Mosaic’s Q1 net profit down 43% to $218m on lower prices

06 May 2014 13:48 Source:ICIS News

LONDON (ICIS)--Mosaic posted a fall of 43% in its first-quarter net profit to £218m on the back of lower prices for phosphate and potash while sales decreased 14% to $1.99bn, the US agrochemical major said on Tuesday.

As a result, earning per share fell notably from $0.89 in the first quarter of 2013 to $0.54 in the first three months of 2014.

In a trend already observed in the last quarter of 2013, the agrochemical company blamed the lower prices for the fall in the net profit, although it said it had sold more volumes of phosphate and potash amid “improving global demand” for those two products, Mosaic’s CEO Jim Prokopanko said.

“While weather continued to create challenges in the operating environment, strong global demand for phosphates pushed prices and margins higher during the first three months of the year, and our early positioning of potash in North America allowed for significant volume growth,” added Prokopanko.

The CEO said the company looks ahead optimistically after the acquisition of CF Industries and its intention to acquire ADM’s fertilizer distribution business in Brazil. Moreover, he said the company is on track with its $500m cost savings programme, to take place in the next five years, “ensuring Mosaic remains a low-cost producer,” he said.

Mosaic’s main division, Phosphates, had flat sales volumes (at 2.7m tonnes) but prices dragged down the final sales reading. Phosphates sold $1.3bn worth of products, a decrease of 16% compared to the first quarter of 2013, resulting in operating earnings at $138m, compared to $185m.

The average phosphate selling price for the first quarter stood at $414/tonne while a year earlier that price stood at $491/tonne.

"Our Phosphates business began the year with strong global shipments and improving margins. With a robust North American application season underway, we have a positive outlook for the second half of the year," said Mosaic’s CEO.

Potash sold products in the first quarter of 2014 worth $733m, down from the $825m sales achieved in the same period of 2013. The decline came on the back of lower prices entirely, as the average realised potash prices were 29% lower than the same period in 2013. As a result, operating earnings at this division stood at $166m, down from $306m in Q1 2013.

Volumes sales also suffered a decline, from 2.2m tonnes in the first quarter of 2013 to 1.9m tonnes in 2014, with a notable decrease in its operational capacity from 83% to 70% as a consequence of rail shipping delays, the company said.

"Both our international volumes and our ability to restock in North America were impacted by logistical constraints, but we are shipping product at our maximum current logistical capacity. In the second half of the year, we expect rail constraints to be resolved and potash prices to be stable," said CEO Prokopanko.

The company expects volume sales to be “strong” during the rest of 2014, and forecasts better phosphate margins and stable potash prices while the company has taken “important strategic actions in order to accelerate our growth as the business cycle continues to improve,” the company’s CEO said.

Mosaic expects phosphate sales volumes to range from 3.1m to 3.4m tonnes in the second quarter of 2014 (up from 2.9m tonnes the same period a year earlier), with an improved price per tonne of in between $430 and $460.

On the other hand, the company expects sales volumes for potash to range from 2.2m to 2.5m tonnes in Q2 2014, giving margin for a worse result than during the same period of 2013, when sales volumes stood at 2.4m tonnes. The potash price is expected to range from $250 to $275/tonne.

By Jonathan Lopez