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Fertilizer Giant Mosaic Soars After Profit Skyrockets
April 04, 2008: 08:05 PM EST
Apr. 7, 2008 (Investor's Business Daily delivered by Newstex) --
Feeding the world these days is big business, as fertilizer giant Mosaic Co. (mos) showed Friday when it reported another record haul.
Fiscal third-quarter earnings shot up to 99 cents a share from 5 cents a year earlier, beating Wall Street views by 4 cents.
Sales surged 68% to $2.15 billion, also topping forecasts.
Mosaic's shares soared 10% to 115.07. The stock has risen more than 300% over the past year.
Feeding the bumper crop was a surge in Mosaic's selling prices for its key products. Phosphate prices more than doubled from a year ago to $487 per ton. Potash went up $77 a ton to $221 a ton.
"We are delivering record results by effectively executing against the backdrop of an exceptional agricultural environment," Mosaic Chief Executive Jim Prokopanko said in a statement.
Despite rising raw material costs for phosphates, he noted that the quarter's profit topped earnings for any fiscal year since Mosaic was formed in 2004 from the merger between Cargill Crop Nutrition and IMC Global.
Increased global demand for corn, grains, soybeans and other farm crops -- from the usual suspects China, India and Brazil in particular -- has pushed prices for such commodities to record or near-record levels.
Growing middle-class populations in developing nations are demanding more protein-rich and grain-intensive foods such as meat and dairy products. Rising demand for corn-based ethanol also has driven up prices.
As a result of the sharp price hikes, farmers have planted more crops and sought better yields -- all of which requires more fertilizer.
"Everybody wants as much (fertilizer) as they can get but you just don't have enough supply," Goldman Sachs analyst Edlain Rodriguez said. "That's why fertilizer prices keep going up. It's all about supply and demand."
Mosaic said Friday that it would further expand its potash mines in Saskatchewan, Canada, in incremental phases over 12 years.
Analysts see no reason for the current robust market environment to end anytime soon, just as they see no reason for global demand for food, feed and fuels to decline anytime soon.
So they expect agricultural commodity prices to keep going up. Prices of corn hit a record $6 a bushel on Thursday due to an expected supply shortfall.
Farmers in the U.S. are planting less corn this year than last as they rotate to soybeans. Corn uses more fertilizer than soybeans, but analysts aren't worried.
"At the end of the day, whether it's corn or soybeans farmers are still trying to maximize their yields," said Rodriguez.
He expects phosphate and potash supplies to remain tight for the next two or three years until enough supply comes into the market to exceed demand.
That spells more good news for Mosaic, analysts say. Noting the accelerated price increases in phosphate and potash in the past quarter, analyst Edwin Chee of BMO Capital Markets said, "If you connect the dots, it means (Mosaic's) earnings are going to go up."
April 04, 2008: 08:05 PM EST
Apr. 7, 2008 (Investor's Business Daily delivered by Newstex) --
Feeding the world these days is big business, as fertilizer giant Mosaic Co. (mos) showed Friday when it reported another record haul.
Fiscal third-quarter earnings shot up to 99 cents a share from 5 cents a year earlier, beating Wall Street views by 4 cents.
Sales surged 68% to $2.15 billion, also topping forecasts.
Mosaic's shares soared 10% to 115.07. The stock has risen more than 300% over the past year.
Feeding the bumper crop was a surge in Mosaic's selling prices for its key products. Phosphate prices more than doubled from a year ago to $487 per ton. Potash went up $77 a ton to $221 a ton.
"We are delivering record results by effectively executing against the backdrop of an exceptional agricultural environment," Mosaic Chief Executive Jim Prokopanko said in a statement.
Despite rising raw material costs for phosphates, he noted that the quarter's profit topped earnings for any fiscal year since Mosaic was formed in 2004 from the merger between Cargill Crop Nutrition and IMC Global.
Increased global demand for corn, grains, soybeans and other farm crops -- from the usual suspects China, India and Brazil in particular -- has pushed prices for such commodities to record or near-record levels.
Growing middle-class populations in developing nations are demanding more protein-rich and grain-intensive foods such as meat and dairy products. Rising demand for corn-based ethanol also has driven up prices.
As a result of the sharp price hikes, farmers have planted more crops and sought better yields -- all of which requires more fertilizer.
"Everybody wants as much (fertilizer) as they can get but you just don't have enough supply," Goldman Sachs analyst Edlain Rodriguez said. "That's why fertilizer prices keep going up. It's all about supply and demand."
Mosaic said Friday that it would further expand its potash mines in Saskatchewan, Canada, in incremental phases over 12 years.
Analysts see no reason for the current robust market environment to end anytime soon, just as they see no reason for global demand for food, feed and fuels to decline anytime soon.
So they expect agricultural commodity prices to keep going up. Prices of corn hit a record $6 a bushel on Thursday due to an expected supply shortfall.
Farmers in the U.S. are planting less corn this year than last as they rotate to soybeans. Corn uses more fertilizer than soybeans, but analysts aren't worried.
"At the end of the day, whether it's corn or soybeans farmers are still trying to maximize their yields," said Rodriguez.
He expects phosphate and potash supplies to remain tight for the next two or three years until enough supply comes into the market to exceed demand.
That spells more good news for Mosaic, analysts say. Noting the accelerated price increases in phosphate and potash in the past quarter, analyst Edwin Chee of BMO Capital Markets said, "If you connect the dots, it means (Mosaic's) earnings are going to go up."
