Mosaic forecast a sharp drop in its potash sales prices, but
a pick-up in volumes, after Monday's long-awaited Chinese import deal, which ended
uncertainties fuelling a 30% drop in operating profits in the latest quarter.
The US-based fertilizer giant said that the price it
achieved for potash would average $370-400 a tonne in the December-to-February
period, a drop of at least 12% year on year.
However, sales volumes, at 1.5m-1.8m tonnes, would rise by
more than one-third, dynamics which the group said reflected the terms of the
deal agreed between China and Canpotex, the North American potash export consortium
of which Mosaic is a member.
China agreed to purchase 1.0m tonnes of potash, but at a
price of $400 a tonne, $70 a tonne below its last deal.
Price vs volume
"Our guidance reflects the lower Canpotex potash contract
price in China," Mosaic chief executive Jim Prokopanko said.
However, the deal also "provides both base-load volume and a
positive boost to market sentiment", he added.
Many other buyers had been awaiting a settlement by China before
settling their own deals.
Terms offered to China, as the top importer, are seen setting
a benchmark by which other contracts are measured, with India, the
second-ranked buyer, now expected to settle for a price of about $420 a tonne.
Indeed Mosaic - which in November cut its potash sales target, citing uncertainty stemming from China's hold-out against a fresh deal –
flagged the impact of a contract delays in hitting profits in the
Potash sales volumes, at 1.5m tonnes, topped the downgraded estimate,
but were down some 17% year on year.
"International shipments were impacted by prolonged contract
negotiations," between exporters and India as well as China, Mr Prokopanko said.
Potash gross margin for the quarter fell 9.8% to $355.4m.
In phosphate fertilizers, of which Mosaic is the world's top
producer, gross margin dropped by one-third to $318m, on sales down 9% to
$1.8bn, sunk by a reluctance by importers to purchase supplies.
"Internationally, customers continue to delay purchases to
avoid price risk," Mr Prokopanko said.
Group operating profits dropped 30% to $559.6m, although earnings
nudged 0.8% higher to $628.8m, boosted by the realisation of tax benefits.
Excluding this gain, earnings per share came in at $1.02,
ahead of Wall Street expectations of a $0.93-a-share result.
Mr Prokopanko added that,
with the China potash deal now sealed, "strong agricultural fundamentals will
lead to strengthening crop nutrient markets".
World potash sales will hit a record 55m-57m tonnes in 2013.
In phosphates, "the global market appears to be in
balance, with steady demand and reported US producer inventories at historic
averages," he said.
"Domestically, we've seen very strong shipments for
fall application. Additionally, low Mississippi River levels are presenting
logistical difficulties and consequently creating a sense of urgency to ensure
product availability for the spring."
Mosaic pegged phosphate shipments at 63m-65m tonnes.
Mosaic shares closed 3.3% higher at $58.62 in New York.