--Mosaic second-quarter earnings climb on tax benefit
--Phosphate and potash fertilizer sales decline
--India demand poses challenge
--Shares rise as results beat expectations
A slowdown in fertilizer shipments to Asia weighed on Mosaic
Co.'s (MOS) fiscal second-quarter earnings, although overall profit
edged higher on a significant tax benefit.
The Minnesota-based fertilizer company, one of the world's
largest potash and phosphate fertilizer producers, reported
second-quarter operating earnings fell 30%. The decline was due
mainly to lower phosphate volumes and prices, the company said.
Despite that pressure, net profit climbed 0.8% thanks to an
income-tax benefit of 42 cents a share, and the results beat
analyst expectations. Shares were recently up 2.6% to $58.30.
Even amid strong U.S. demand, the market for potash and
fertilizer has been under pressure in recent months by prolonged
contract negotiations with buyers in India and China, who have
insisted on lower prices. Although China recently agreed to a new
potash contract that Chief Executive Jim Prokopanko said should
revive the market, short-term challenges remain, he said.
"The market is really a tale of two hemispheres," Mr. Prokopanko
said in a conference call with investors.
The company slashed its global potash shipment forecast to 55
million to 57 million tons for 2013, down from a prior forecast of
58 million to 60 million, and cut its phosphate shipment forecast
to 63 million to 65 million tons, down 1 million. The company in
November had cut its second-quarter potash and phosphates sales
volume expectations, pointing to weaker demand.
Still, the company has said it believes that customer demand is
simply delayed, adding that the long-term prospects for fertilizer
remains positive.
Historically high crop prices have compelled farmers to plant as
many acres as possible, and the U.S. fall application season was
stronger than expected, Mr. Prokopanko said.
Farmers "have these high grain and oilseed prices clearly in
focus," he said.
Mr. Prokopanko and other fertilizer executives have pointed to a
growing world population and improved diets driving demand for
grain, and hence fertilizer, for many years to come. But some
analysts say that the market is becoming saddled with too much
fertilizer production capacity.
In the short term, Mr. Prokopanko added the phosphate market
could get a boost from dwindling Mississippi River levels, which
could cause a spike in demand as customers try to secure fertilizer
ahead of potential river transportation shutdowns.
In the latest period, phosphate net sales--the company's biggest
source of revenue--were down 19% at $1.8 billion as sales volume
shrank about 6.3%. Net sales in the potash segment fell 7% to $780
million as volume sank about 17%.
For the quarter ended Nov. 30, Mosaic reported a profit of
$628.8 million, or $1.47 a share, up from $623.6 million, or $1.40
a share, a year earlier.
Net sales sank 16% to $2.54 billion, driven by lower phosphate
and potash volumes and lower phosphate prices.
Analysts polled by Thomson Reuters most recently projected
earnings of 93 cents a share on revenue of $2.57 billion.
Gross margin narrowed to 26.7% from 29.2%.
Write to Ian Berry at ian.berry@dowjones.com and Ben Fox Rubin
at ben.rubin@dowjones.com
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