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Mosaic's Q4 Earnings Top, Profit Drops on Weak Pricing

Mosaic 's MOS profits tumbled in fourth-quarter 2015, hit by lower phosphate and potash prices. Lower prices and sluggish demand hurt margins in the company's core phosphates business in the quarter.

The fertilizer maker logged profit of $155 million or 44 cents per share in the reported quarter, down 57% from $361 million or 97 cents per share a year ago. Earnings, barring one-time items, were 53 cents per share, topping the Zacks Consensus Estimate of 44 cents.

For 2015, profit was $1 billion or $2.78 per share, compared with $1 billion or $2.68 per share recorded in 2014.

The Minnesota-based company's revenues fell roughly 9% year over year to $2,163.2 million in the reported quarter due to lower volumes and prices. Sales, however, came ahead of the Zacks Consensus Estimate of $1,952 million.

For 2015, revenues fell nearly 2% year over year to $8,895.3 million.

The Mosaic Company (MOS) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Segment Highlights

Revenues from Mosaic's Phosphates segment slipped roughly 17% year over year to $1 billion in the quarter on lower sales volumes and reduced product prices. The segment's gross margin shrank around 48% to $121 million due to lower product prices and lower operating rate.

Segment sales volumes went down roughly 8% year over year to 2.2 million tons. Average selling price fell around 8% to $410 per ton in the quarter from $447 per ton in the prior-year quarter.

Potash division sales tumbled around 25% year over year to $572 million in the quarter, hurt by reduced shipments and lower prices. Sales volumes fell roughly 17% year over year to 1.9 million tons, while selling price declined roughly 14% to $254 per ton from $295 per ton a year ago. Gross margin slid around 53% year over year to $155 million, dragged down by lower selling prices and reduced volumes.

Revenues from the International Distribution segment went up around 17% year over year to $605 million on higher volumes from the acquisition of ADM's distribution business. Gross margin fell around 7% to $38 million. Selling price fell around 11% to $407 per ton, while volumes jumped roughly 36% to 1.5 million tons.

Financials

Mosaic ended 2015 with cash and cash equivalents of $1,276.3 million, down around 46% year over year. Long-term debt rose roughly 0.3% year over year to $3,791.1 million. Mosaic's capital expenditures and investments in its Ma'aden joint venture were $398 million in the reported quarter. Operating cash flow was $302 million in the quarter, down around 13% year over year.

Mosaic bought back roughly 15.6 million shares for $698 million in 2015 and paid $385 million in dividends during the year. The company has announced a $75 million accelerated share repurchase program.

Outlook

Looking forward, Mosaic sees a record year for global phosphate shipments in 2016. For potash, it expects a more stable operating environment this year.

Mosaic expects phosphates sales volumes in the band of 1.8 to 2.2 million tons for the first quarter of 2016 versus 2.3 million tons for the same quarter in 2015. Average selling price for the quarter is projected to be in the band of $350 to $370 per ton. The segment's gross margin for the quarter is expected to be roughly 10%, while operating rate is estimated to be around 70%-80% reflecting the company's move to curtail production.

Potash sales volumes have been forecast in the range of 1.5 to 1.9 million tons for the first quarter versus 2 million tons a year ago. Average selling price for the quarter is expected in the range of $200 to $230 per ton. The segment's gross margin is expected to be in the low to mid 20% range in the first quarter. Operating rate is estimated to be in the 70% to 80% range.

Sales volumes for the International Distribution segment are expected in the band of 1-1.2 million tons for the first quarter compared with 1 million tons a year ago. Segment gross margin is anticipated to be roughly $10 per ton for the quarter.

For full-year 2016, phosphates sales volumes are expected in the range of 9 million to 10 million tons. Potash sales volumes are forecast in the band of 7.5 million to 8.5 million tons. Sales volumes for the International Distribution segment are expected in the range of 6 million to 7 million tons.

For 2016, capital expenditures are expected in the range of $0.9 billion-$1.1 billion.

Mosaic currently has a Zacks Rank #4 (Sell).

Better-ranked companies in the basic materials sector include Koninklijke DSM N.V. RDSMY , Daqo New Energy Corp. DQ and KMG Chemicals Inc. KMG , all sporting a Zacks Rank #1 (Strong Buy).

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KONINKLIJKE DSM (RDSMY): Free Stock Analysis Report

DAQO NEW ENERGY (DQ): Free Stock Analysis Report

MOSAIC CO/THE (MOS): Free Stock Analysis Report

KMG CHEMICALS (KMG): 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.


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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