Mosaic Reports Fiscal Year 2009 Second Quarter Results
(NYSE: MOS) announced today net earnings of
diluted share, for the second quarter ended
compare with net earnings of
second quarter ended
financial position, with cash and cash equivalents of
KEY FACTORS
-- Operating earnings were $682.0 million, or 22.7% of net sales, up from
$529.6 million, or 24.1% of net sales last year
-- Potash operating earnings more than tripled to $547.5 million
-- The average diammonium phosphate (DAP) selling price was $1,083 per
tonne and total phosphate sales volumes were 1.2 million tonnes
-- The average muriate of potash (MOP) selling price was $529 per tonne
and total potash sales volumes were 1.7 million tonnes
-- An inventory valuation write-down of $293.5 million, or $0.41 per
share, was recorded
-- Mosaic recorded a gain on the sale of its interest in Saskferco of
$673.4 million, or $1.03 per share
-- The Company expects to reduce phosphate and potash production
significantly during the remainder of fiscal 2009
-- Results are expected to be weak at least through the fiscal third
quarter
Mosaic had net sales in the second quarter of fiscal 2009 of
an increase of
ago.
Mosaic’s gross margin for the second quarter fiscal 2009 was
million
sales, a year ago. Second quarter operating earnings were
compared with
driven by higher DAP and MOP selling prices and the gain on the sale of
Saskferco, offsetting the impact of lower sales volumes and the inventory
valuation write-down. Deteriorating market conditions and rapidly declining
raw material costs caused phosphate selling prices to decline sharply toward
the end of the quarter and were the primary causes of an inventory valuation
write-down totaling
among other factors, lower grain and oilseed prices, a late North American
harvest, congested distribution supply chains and the global economic
slowdown.
“Second quarter earnings were up from the prior year as we executed our
strategic game plan and benefited from higher realized selling prices,
especially in our Potash business unit,” said
President and Chief Executive Officer. “Toward the end of the quarter,
however, worldwide crop nutrient sales activity dropped sharply, and it is
expected to remain weak through at least the third quarter. Because of these
conditions, we are reducing our production to manage excess inventories,
reducing capital expenditures, and working to maintain financial strength and
flexibility.”
Phosphates
Net sales in the Phosphates segment were
quarter, compared with net sales of
second quarter gross margin was
compared with
year ago. Operating earnings were
in the same period last year. Higher selling prices were more than offset by
a combination of factors including a 46% decrease in sales volumes to 1.2
million tonnes, an inventory valuation write-down of
raw material costs, and net unrealized mark-to-market derivative losses of
buyer sentiment as a result of the factors previously noted.
The inventory valuation write-down in the second quarter was necessary
because the carrying cost of ending phosphate inventories, which included
higher sulfur and ammonia costs, exceeded estimates of future phosphate
selling prices. Mosaic expects the Phosphate segment’s results to be much
weaker at least through the third quarter because of lower selling prices and
margins, soft sales volumes, and lower production levels. As previously
announced, Mosaic reduced phosphate production by approximately one million
tonnes through
additional one million tonnes through fiscal 2009.
The average second quarter DAP selling price, FOB plant, was
tonne, which was a
per tonne increase compared with the first quarter of fiscal 2009. The price
momentum of the past several quarters reversed toward the end of the second
quarter due to factors previously noted and significantly lower prices are
expected in upcoming quarters.
Potash
Net sales in the Potash segment were
quarter, more than double net sales of
segment’s gross margin increased to
59.1% of net sales, compared with
ago. Operating earnings were
more than triple 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 and the impact of a 15% decline in sales volumes.
The average second quarter MOP selling price, FOB plant, was
tonne, which is a
per tonne increase compared with the first quarter of fiscal 2009. As
previously disclosed, this was below Mosaic’s prior guidance range of
$620
locations.
The Potash segment’s total sales volume was 1.7 million tonnes for the
second quarter compared with second quarter volume of 2.0 million tonnes a
year ago. The decline in sales volumes was primarily due to lower customer
demand. Sales volumes are expected to remain weak at least through the third
quarter with realized prices expected to decline slightly compared to second
quarter levels. To better manage growing inventory levels, Mosaic is reducing
potash production by up to one million tonnes in the second half of fiscal
2009.
Offshore
The Offshore segment’s net sales totaled
quarter compared with
the second quarter, Mosaic changed the timing of when sales subject to the
Indian government subsidy are recognized until payment has been received.
Gross margin decreased to a loss of
compared to a gross margin of
Offshore incurred an operating loss of
compared to operating earnings of
loss resulted from an inventory valuation write-down of
lower sales volumes. Mosaic expects the Offshore segment’s results to remain
weak at least through fiscal 2009, primarily due to slow demand mainly in
Other
Selling, general, and administrative expenses (SG&A) were
the second quarter, or 2.6% of net sales, compared to
or 3.6% of net sales.
Net interest expense totaled
A foreign currency transaction gain of
second quarter compared to a loss of
ago. This non-cash gain is the result of the effect of a weakening Canadian
dollar on significant U.S. dollar denominated intercompany receivables and
cash held by Mosaic’s Canadian affiliates, partially offset by the effect of a
weakening Brazilian Real on significant U.S. dollar denominated payables.
Net unrealized mark-to-market derivative losses impacted gross margin by
previously noted.
Mosaic recorded a pre-tax gain of
tax (
Saskferco Products ULC in
Income tax expense was
an effective tax rate of 32.6% compared to
rate of 22.3% for the same period last year. The effective tax rate in the
second quarter of fiscal 2009 included a cost specific to the period resulting
from the recording of a deferred tax asset valuation allowance for
to the weaker financial results and soft near-term outlook for
tax expense in the year-ago quarter included a
specific to that period.
Total equity earnings in non-consolidated subsidiaries were
in the second quarter, compared with
ago. Mosaic’s equity earnings in Saskferco decreased to
second quarter compared to
primarily the result of the sale of Saskferco during the quarter. Equity
earnings in Fertifos S.A. were
to
Mosaic ended the second quarter with
equivalents. Cash flow from operating activities in the second quarter of
fiscal 2009 was
largely due to the timing of tax payments. Mosaic’s total debt as of
30, 2008
Mosaic expects its operating cash flow to be negative at least through the
third quarter as a result of the weak near-term outlook.
Year-to-Date
For the first half ended
an increase of 74.6% compared to last year. Year-to-date operating earnings
were
Year-to-date SG&A expenses were
for the same period in fiscal 2008. A foreign currency transaction gain of
loss of
non-consolidated entities increased year-to-date to
million
million
Outlook
Long-term world grain and oilseed use is expected to continue to increase
at a faster pace than historical trends due to steady population growth,
higher per capita incomes and further increases in biofuels production. This
will require additional harvested area and steady increases in yields, which
can be accomplished through more intensive and balanced crop nutrient use and
improved crop genetics.
“We continue to believe long-term agriculture fundamentals are excellent,”
said
crops are still required to secure the world’s food supply and crop nutrients
will play an essential role in achieving that objective. Mosaic is well
positioned strategically and financially to respond to these fundamentals with
one of the strongest balance sheets in the industry and leading global
positions in both potash and phosphates.”
About The Mosaic Company
The Mosaic Company is one of the world’s leading producers and marketers
of concentrated phosphate and potash crop nutrients. Mosaic is a single
source provider of phosphates and potash fertilizers and feed ingredients for
the global agriculture industry. More information on the company is available
at mosaicco.com.
Mosaic will conduct a conference call on
a.m. EST
a simultaneous audio webcast of the conference call may be accessed through
Mosaic’s website at mosaicco.com/investors. Additionally, the conference
call-in number is 888-679-8038 and the passcode is 30488542. This webcast
will be available up to one year from the time of the earnings call.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, statements about future financial and
operating results. Such statements are based upon the current beliefs and
expectations of The Mosaic Company’s management and are subject to significant
risks and uncertainties. These risks and uncertainties include but are not
limited to the predictability and volatility of, and customer expectations
about, agriculture, fertilizer, raw material, energy and transportation
markets that are subject to competitive and other pressures and the effects
of the current economic and financial turmoil; the build-up of inventories in
the distribution channels for crop nutrients; changes in foreign currency and
exchange rates; international trade risks; changes in government policy;
changes in environmental and other governmental regulation; adverse weather
conditions affecting operations in
United States
of asset retirement, environmental remediation, reclamation or other
environmental regulation differing from management’s current estimates;
accidents and other disruptions involving Mosaic’s operations, including brine
inflows at its
fires, floods, explosions, seismic events or releases of hazardous or volatile
chemicals, as well as other risks and uncertainties reported from time to time
in The Mosaic Company’s reports filed with the Securities and Exchange
Commission. Actual results may differ from those set forth in the
forward-looking statements.
Condensed Consolidated Statements of Earnings
(in millions, except per share amounts)
The Mosaic Company (unaudited)
Three months ended Six months ended
November 30 November 30
2008 2007 2008 2007
Net sales $3,006.5 $2,195.4 $7,329.0 $4,198.7
Cost of goods sold 1,939.3 1,572.3 4,613.2 3,053.8
Lower of cost or market write-down 293.5 - 293.5 -
Gross margin 773.7 623.1 2,422.3 1,144.9
Selling, general and
administrative expenses 76.8 79.8 166.8 146.4
Restructuring loss - 10.3 - 10.3
Other operating expense 14.9 3.4 24.6 9.0
Operating earnings 682.0 529.6 2,230.9 979.2
Interest expense, net 8.3 25.5 18.9 59.5
Foreign currency transaction
(gain) loss (32.3) 52.4 (119.0) 71.8
Gain on sale of equity investment (673.4) - (673.4) -
Other income (4.4) (1.2) (5.9) (1.2)
Earnings from consolidated
companies before income taxes 1,383.8 452.9 3,010.3 849.1
Provision for income taxes 451.2 100.9 948.9 201.7
Earnings from consolidated
companies 932.6 352.0 2,061.4 647.4
Equity in net earnings of
nonconsolidated companies 28.7 45.5 88.5 57.3
Minority interests in net earnings
of consolidated companies (1.5) (3.5) (5.4) (5.2)
Net earnings $959.8 $394.0 $2,144.5 $699.5
Diluted earnings per share $2.15 $0.89 $4.81 $1.57
Diluted weighted average number of
shares outstanding 446.1 445.0 446.3 444.5
Condensed Consolidated Balance Sheets
(In millions, except share and per share amounts)
The Mosaic Company (unaudited)
November 30 May 31
2008 2008
Assets
Current assets:
Cash and cash equivalents $2,811.6 $1,960.7
Receivables, net 918.1 1,039.2
Inventories 1,614.2 1,350.9
Deferred income taxes 208.9 256.9
Other current assets 417.7 201.8
Total current assets 5,970.5 4,809.5
Property, plant and equipment, net 4,331.9 4,648.0
Investments in nonconsolidated
companies 280.7 353.8
Goodwill 1,682.0 1,875.2
Other assets 162.6 133.3
Total assets $12,427.7 $11,819.8
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt $110.5 $133.1
Current maturities of long-term debt 30.2 43.3
Accounts payable and accrued liabilities 1,560.5 1,843.0
Accrued income taxes - 131.9
Deferred income taxes 28.7 34.8
Total current liabilities 1,729.9 2,186.1
Long-term debt, less current
maturities 1,272.7 1,375.0
Deferred income taxes 629.9 516.2
Other noncurrent liabilities 920.9 987.9
Minority interest in consolidated
subsidiaries 21.5 23.4
Stockholders' equity:
Preferred stock, $0.01 par value,
15,000,000 shares authorized, none
issued and outstanding as of
November 30, 2008 and May 31, 2008 - -
Common stock, $0.01 par value,
700,000,000 shares authorized:
Class B common stock, none issued and
outstanding as of November 30, 2008
and May 31, 2008 - -
Common stock, 444,375,461 and
443,925,006 shares issued and
outstanding as of November 30, 2008
and May 31, 2008, respectively 4.4 4.4
Capital in excess of par value 2,472.7 2,450.8
Retained earnings 5,585.0 3,485.4
Accumulated other comprehensive
income (209.3) 790.6
Total stockholders' equity 7,852.8 6,731.2
Total liabilities and stockholders'
equity $12,427.7 $11,819.8
Condensed Consolidated Statements of Cash Flows
(In millions, except share and per share amounts)
The Mosaic Company (unaudited)
Three months ended Six months ended
November 30 November 30
2008 2007 2008 2007
Cash Flows from Operating Activities
Net cash provided by
operating activities $386.5 $542.5 $948.0 $980.9
Cash Flows from Investing Activities
Capital expenditures (223.2) (79.1) (410.1) (161.2)
Proceeds from sale of equity method
investment 745.7 - 745.7 -
Proceeds from sale of business - (0.3) - 7.5
Restricted cash (31.1) 0.2 (32.3) -
Other - 0.1 0.3 0.9
Net cash provided by (used in)
investing activities 491.4 (79.1) 303.6 (152.8)
Cash Flows from Financing Activities
Payments of short-term debt (51.8) (185.4) (193.3) (277.0)
Proceeds from issuance of short-term
debt 53.4 136.8 172.0 242.9
Payments of long-term debt (67.3) (454.4) (101.1) (637.5)
Proceeds from issuance of long-term
debt - - 0.1 -
Payment of purchase premium on debt 0.2 - - -
Proceeds from stock options
exercised 3.0 19.2 4.1 37.6
Contributions by Cargill, Inc. - 1.5 - 1.5
Excess tax benefits related to stock
option exercises 2.0 - 4.8 -
Dividend to minority shareholder (0.4) (3.4) (1.8) (3.5)
Cash dividends paid (22.2) - (44.4) -
Net cash used in financing
activities (83.1) (485.7) (159.6) (636.0)
Effect of exchange rate changes on
cash (172.9) 25.3 (241.1) 29.5
Net change in cash and cash
equivalents 621.9 3.0 850.9 221.6
Cash and cash equivalents -
beginning of period 2,189.7 639.2 1,960.7 420.6
Cash and cash equivalents -
end of period $2,811.6 $642.2 $2,811.6 $642.2
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for:
Interest (net of amount
capitalized) $0.5 $16.0 $47.9 $79.4
Income taxes 567.8 48.5 760.5 97.0
Condensed Consolidated Financial Highlights
(dollars in millions)
The Mosaic Company (unaudited)
Three months ended Increase/
November 30 (Decrease)
2008 2007 Amount %
Net sales:
Phosphates $1,750.9 (b) $1,230.8 (b) $520.1 42%
Potash 973.2 431.6 541.6 125%
Offshore 562.4 644.3 (81.9) (13%)
Corporate/Other (a) (280.0) (111.3) (168.7) (152%)
$3,006.5 (b) $2,195.4 (b) $811.1 37%
Gross margin:
Phosphates (d) $298.2 $397.6 $(99.4) (25%)
Potash 574.9 175.2 399.7 228%
Offshore (c) (95.2) 50.1 (145.3) NM
Corporate/Other (a) (c) (4.2) 0.2 (4.4) NM
$773.7 $623.1 $150.6 24%
Operating earnings (loss):
Phosphates (d) $258.8 $346.8 $(88.0) (25%)
Potash 547.5 161.2 386.3 240%
Offshore (c) (120.1) 25.7 (145.8) NM
Corporate/Other (a) (c) (4.2) (4.1) (0.1) NM
$682.0 $529.6 $152.4 29%
Six months ended Increase/
November 30 (Decrease)
2008 2007 Amount %
Net sales:
Phosphates $4,343.7 (b) $2,413.3 (b) $1,930.4 80%
Potash 1,949.6 843.4 1,106.2 131%
Offshore 1,610.4 1,141.8 468.6 41%
Corporate/Other (a) (574.7) (199.8) (374.9) (188%)
$7,329.0 (b) $4,198.7 (b) $3,130.3 74.6%
Gross margin:
Phosphates (d) $1,303.9 $751.1 $552.8 74%
Potash 1,078.1 301.8 776.3 257%
Offshore (c) 85.4 101.2 (15.8) (16%)
Corporate/Other (a) (c) (45.1) (9.2) (35.9) NM
$2,422.3 $1,144.9 $1,277.4 112%
Operating earnings (loss):
Phosphates (d) $1,209.6 $657.0 $552.6 84%
Potash 1,025.3 271.4 753.9 278%
Offshore (c) 38.9 55.8 (16.9) NM
Corporate/Other (a) (c) (42.9) (5.0) (37.9) NM
$2,230.9 $979.2 $1,251.7 128%
(a) Includes elimination of intercompany sales.
(b) Includes PhosChem sales for its other members of $323.7 million and
$144.6 million for the three months ended November 30, 2008 and 2007,
and $612.6 million and $282.1 million for the six months ended
November 30, 2008 and 2007, respectively. PhosChem is a consolidated
subsidiary of Mosaic.
(c) The Offshore segment impact of lower of cost or market inventory
write-down was $149.3 million; however, the consolidated impact is
$74.5 million as some of the product was purchased from the Phosphates
segment. The $74.8 million intercompany amount is eliminated and
included in our Corporate, Eliminations, and Other segment. In
addition, the Corporate, Eliminations, and Other segment includes a
$5.8 million lower of cost or market inventory write-down related to
nitrogen products.
(d) The Phosphate segment impact of lower of cost or market inventory
write-down was $213.2 million.
Key Statistics
The Mosaic Company (unaudited)
Three months ended Increase/
November 30 (Decrease)
2008 2007 Amount %
Sales volumes
(000 metric tonnes):
Phosphates (a)
Crop Nutrients: North America 366 845 (479) (57%)
International 740 1,201 (461) (38%)
Phosphate Feeds 126 234 (108) (46%)
1,232 2,280 (1,048) (46%)
Potash (b)
Crop Nutrients: North America 524 789 (265) (34%)
International 921 948 (27) (3%)
Non agricultural 277 279 (2) (1%)
1,722 (c) 2,016 (c) (294) (15%)
Average selling price per
metric tonne:
DAP (d) $1,083 $417 $666 160%
MOP (d) 529 174 355 204%
K-Mag (d) 318 132 186 141%
Average purchase price paid
for key raw materials:
Ammonia (metric ton)
(Central Florida) (e) $810 $316 $494 156%
Sulfur (long ton) 488 100 388 388%
Canadian resource taxes and
royalties (f) $142 $34 $108 318%
Six months ended Increase/
November 30 (Decrease)
2008 2007 Amount %
Sales volumes
(000 metric tonnes):
Phosphates (a)
Crop Nutrients: North America 1,145 1,747 (602) (34%)
International 1,878 2,342 (464) (20%)
Phosphate Feeds 300 434 (134) (31%)
3,323 4,523 (1,200) (27%)
Potash (b)
Crop Nutrients: North America 1,070 1,578 (508) (32%)
International 2,011 2,018 (7) (0%)
Non agricultural 538 504 34 7%
3,619 (c) 4,100 (c) (481) (12%)
Average selling price per
metric tonne:
DAP (d) $1,041 $413 $628 152%
MOP (d) 508 168 340 202%
K-Mag (d) 299 125 174 139%
Average purchase price paid
for key raw materials:
Ammonia (metric ton)
(Central Florida) (e) $669 $321 $348 108%
Sulfur (long ton) 538 87 451 518%
Canadian resource taxes
and royalties (f) $311 $71 $240 338%
(a) Phosphates volumes represent dry product tonnes, primarily DAP and
MAP. Excludes tonnes sold by PhosChem for its other members.
(b) Potash volumes exclude tonnes mined under a third party tolling
arrangement.
(c) Includes sales volumes (in thousands of metric tonnes) of 125 tonnes
and 334 tonnes of K-Mag(R) for the three months ended November 30,
2008, respectively, and 167 tonnes and 354 tonnes of K-Mag(R) for the
three and six months ended November 30, 2007, respectively.
(d) FOB plant/mine
(e) Delivered Tampa
(f) Amounts in millions of U.S. dollars
SOURCE The Mosaic Company