morning. Thank you for joining our first quarter earnings discussion. I am pleased to report that Mosaic delivered another solid quarter despite a wide array of external and logistical challenges.

Today, I have three goals. First, to help you understand the various external factors both economic and sentiment related that are impacting our business. Second, to review our results and progress on strategic objectives and finally to convey our confidence in Mosaic’s very bright long-term future. Simply put, we want to be the world’s leading crop nutrition company and we believe we are well on our way to achieving that vision.

First a quick review of the numbers. We reported operating earnings of $610 million on revenue of $2.5 billion for the quarter. The potash business contributed $416 million and the phosphates unit generated $208 million in operating earnings.

In total, we reported earnings per share of $1.01 which includes $0.02 per share of negative impact from notable items. It’s important to point out that we continue to maintain a very strong cash position with $3.6 billion of cash on hand.

I can’t remember another time in my career when so many of the outside influences that impact our business and global food supply were so volatile. Mother Nature has left much of the planet very thirsty, while also battering us with tropical storms, hurricanes and heavy rainfall in Canada.

The North American drought pushed grain and oil seed prices to record highs and the situation is compounded by the growing logistical challenge of the receding the Mississippi River. Drought has depleted the corn crop in the U.S. Heartland, the wheat harvest in Russia and rice in India.

Global grain and oil seed stocks are dropping quickly and reaching dangerously low levels. Farmers know this well, and they will once again have strong incentive to maximize yields in the coming seasons. It will likely take two years of trend yields to get stocks back to secure the levels.

As a result, prices have climbed dramatically, if the fall harvest continues various potential for grain and oil seed prices to go even higher in order to balance demand with supply. Given the current (inaudible) balance in grain and oil seeds prices are going to remain highly sensitive to weather events. Any indication of a potential negative impact of weather on yields in South America is likely to drive prices still higher. In fact, spring corn planting in Brazil is only 7% complete versus 15% at this point last year due to a prolong dry period.

As a result of the historically high grain and oil seed prices, crop nutrients are as affordable as they’ve ever been, as the slide makes clear. Remember it was only a few months ago when experts were predicting some $4 dollar corn, even if grain and oil seed prices were to drop significantly, we would expect to continue to deliver strong results.

Financial returns on the farm in many parts of the world are at record levels. The USDA predicts U.S. farmers will realize record cash income and gain in 2012, for the third consecutive year or even part by payouts of crop insurance.

In India, cash payouts and farmer returns are increasing along with higher on farm prices for nutrients. And in Brazil, economics remained strong and farmers there are expected to plant record acres of beans and corns.

Read the rest of this transcript for free on seekingalpha.com