SubscribeMosaic misses the number
North American fertilizer company Mosaic Co said on Wednesday its fiscal first- quarter profit almost tripled, driven by a boom in the global agricultural sector and the soaring price of potash- and phosphate-based crop nutrients.
But the company’s shares plummeted more than 20 percent to $53.80 in trading after the closing bell because earnings fell short of Wall Street expectations.
The company also warned it planned to sharply reduce phosphate production over the next several months, due to high inventory levels.
Net income in the quarter ended Aug 31 was $1.18 billion, or $2.65 a share, up from a year-ago’s profit of $305.5 million, or 69 cents a share.
My comment: Record earnings but missed the street number and now uncertainty going forward due to cutting phosphate production. The good news is the potash market is still strong as the company indicated in its press release.
Net sales in the Potash segment totaled $976.4 million for the first quarter, more than double net sales of $411.8 million a year ago. The Potash segment’s gross margin increased to $503.2 million in the first quarter, or 51.5% of net sales, compared with $126.6 million a year ago, or 30.7% of net sales. Operating earnings were $477.8 million during the first quarter, or quadruple the operating earnings in the same period last year. The increase in operating earnings was primarily a result of higher selling prices. This increase was partially offset by significantly higher Canadian resource taxes and royalties, net unrealized mark-to-market derivative losses of $41.8 million, and the impact of a 9% decrease in sales volumes.
The average first quarter MOP selling price, FOB plant, was $488 per tonne, which is a $324 per tonne increase compared with a year ago and a $153 per tonne increase compared with the fourth quarter of fiscal 2008. Realized prices at the end of the first quarter were significantly higher than the average for the quarter and have continued to increase since the end of the quarter.
The company still expects “strong year over year earnings growth” for the rest of fiscal year 2009. The reaction to this earnings miss, if you call tripling earnings a miss, was that the stock got clipped for 20% after hours. That is going to happen in this type of market. You have to perform flawlessly just to stay even. The company now trades at around a forward P/E of around 5. I will have to listen to the conference call to find out exactly what is going on with the phosphate market.
John Polomny
The Real Deal
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