News And Updates
Mosaic Posts Record Profit
Published By: The Ledger
Company's fortunes get boost from an increase in the price of a popular fertilizer product.
By Kevin Bouffard The Ledger
LAKELAND A nearly 42 percent increase in the price of the most popular fertilizer product sent the Mosaic Co. to a second consecutive quarter of record profit. Although the phosphate industry saw big price increases in the 1970s, "you've never seen anything that's gone up quite like this," said Mike Lloyd Jr., director of research programs at the Florida Institute of Phosphate Research in Bartow, who has more than 50 years in the industry.
The Plymouth, Minn.-based company, with phosphate mining operations centered in Polk County, on Wednesday reported a profit of $394 million (89 cents per share) for the quarter ending Nov. 30, or six times higher than a profit of $65.9 million (15 cents per share) a year earlier.
The explosion in the price of diammonium phosphate (DAP), the most widely sold phosphate fertilizer, led the improved performance. During the quarter, Mosaic sold DAP at an average price of $417 per metric ton, a 71.6 percent increase from the average price of $243 per ton a year earlier.
That average is certain to rise in the current quarter because Mosaic shipped DAP at $685 per metric ton earlier this week from Tampa to South America, said Jim Prokopanko, the company's president and chief executive officer, in a Wednesday morning teleconference.
Industry sources show the current domestic DAP price at $525 to $530 per standard U.S. ton, which is consistent with the export price reported by Prokopanko, Lloyd said.
The price runup stems from a global shortage of fertilizers paired with an increase in demand both in the U.S. and worldwide, particularly from developing countries such as China, India and Brazil with emerging middle classes spending more on improved diets, Lloyd said.
At the same time, farmers in the U.S. and other countries are growing more corn, sugar and other crops for ethanol and other biofuels, he added.
In recent months, U.S. fertilizer retailers have been buying anything they can get in anticipation of big sales for the spring planting season, Lloyd said.
"A lot of dealers are buying because of short supplies so they have enough for the spring," he said.
Mosaic and other manufacturers "are selling everything they can make as soon as they can make it," Lloyd said.
Those trends also are benefitting Mosaic's Canadian-based potash fertilizer business. The second quarter average potash price rose 20 percent to $171 per metric ton, the company reported.
Mosaic's total sales revenue for the quarter rose 44 percent to nearly $2.2 billion compared to a year ago. Sales revenue for the first half of fiscal year 2008 rose to almost $4.2 billion, up 49 percent from $2.8 billion in the same period last year.
Phosphate sales revenue for this year's second quarter reached $1.2 billion, up 61 percent from a year ago, on volume of nearly 2.28 million metric tons, down 1 percent from a year ago. For the first half, sales revenue rose 55 percent to $2.4 billion on volume of 4.5 million metric tons, down 2 percent from last year.
North American sales volumes increased 70 percent for the second quarter and 83 percent for the half while export volumes fell 25 percent and 27 percent, respectively.
The potash division saw second-quarter sales revenue increase 23 percent to $431.6 million on volume of 2 million metric tons, up 3 percent. Revenue for the first six months of fiscal 2008 rose 31 percent to $843.4 million on volume of 4.1 million tons, up 13 percent.
A major negative in the current and future earnings is the rising cost of sulfur, a raw material in phosphate fertilizers, said Larry Stranghoener, who called himself Mosaic's "curmudgeon" chief financial officer.
The average cost of a long ton of sulfur delivered to Central Florida plants jumped 55 percent to $102, according to its financial statement.
Fertilizer manufacturers buy as much as 75 percent of sulfur from oil companies, which produce it as a byproduct of refining, Lloyd said. Prices have risen because of a global shortage driven by increased fertilizer production worldwide.
The current U.S. sulfur price has risen to $110 per ton and is expected to increase at least another $100, he said. That's because sulfur prices in the Middle East are already at $495 per metric ton.
Mosaic stock closed at $89.04 Wednesday, up 64 cents from Tuesday. It closed Dec. 31, 2007, at $94.34, a 335.8 percent increase for the year.
Kevin Bouffard can be reached at [email protected] or at 863-802-7591.