PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 14:56 UK, 6th May 2014, by Agrimoney.com
Mosaic blames rail hiccups as profits tumble

Mosaic flagged setbacks from North America's rail hiccups as the fertilizer giant unveiled a deeper-than-expected fall in profits, adding that it was upbeat on prospects despite cutting its forecast for industry potash volumes.

The fertilizer giant, the world's top phosphates group, unveiled a slide of 43% to $218m in earnings for the January-to-March period, equivalent to $0.54 a share, on revenues down 14.1% at $1.99bn.

Wall Street had forecast earnings of $0.59 a share.

The extent of the decline in profits reflected the slump in fertilizer prices, particularly potash, values of which plunged after the break-up in July of the Belarusian Potash Company cartel which controlled more than 40% of world trade.

Mosaic achieved an average of $267 a tonne for its potash during the quarter, down 29% year on year, and down 12% on the value achieved in the October-to-December period.

'Logistical constraints'

However, the group also highlighted a drag on sales volumes from the rail logistical setbacks stemming from the cold winter, which forced rail operators to run shorter trains, at lower speeds.

"Weather continued to create challenges in the operating environment," said Jim Prokopanko, the Mosaic chief executive.

In potash, "both our international volumes and our ability to restock in North America were impacted by logistical constraints".

Potash sales volumes, while up 400,000 tonnes year on year, were at 2.4m tonnes, towards the lower end of Mosaic's forecast range for the quarter.

Potash production dropped 300,000 tonnes to 1.9m tonnes equivalent to 70% of operational capacity, or 10 points below the target figure "as a result of rail shipping delays".

Potash downgrade

The comments come the day after it was revealed that Louis Dreyfus, the grain trading giant, had filed a complaint with the Canadian government over the service received from Canadian National Railway, the country's biggest rail operator.

Mr Prokopanko flagged an improvement in Mosaic's own fortunes on transport, saying that in the second half of 2014, "we expect rail constraints to be resolved and potash prices to be stable".

Indeed, the group was "optimistic about the remainder of 2014, for both of our business units", phosphates and potash, he said.

The upbeat sentiment came even as the group lowered to 56.7m-58.1m tonnes, from 56.8m-59.1m tonnes, its forecast for global potash shipments this year.

 

The downgrade reflected in the main worse prospect for Europe and the former Soviet Union, for which the potash volume forecast was cut to 10.7m-10.9m tonnes, from 11.3m-11.7m tonnes.

The revision follows a caution from US Department of Agriculture staff in Kiev over the threat to Ukraine consumption of imported inputs, such as many fertilizer types, thanks to a 40% depreciation in the country's currency, the hryvnia.

'Robust demand'

Mosaic forecast potash sales volumes in the current quarter of 2.2m-2.5m tonnes, in line with the 2.4m tonnes a year ago, with the average selling price at $250-275 a tonne, down from last year but stable on the result in the latest quarter.

Mosaic forecasts, industry fertilizer shipments and (previous forecast)

Potash: 56.7m-58.1m tonnes, (56.8m-59.1m tonnes)

Incl. Europe and FSU: 10.7m-10.9m tonnes, (11.3m-11.7m tonnes)

Latin America minus Brazil: 2.5m-2.6m tonnes, (1.9m tonnes)

Phosphate: 64.9m-66.3m tonnes, (64.1m-66.1m tonnes)

Incl. China: 22.0m-22.2m tonnes, (22.0m-22.4m tonnes)

Brazil: 7.2m-7.5m tonnes, (6.6m-6.8m tonnes)

For phosphates, sales volumes will rise from 2.9m tonnes to 31m-3.4m tonnes, at a price of $430-360 a tonne for diammonium phosphate - or (Dap), a benchmark phosphate fertilizer product - rising for a second successive quarter.


"Strong global demand pushed [phosphates] prices and margins higher during the first three months of the year," Mr Prokopanko said, and terming "robust" demand during the spring North American application season.

Nonetheless, after the below-forecast results, Mosaic shares fell 2.6% t $1.28 in early deals in New York.

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