Mosaic called the bottom of the fertilizer market rout, even
as it unveiled a 79% plunge in earnings, more than Wall Street had expected,
thanks to lower phosphate and potash prices.
The US-based fertilizer giant, the world's top phosphate
nutrients group, reported earnings of $128.9m for the October-to-December
quarter – down from $615.7m in the same period the year before.
The result, equivalent to $0.36 a share excluding one-off
charges, fell short of analyst expectations of a $0.42-a-share result.
And it reflected the dent from the break-up in July of the Belarusian
Potash Company cartel, which controlled more than 40% of world potash trade, an
event which sent prices of the nutrient tumbling, and provoked buyers to
withdraw from other fertilizer markets too in expectation of lower values.
'Low market prices'
Mosaic achieved an average of $381 a tonne for its
diammonium phosphate, or DAP, a benchmark phosphate fertilizer product – down 28%
year on year.
Although volumes rose 21% to a company record of 3.4m
tonnes, the lower price meant these sales were made at reduced margins.
In potash, the group realised an average of $303 a tonne,
down 30%, again more than offsetting the boost to profits from higher sales
"Our results for the fourth quarter reflect the low market
prices for potash and phosphate," said Jim Prokopanko, the Mosaic chief
However, Mr Prokopanko also flagged signs of market recovery,
particularly in phosphates, for which the group already "seeing meaningful
"Prices hit bottom during the fourth quarter," he said.
"Prices improved during December and we believe momentum
will continue through the spring in North America."
These higher prices, coupled with lower costs of the raw
materials such as ammonia and sulphur used for making fertilizers, "should
bode well for the profitability of our growing phosphates business".
The comments echo those on Monday from Andrey Guryev, chief
executive at Russian fertilizer group PhosAgro, who said that the impact of the
BPC break-up on fertilizer markets had "subsided".
"We are seeing prices for key phosphate-based fertilizers
normalise as demand - backed by solid farmer economics - returns ahead of planting
seasons in key markets," Mr Guryev said.
'Bottom in prices'
For potash, Mr Prokopanko said that "prices seem to have found a bottom" after China agreed fresh import contracts last month.
And "the stage is set for
improving prices later this year", with values lifted by rising demand which will see world shipments hit a record 57m-59m tonnes, up from 54m tonnes last year.
"Customers believe a bottom in potash prices has
been reached and are now exhibiting improved confidence in their buying
He told investors that "it's important for you to understand that we do not expect dramatic short-term potash price increases.
"The downward part of the cycle is prolonged, and we expect the upward swing to take time as well. But we do expect better operating conditions in the second half of this year."
The reassurance, and the announcement of a $1bn share buyback, helped underpin Mosaic shares, which stood 2.8% higher at $48.14 in lunchtime deals in New York.
The repurchase announcement adds to the agreement to buy 43.3m shares from trusts related to the family which owns Cargill, Mosaic's former controlling shareholder. This deal is worth more than $2bn at current market values.