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Mosaic shares tumble, after US wetness forces another cut to profit hopes


Mosaic cut its full-year earnings forecast for a second time, after the “unprecedented wet weather” in the US spring sent its phosphate operations into the red, landing the group with lower-than-expected quarterly profits.


Shares in the group, the world’s biggest phosphate fertilizer company, plunged 9.3% in early deals, before recovering some ground to stand at $21.74, down 7.9% on the day.


The US-based group lowered to $1.10-1.50 per share its forecast for adjusted earnings in 2019, from a previous forecast of $1.50-2.00 per share.


Mosaic had started off the year expecting earnings of $2.10-2.50 per share, although Wall Street has marked down its forecast to $1.58 per share ahead of Tuesday’s results.


The latest downgrade reflected “the impact of lower-than-expected sales volumes in the first half of 2019 and a slower recovery of phosphates margins”, Mosaic said.


“The unprecedented wet weather in the Midwest United States has negatively impacted its North American spring fertilizer sales volumes and phosphates margins.”


Phosphate setback

In potash, the group reported sales volumes of 2.2m tonnes for the April-to-June quarter, marginally behind company guidance of 2.3m-2.6m tonnes, but with gross margin, at $84 per tonne, ahead of target, thanks to “both higher realised prices and lower costs”.


For the Brazilian operation, Mosaic Fertilizantes, sales volumes of 2.1m tonnes, and gross margin of $17 per tonne, were in line with company guidance.


However, in phosphates, while the group’s sales of 2.2m tonnes were also only a little behind a target of 2.3m-2.6m tonnes, prices dropped too, depressing margin to a negative $7 per tonne – compared with expectations of a positive result of $40-50 per tonne.


Mosaic flagged “both lower sales prices and lower volumes due to weather- and logistics-related challenges in North America”, noting too “higher raw material costs” as weighing on margins.


Capacity cuts

The group forecast a market fillip ahead as the boost to crop prices from what the group said was a “spring season that was wetter and later than any in recorded history” lifts farmer demand.


“Strong price increases in grains together with depleted soil nutrients in North America are expected to drive fertilizer applications significantly higher this fall,” said Joc O’Rourke, the Mosaic chief executive, also noting margin boosts from capacity cuts.


The group also on Tuesday announced production curtailments at its relatively-high-cost Colonsay potash mine, in Canada’s Saskatchewan province, a move Mosaic said would cut production costs, “accelerate inventory depletion, and increase the company’s leverage to strengthening markets into 2020”.


The group in June unveiled the permanent closure of its Plant City phosphate site in Florida, US.


Short of forecasts

Reflecting too a $284m charge from the Plant City closure, Mosaic for the April-to-June it unveiled a loss of $233.1m, compared with earnings of $67.9m a year before.


Revenues eased by 1.3% to 2.18bn.


Excluding one-off factors, earnings came in at $0.12 per share, below Wall Street expectations of a $0.29-per-share result.


The group also lowered to $1.8bn-2.0bn, from $2.0bn-2.3bn, its forecast for adjusted group ebitda this year, while cutting too, to 8.4m-8.8m tonnes, from 8.6m-9.0m tonnes, its guidance for phosphate sales.

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