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Strong phospate sales help Mosaic beat earnings expectations

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US fertilizer group Mosaic profits exceeded analysts' expectations for earnings and sales, with results showing improved profit margins, strong phosphates sales, and rising potash prices.

Mosaic reported good volumes and prices thanks to "demand from the export markets, combined with continued healthy fertilizer application rates in North America".

Mosaic's earnings increased by 57% in the three months to June 30, to $390.6m, or $1.08 per share, from $248.4m in the same period last year.

Mosaic reported adjusted earnings of $1.05 a share, well above analyst's expectations of $0.89 per share.

Net sales were up 2% to $2.49b, compared to analysts' expectations of 2.4b.

Chief steps down

Jim Prokopanko, president and chief executive, noted Mosaic's improved profit margins.

"This quarter we generated higher earnings per share than two years ago, notwithstanding lower potash and phosphates prices since then," he said.

Mr Prokopanko is stepping down as Mosaic president and chief executive, to be replaced by James O'Rourke, who is currently Mosaic's vice president and chief operating officer.

Confident outlook

Mosaic remains upbeat on future margins.

"Despite the recent swings in grain and oilseed prices, we remain confident in our second half outlook," said Mr Rourke.

"Stable farm economics, combined with the benefits of our strategic initiatives, position Mosaic to generate attractive returns for our shareholders." Mosaic increased its forecast for full-year phosphate sales volumes, and trimmed them for potash sales volumes.

Phosphate volume grow

Mosaic's phosphates segment managed to increase operating earnings in the three months to June 30 by 18%, to $259m, compared to $219m last year, despite lower phosphate prices.

Phosphate sales volumes reached 2.8m tonnes, compared to 2.6m tonnes in the same quarter last year, and exceeding Mosaic's forecast of 2.3m-2.7m tonnes.

The increase in volumes allowed Mosaic to grow phosphate sales by value to $1.4b from $1.3b last year, despite falling prices, while margins also improved.

Mosaic reported average diammonium phosphate prices of $450 a tonne in the three months to June 30, compared to $465 a tonne a year ago.

Demand bodes well

"Our Phosphates business is driving earnings growth for Mosaic," Mr Prokopanko said.

"In fact, during the second quarter and year-to-date the business accounted for half of Mosaic's operating earnings," he said, adding that strong global demand and stable raw material costs "bode well" for the phosphates business.

Mosaic increased its forecast for 2015 phosphate sales to 9.5m-10m tonnes, from a previous forecast of 9m-10m tonnes.

Potash margins improve

Mosaic's potash business also increased earnings from last year, despite fallings sales volumes, thanks to an increasing margins and higher realised prices.

Gross profits for the segment increased to $295m, compared to $226m over the same period last year.

"The year-over-year increase in gross margin rate was driven by higher realized prices combined with lower costs of production as a result of higher operating rates, cost savings initiatives and a weaker Canadian dollar," Mosaic said.

The second quarter Mosaic realised muriate of potash prices of $280 a tonne, up from $267 a tonne a year ago.

Mosaic revised its forecast for 2015 full year potash sales down to 8.2m-8.6m tonnes, from a previous forecast of 8.5m-9m tonnes.

By Agrimoney.com

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