Mosaic looks for bargain buys as fertilizer sector slumps

Mosaic’s potash facility at Esterhazy, Sask. (Greg Berg photo)

Reuters — U.S. fertilizer company Mosaic Co., grappling with falling prices and profits, is looking for acquisitions that could be bargain-priced in a weak commodity sector.

The world’s largest producer of finished phosphate products on Thursday forecast lower selling prices for potash and phosphate in the current quarter. The Plymouth, Minn.-based company also reported fourth-quarter profit that fell less than expected, and announced a $75 million share repurchase program (all figures US$).

CEO Joc O’Rourke said the company is interested in acquisitions related to either potash or phosphate, but would weigh any opportunities against the benefits of further repurchases of its stock, which has fallen about 50 per cent over the past year.

“The down parts of the (commodity) cycle do present opportunities,” chief financial officer Rich Mack said on a call with analysts. “If there is something that is extraordinarily compelling, it’s something that we could act on.”

Fertilizer producers’ profits have been hit by falling prices, largely due to weak currencies in countries such as Brazil and low grain prices.

Falling currency values against the U.S. dollar have lowered production costs 17 per cent in Canada, where Mosaic’s largest potash mines are located, but the savings amount to 41 per cent in Belarus, where potash rival Belaruskali operates, Mosaic said.

It expects phosphate prices to fall as much as 14.6 per cent to $350 per tonne in the current quarter and potash prices to fall as much as 21 per cent.

Mosaic forecast global phosphate shipments in 2016 of 65 million to 67 million tonnes, up from 64.4 million last year, according to BMO Nesbitt Burns. Potash shipments look slightly lower this year at 58 million to 60 million tonnes, down from 60.7 million in 2015.

The company said last week that it would cut output of phosphates by up to 400,000 tonnes in the first quarter, due to weak demand.

Mosaic also noted Thursday its potash mine expansion work near Esterhazy, Sask., about 90 km southeast of Yorkton, is still on time and on budget for commissioning next year.

The expansion, at the company’s K3 site, is expected to “further reduce the company’s ongoing costs of production” and cut out risk from brine inflow.

Mosaic’s adjusted earnings per share were 53 cents, compared with average analysts’ estimates of 44 cents per share, according to Thomson Reuters I/B/E/S.

Fourth-quarter net earnings fell to $155 million, or 44 cents per share, in the fourth quarter ended Dec. 31, from $360.7 million, or 97 cents per share, a year earlier.

Net sales fell nine per cent to $2.16 billion.

Reporting for Reuters by Rod Nickel in Winnipeg and Kanika Sikka in Bangalore. Includes files from Network staff.


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