Pricing Continues to Bedevil Fertilizer Maker Mosaic

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The Mosaic Co. (NYSE: MOS) reported fiscal third-quarter 2013 results before markets opened this morning. The fertilizer maker reported adjusted diluted earnings per share (EPS) of $0.88 on revenues of $2.24 billion. In the same period a year ago, Mosaic reported EPS of $0.64 on revenue of $2.19 billion. This morning’s results also compare to the consensus estimates for EPS of $0.87 and $2.54 billion in revenue.

Excluding one-time items, diluted EPS totaled $0.81.

The company’s CEO said:

As we emerge from the traditionally slow third fiscal quarter, we are seeing strong demand and improving sentiment in most of our geographies. Global farm economics remain compelling, with continuing attractive commodity prices and low costs for critical crop inputs. Economic and demographic trends are extremely promising for Mosaic, and the Company’s long-term prospects are excellent.

Gross margins fell sequentially from 27% to 25%, and operating profit was down from $560 million to $419 million. Year-over-year operating profit was up slightly from $414 million, and gross margin was up from 24% to 25%. The improvement in gross margin was attributed to higher potash volumes and lower phosphate raw materials cost. Both the phosphates and potash businesses suffered from low selling prices.

Mosaic forecast potash sales of 2.3 million to 2.6 million metric tons for the fourth fiscal quarter, at a price of $350 to $380 per metric ton. Gross margin on potash is expected to be in the range of 40% to 45%, compared with 41% in the third quarter.

The company forecast phosphates sales of 2.6 million to 2.9 million metric tons at a price of $475 to $505 per metric ton. Gross margins are expected to be around 18%, flat with the third quarter.

For the third quarter, potash prices averaged $385 and phosphate prices averaged $496. Mosaic has lowered its expected price by $20 at each end of the potash range and by $10 at each end of the phosphate range. Estimated shipments will rise quarter-over-quarter, but probably not enough to offset the lower prices. The consensus EPS estimate for the fourth quarter is $1.29. That number may be out of reach.

Shares are down 0.8% in premarket trading this morning, at $58.20 in a 52-week range of $44.43 to $63.46. Thomson Reuters had a consensus analyst price target of around $84.50 before today’s results were announced.