Mosaic Profit Misses Estimates Amid ‘Soft’ Chinese Demand

Mosaic Co. (MOS), the largest U.S. fertilizer producer, reported fiscal first-quarter profit and revenue that missed analysts’ estimates amid “soft” potash demand in China and India while adverse weather curbed phosphate shipments.

Net income fell 18 percent to $429.4 million, or $1.01 a share, in the three months to Aug. 31, from $526 million, or $1.17, a year earlier, Plymouth, Minnesota-based Mosaic said today in a statement. That trailed the $1.15 average of nine estimates compiled by Bloomberg. Sales slid 19 percent to $2.51 billion, less than the $2.69 billion average of 14 estimates.

“We saw soft demand in India and China, and in response, we slowed production” of potash, Chief Executive Officer Jim Prokopanko said in the statement. Phosphate production “was impacted by longer annual maintenance shutdowns and challenges posed by hurricanes.”

China is still negotiating supply contracts for potash, a crop nutrient used to strengthen roots and help plants resist drought, and India is awaiting the outcome of those talks. China is seeking a lower price than the $470 a ton that it negotiated for the first half of 2012 and India has reduced imports because of a weaker rupee and budgetary constraints, said Horst Hueniken, a Toronto-based fund manager at Dundee Corp. (DC/A)

‘Tight’ Market

“You have a fertilizer demand picture here that is frankly quite mixed,” Hueniken said in a telephone interview before the results were released. “The demand outlook is for flat to up, with the up being only modest.”

Mosaic dropped 2.4 percent to $56.64 at 9:45 a.m. in New York after earlier falling 3.7 percent, the most intraday since June 21. The shares have increased 12 percent this year.

The company’s potash production fell 21 percent to 1.5 million tons in the quarter while sales volumes were 5.6 percent higher at 1.9 million tons.

Mosaic’s North American phosphate output dropped 9.1 percent to 2 million tons while sales were 16 percent lower at 2.7 million tons. The market for phosphates, which accelerate crop maturity and increases the ability of plants to benefit from sunlight, continues to be “tight,” Prokopanko said.

“Demand for our products outpaced our ability to produce and deliver,” he said in the statement. “We expect better execution in the quarters ahead.”

In the potash market, sentiment among North American dealers is improving and producer inventories are falling, Mosaic said.

Farmers who saw their crops damaged in the worst U.S. drought in half a century are considering their alternatives for the fertilizer application season in the coming months. While the drought spurred corn futures to record highs, some farmers may skimp on crop nutrients because low yields and the interrupted growing season may have left phosphate and potash fertilizer in the ground, Hueniken said.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net