Mosaic Beats Estimates After Potash Sales Exceed Forecast

Mosaic Co., the largest U.S. fertilizer producer, reported fiscal second-quarter profit that beat analysts’ estimates after North American sales helped potash volumes to exceed its own forecast.

Net income rose to $1.47 a share in the three months through November from $1.40 a year earlier, Plymouth, Minnesota-based Mosaic said today in a statement. Profit excluding a tax benefit and a foreign-exchange loss was $1.02 a share, surpassing the 88-cent average of 11 estimates compiled by Bloomberg. Sales declined 16 percent to $2.54 billion, more than the $2.51 billion average of 12 estimates.

Mosaic’s North American fertilizer sales benefited from a longer-than-expected fall season, offsetting a lack of potash exports to Asia. The agreement announced Dec. 31 by North America’s largest potash producers to supply China with 1 million tons in the first half may signal and end to the deadlock with the biggest Asian consumers and foreshadow a revival in demand. Chief Executive Officer Jim Prokopanko forecast record 2013 global shipments for potash and phosphates.

The China deal “indicates very strong demand” for potash, Prokopanko said today on a conference call. “The contract provides a baseload to get the global potash market functioning smoothly again.”

Potash is a form of potassium used by farmers to boost crop yields by helping plants to strengthen their root systems and better resist drought. Most of Mosaic’s potash production is from mines in the Canadian province of Saskatchewan.

Asian Negotiations

Mosaic rose 3.3 percent to $58.62 at the close in New York, the biggest climb in six weeks. The shares had increased 7.9 percent in the 12 months through yesterday.

Net income rose to $628.8 million in the quarter, from $623.6 million a year earlier. Potash sales fell to 1.5 million metric tons from 1.8 million tons as China and India delayed purchases and other buyers awaited the outcome of Asian price negotiations. The average selling price was $443 a ton.

Total potash sales volumes surpassed Mosaic’s November forecast of as much as 1.4 million tons. Mark Connelly, a New York-based analyst at Credit Agricole Securities USA, had estimated shipments of 1.36 million tons at an average of $444 a ton. Adam Schatzker, a Toronto-based analyst at RBC Capital Markets, projected 1.3 million tons at $445.

“There was a longer, stronger tail to the fall application season in North America than we anticipated,” giving farmers more time to put fertilizers on crops, Prokopanko said today in a phone interview. “It was a darn good fall season -- if it’s not a record in North America it would be approaching record volumes.”

Canpotex Sales

Canpotex Ltd., the offshore potash marketing arm of Mosaic, Canada’s Potash Corp. of Saskatchewan Inc. and Agrium Inc., said Dec. 31 it will sell to China for about $400 a ton. India will probably hammer out an agreement with potash suppliers within the first three months of this year, Connelly said in a Dec. 31 note.

Mosaic today forecast fiscal third-quarter potash sales of 1.5 million to 1.8 million tons at an average price of $370 to $400 a ton.

The company’s phosphate sales, which account for most of its revenue, were 3 million tons at an average price of $544 a ton in the second quarter. Third-quarter phosphate sales will be 2.5 million to 2.8 million tons at $485 to $515 a ton, it said.

Prokopanko said global potash shipments this year will be 55 million to 57 million tons and phosphate shipments will rise as much as 3 percent to 63 million to 65 million tons.

“Crop nutrients have never been more affordable, and farmers around the world continue to have strong incentives to use our products to increase crop yields,” Prokopanko said today in the statement.

Before it's here, it's on the Bloomberg Terminal.