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Released January 07, 2013 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading miner and fertilizer producer The Mosaic Company (NYSE:MOS) (Plymouth, Minnesota) encountered rough market conditions in the second quarter of the company's fiscal year 2013, driven by a steep decline in phosphate volumes and prices, despite stronger demand in the Americas. Net earnings for the quarter were reported to be $628.8 million, an increase of less than 1% from the second quarter of fiscal year 2012.
Total sales stood at $2.54 billion, a 15.87% decrease from the same period last year. Although Mosaic saw solid demand and sales in North and South America that were driven by strong application seasons, prices in the Phosphate segment were sharply lower, and both the Phosphate and Potash segments saw lower volumes. Contract negotiations with India and China negatively affected international shipments, as they proved to be longer and more difficult than anticipated, although those with China were eventually resolved. Many international customers in the Phosphate segment also delayed purchases during the quarter to avoid price risk.
Low raw material costs offset some of the losses, and the company saw a $179 million gain from a decrease in the amount of unrecognized tax benefits. Capital expenditures during the quarter totaled $394 million.
Industrial Info is tracking 30 active Mosaic projects that are worth a total of about $5 billion, including the $1.4 billion, second-stage construction of an underground potash mine in Esterhazy, Saskatchewan. The project, which is part of a $2 billion plan to expand the Esterhazy potash operations, involves constructing a 3 million-metric-ton-per-year satellite underground mining operation and a 4.5-mile haul road to truck ores to a processing plant to produce 900,000 tons per year of potash. The expansion will increase the Esterhazy operation's total capacity to 7 million metric tons per year.
"Despite the severe drought in the U.S. and weather problems in other parts of the world, this year's global harvest was the second-largest ever," said Jim Prokopanko, the president and chief executive officer of Mosaic, in a conference call. "Even so, the world will consume more grains and oilseeds than it harvests this year. Food supply is precarious, and farmers are well aware of this fact. So it should come as no surprise that futures markets are signaling farmers to expand planted areas and increase fertilizer applications to boost yields in 2013."
Both of the company's major segments reported declines in sales and earnings, as weaker volumes and product prices took their toll:
Mosaic executives expect 2013 to be a record year for exports, estimating between 55 million and 57 million tonnes of global potash shipments, and between 63 million and 65 million tonnes of global phosphate shipments. In particular, a recently settled contract with China has improved Mosaic's international outlook. Globally, crop nutrient markets are expected to improve. In Canada, Mosaic is moving forward on brownfield potash expansion plans at three mines in Saskatchewan.
"Farm economics around the world were extremely compelling, and as a result, we expect record global phosphate and potash shipments in calendar 2013," Prokopanko said in the conference call. "Positive fundamentals should take root this year and overtake cautious sentiments. We expect to see volumes increase, followed by stronger pricing."
Capital expenditures for the full 2013 fiscal year are expected to range between $1.5 billion and $1.8 billion.
"Overall, even as we enter the seasonally slowest period of our year, we feel good about the performance of our two business units in the face of some difficult challenges, and we feel very good about the longer-term prospects for both potash and phosphates," Prokopanko said.
For more information, visit Industrial Info's North American Metals & Minerals Project Database.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Total sales stood at $2.54 billion, a 15.87% decrease from the same period last year. Although Mosaic saw solid demand and sales in North and South America that were driven by strong application seasons, prices in the Phosphate segment were sharply lower, and both the Phosphate and Potash segments saw lower volumes. Contract negotiations with India and China negatively affected international shipments, as they proved to be longer and more difficult than anticipated, although those with China were eventually resolved. Many international customers in the Phosphate segment also delayed purchases during the quarter to avoid price risk.
Low raw material costs offset some of the losses, and the company saw a $179 million gain from a decrease in the amount of unrecognized tax benefits. Capital expenditures during the quarter totaled $394 million.
Industrial Info is tracking 30 active Mosaic projects that are worth a total of about $5 billion, including the $1.4 billion, second-stage construction of an underground potash mine in Esterhazy, Saskatchewan. The project, which is part of a $2 billion plan to expand the Esterhazy potash operations, involves constructing a 3 million-metric-ton-per-year satellite underground mining operation and a 4.5-mile haul road to truck ores to a processing plant to produce 900,000 tons per year of potash. The expansion will increase the Esterhazy operation's total capacity to 7 million metric tons per year.
"Despite the severe drought in the U.S. and weather problems in other parts of the world, this year's global harvest was the second-largest ever," said Jim Prokopanko, the president and chief executive officer of Mosaic, in a conference call. "Even so, the world will consume more grains and oilseeds than it harvests this year. Food supply is precarious, and farmers are well aware of this fact. So it should come as no surprise that futures markets are signaling farmers to expand planted areas and increase fertilizer applications to boost yields in 2013."
Both of the company's major segments reported declines in sales and earnings, as weaker volumes and product prices took their toll:
- Phosphate segment net sales were reported to be $1.8 billion, a 19% decrease from second-quarter 2012, while operating earnings were reported to be $245 million, a 43.29% decrease. Sales volumes stood at 3 million tonnes, a 6.25% decrease.
- Potash segment net sales were reported to be $780 million, a 7.03% increase from the same period last year, while operating earnings were reported to be $316 million, an 11.73% decrease. Sales volumes stood at 1.5 million tonnes, a 16.67% decrease.
Mosaic executives expect 2013 to be a record year for exports, estimating between 55 million and 57 million tonnes of global potash shipments, and between 63 million and 65 million tonnes of global phosphate shipments. In particular, a recently settled contract with China has improved Mosaic's international outlook. Globally, crop nutrient markets are expected to improve. In Canada, Mosaic is moving forward on brownfield potash expansion plans at three mines in Saskatchewan.
"Farm economics around the world were extremely compelling, and as a result, we expect record global phosphate and potash shipments in calendar 2013," Prokopanko said in the conference call. "Positive fundamentals should take root this year and overtake cautious sentiments. We expect to see volumes increase, followed by stronger pricing."
Capital expenditures for the full 2013 fiscal year are expected to range between $1.5 billion and $1.8 billion.
"Overall, even as we enter the seasonally slowest period of our year, we feel good about the performance of our two business units in the face of some difficult challenges, and we feel very good about the longer-term prospects for both potash and phosphates," Prokopanko said.
For more information, visit Industrial Info's North American Metals & Minerals Project Database.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
