Mosaic sees sliding fertilizer sales; cost-cutting boosts profit

Mosaic’s mine shaft tower from its K3 facility in southern Sask. Photo: Greg Berg

Fertilizer sales look to slide through the rest of the year, U.S. producer Mosaic Co. said on Tuesday, as greater shipments into key markets by rivals in Belarus and China boost competition.

The world’s largest producer of finished phosphate products reported a bigger-than-expected quarterly profit, helped by cost-cutting.

Fertilizer prices have fallen as the strong U.S. dollar makes phosphate and potash more expensive in export markets such as Brazil and India.

At the same time, Chinese companies have boosted phosphate exports to India while state-owned fertilizer company Belaruskali earlier this year shipped a “disrupting” amount of potash into Mosaic’s U.S. backyard, Chief Executive Joc O’Rourke said in an interview.

Mosaic said its sales of phosphate and potash dipped in the third quarter and look lower for the current fourth quarter. But globally, Mosaic predicts record-high phosphate shipments this year and next, and potash sales by all sellers combined to finish 2015 with the second-highest total ever.

O’Rourke, who took the top job in August, said he is “not particularly concerned” about losing market share.

“When you maximize value, there’s certain business you walk away from because it’s not giving you the return you want.”

Mosaic, North America’s second-biggest potash producer, has curbed its Canadian potash production twice in the past two months.

Excluding one-time items, Mosaic earned 62 cents per share in the third quarter, above the average analyst estimate of 53 cents, according to Thomson Reuters I/B/E/S.

Cost-cutting, share buybacks and a lower effective tax rate lifted Mosaic’s adjusted earnings per share, Chief Financial Officer Rich Mack said.

The company is carrying out a five-year plan, announced in 2013, to cut $500 million in operating costs, including about 550 jobs. (Related: Mosaic lays off staff at Sask. potash mine)

Net earnings dropped nearly 21 per cent to $160 million, or 45 cents per share, hurt by lower sales of phosphates and potash and a strong dollar.

Mosaic’s net phosphates sales fell to $1 billion in the quarter from $1.1 billion a year earlier, while potash net sales dropped to $492 million from $593 million.

The Plymouth, Minnesota-based company’s net sales fell 6.5 per cent to $2.11 billion in the third quarter, below analysts’ estimate of $2.33 billion.

Mosaic stock rose 3.6 per cent in New York to $35.73. Up to Monday’s close, Mosaic’s shares had lost more than 21 per cent in the past 12 months.

Reporting by Rod Nickel and Shubhankar Chakravorty



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