the mosaic company earnings: 5 things you need to know
TRANSCRIPT
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The Mosaic Company Earnings: 5 Things You Need to Know
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Margins continue to expand1
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Potash
lower production costs as
company operated plants at 90% capacity in anticipation of planned turnarounds and higher demand in coming months
improved selling prices as potash markets recovered
Mosaic’s potash gross margin jumped to 40% from 33% a year ago, thanks to:
Expansion underway at Mosaic’s low-cost Esterhazy potash mine. Source: Company website
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Phosphates
Low input costs boosted phosphates gross margin by a percentage point to 21% despite flat revenue.
Phosphates contributed 50% to Mosaic’s operating earnings in Q2.
Source: Mosaic Q2 earnings presentation
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Costs in control2
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Restructuring efforts paying off
Mosaic’s selling, general, and administrative expenses were flat despite 4% higher revenue and greater business footprint (backed by acquisitions) compared to last year.
2015 target: SG&A expenses of $360-$380 million. Company incurred $382 million in 2014.
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Integration of acquired business on track3
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International distribution segment growing
Integration of Archer Daniels Midland’s fertilizer distribution business in Brazil and Paraguay acquired last year is complete.
The acquisition pushed segment sales up by 17.5% in Q2.
Mosaic’s distribution capacity in the region is projected to jump 50%.
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Ma’aden joint venture to cost more4
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Wa'ad Al Shamal Phosphate Company Capital cost of JV project
in Saudi Arabia -- in which Mosaic holds 25% stake --to be $8 billion, or 7% higher than initial estimates.
At the time of agreement, Mosaic outlined $1 billion cash investment. Construction underway at Ma’aden JV site.
Source: Mosaic Q2 earnings presentation
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Sales volumes guidance revised5
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Weak expected Q3 to blameMosaic upgraded full-year phosphates sales volumes slightly, but downgraded potash volumes.
2015 Sales volumes (in million tonnes)
Segment Previous guidance Revised guidance
Phosphates 9-10 mt 9.5-10 mt
Potash 8.5-9 mt 8.2-8.6 mt
Data source: Company earnings release. Chart by author
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Foolish takeaway
While Mosaic doesn’t give out full-year sales and profit guidance, it appears to be on track to a solid year. The fertilizer markets may be under pressure, but the company’s cost-reduction efforts and growth initiatives should push its margins higher in 2015 and beyond.
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