MOS 2009 Q4 Earnings - by Better Trades

With overall sales of potash and phosphates plummeting, fertilizer maker Mosaic Co. (MOS) made it known following the closing bell on July 22 that profits during the 4Q plunged. Results were greatly affected by lower sales and lower volume in conjunction with higher raw material costs.

For the recent period, Mosaic recorded net income of $146.9M, or $0.33 per share, in sharp contrast to last year’s earnings during the 4Q of $862.5M, or $1.93 per share, a decrease in profits of nearly 83%.

The greatest deterrent to the company’s quarterly success came from the company’s decline in sales, which amounted to $1.59B, down more than 54% from last year’s revenues of $3.47B. Mosaic attributed the lack of sales to a steep decline in primarily the potash segment, as well as lack of demand in phosphates.

The potash unit saw revenues dip from $860.5M a year ago to $386.8M this year, a decrease in sales of more than 55%. Overall sales volume decreased to 0.6 million tons from last year’s tally of 2.4 million tons in the 4Q of 2008.

Within the company’s phosphate division, Mosaic witnessed gross sales falling from $2B last year to their current total of $884.5M. Furthermore, overall sales volume dipped as well, falling from 2.4 million tons in last year’s 4Q to 1.9 million tons this year.

Analysts, within the industry, were looking for the crop nutrient producer to post quarterly earnings of $0.10 per share on overall revenues of $1.58B.

Following the company’s announcement, Jim Prokopanko, President and CEO at Mosaic commented, "We managed our business well and became financially stronger during a year of unprecedented volatility. We remain highly confident in the long-term agricultural outlook and look forward to building momentum during fiscal 2010."

Digging deeper into the company’s report, Mosaic’s offshore segment saw net sales fall from $695M during the same period a year ago, to $394.1M, a decrease of more than 43%. The offshore unit sustained an operating loss of $126.7M, versus a profit of $101.5M a year ago.

Mosaic benefited during the quarter from lower selling, general and administrative (SG&A) expenses, which amounted to $83.3M, down more than 13% from the previous year’s expenses of $96.2M. However, the company did incur an increase in net interest expenses that totaled $16.2M, up nearly three-fold from last year’s total of $6.3M, due in large part to a lower rates earned on cash balances.

The report also revealed that Mosaic booked a tax benefit of $330.3M during the quarter, down from last year’s benefit of $354M. Additionally, the company was hit with a transaction loss in foreign currency of $297.9M, compared to the prior year’s gain of $12.8M. The loss in the exchange rate came from the result of a weaker dollar.

For full-year fiscal 2009, the company recorded net earnings of $2.35B, or $5.27 per share, compared to overall earnings in 2008 of $2.08B, or $4.67 per share, an increase in profits of nearly 13%. Annual sales in 2008 came in at $10.3B, up nearly 5% from the previous year’s total of $9.81B.

On average, analysts were looking for Mosaic to post yearly earnings of $3.97 per share on overall sales of $10.27B.

Prokopanko added, "While near-term uncertainties remain, we have emerged from the market turmoil of the past year as a stronger competitor and are poised to capitalize on the positive trends we foresee in the potash and phosphates markets."

The company did not provide any guidance for the upcoming fiscal 2010 year. Mosaic did however state that they anticipate phosphate sales volumes to range between 1.9 million and 2.2 million tons, with the average selling price ranging between $255 and $295 per ton during the 1Q.

At the close of the July 22 trading session, prior to the company’s earnings announcement, shares of MOS were down 1.45%, or $0.71, at $48.42 per share. During the next day’s trading, Mosaic shares jumped 6.3%, adding $3.03 to end the session at $51.45 per share.

Over the past year, Mosaic’s stock has traded as high as $133.91 and as low as $21.94 per share.

By Better Trades