PLYMOUTH, Minn, April 4, 2008 /PRNewswire-FirstCall/ -- The Mosaic Company
(NYSE: MOS) announced today net earnings of $520.8 million, or $1.17 per
share, for the third quarter ended February 29, 2008. These results compare
with net earnings of $42.2 million, or $0.10 per share, for the quarter ended
February 28, 2007.
Net sales in the third quarter of fiscal 2008 were $2.1 billion, an
increase of $868.5 million, or 68% compared with the same period a year ago.
Mosaic's gross margin for the fiscal 2008 third quarter was $727.9
million, or 33.9% of net sales, compared with $113.1 million, or 8.8% of net
sales, a year ago. Third quarter operating earnings were $647.4 million,
compared with $34.2 million for the third quarter in fiscal 2007. Net sales,
gross margin and operating earnings continue to benefit from increases in
selling prices, strong operational performance and sales of lower cost
inventories in the Offshore segment. These results were achieved despite
significantly higher costs for sulfur and ammonia, two primary raw materials
for phosphates.
"We are delivering record results by effectively executing against the
backdrop of an exceptional agricultural environment," stated Jim Prokopanko,
Mosaic's President and Chief Executive Officer.
Phosphates
Net sales in the Phosphates segment were $1.3 billion for the third
quarter, an increase of 82% compared to a year ago. Phosphates' third quarter
gross margin was $478.4 million, or 38.0% of net sales, compared with $19.7
million, or 2.9% of net sales, for the same period a year ago. Operating
earnings were $442.7 million compared with an operating loss of $11.1 million
for the same period last year. The sales, gross margin and operating earnings
growth were driven by significant increases in selling prices, supplemented by
unrealized mark-to-market gains of $25.7 million on natural gas and certain
ocean freight forward contracts (compared with losses of $1.0 million on
natural gas derivatives for the third quarter of fiscal 2007) partially offset
by higher sulfur and ammonia raw material costs.
The average third quarter DAP price, FOB plant, was $487 per tonne, which
is a $241 per tonne increase compared with a year ago and a $70 per tonne
increase compared with the second quarter of fiscal 2008. Fertilizer and feed
sales in the Phosphates segment (excluding tonnes sold by PhosChem for
non-Mosaic customers) were up 6% to 2.2 million tonnes for the third quarter
compared to the same period of the prior year.
Potash
Net sales in the Potash segment totaled $547.3 million for the third
quarter, an increase of 60% compared with a year ago. The Potash business'
gross margin increased to $209.1 million in the third quarter, or 38.2% of net
sales, compared with $81.3 million a year ago, or 23.7% of net sales.
Operating earnings were $195.9 million during the third quarter, an increase
of $128.9 million, or nearly a three-fold increase compared to the same period
last year. Sales, gross margin and operating earnings increased primarily as
a result of the higher selling prices and an increase in international
volumes, partially offset by the foreign currency impact on operational costs
(due to a weaker U.S. dollar) and higher Canadian resource taxes.
The average MOP price, FOB plant, increased to $221 per tonne in the third
quarter, up $77 per tonne compared with a year ago and $47 per tonne compared
with the second quarter of fiscal 2008. The average selling price FOB plant
for K-Mag(R), a specialty product, increased to $145 per tonne in the third
quarter, up $27 per tonne from a year ago and a $13 per tonne increase from
the second quarter of fiscal 2008.
The Potash segment's total sales volume of 2.1 million tonnes during the
third quarter was 18% higher than last year's third quarter volume of 1.8
million tonnes. The increase in sales volume was due to increased
international demand for MOP and increased production from the expansion at
Esterhazy last year.
Offshore
The Offshore segment's net sales totaled $387.0 million during the third
quarter, an increase of $144.1 million or 59% compared to the same period a
year ago. This increase was mainly due to higher selling prices. Gross
margin increased to $43.2 million in the third quarter, or 11.2% of net sales,
compared to $11.3 million, or 4.7% of net sales, for the same period a year
ago. Offshore operating earnings of $18.1 million benefited from higher
selling prices and lower cost inventories particularly in Brazil, China and
Thailand.
Other
Selling, general, and administrative expenses (SG&A) were $81.2 million in
the third quarter, compared to $77.8 million last year. The increase was
primarily due to higher incentive compensation accruals and external
consulting fees.
A foreign currency transaction gain of $1.5 million was recorded for the
third quarter compared to a gain of $17.8 million for the same period a year
ago. The gain in fiscal 2008 was the result of the strengthening of the
Canadian dollar and Brazilian Real against the U.S. dollar. This is primarily
a non-cash gain.
Included in other income is a $24.6 million gain from the sale of a
remaining minority interest in a non-core business.
Income tax expense was $159.2 million resulting in an effective tax rate
of 24.5% which includes a tax benefit totaling $40.1 million, primarily as a
result of the reduction in the federal Canadian tax rate.
Total equity earnings in non-consolidated subsidiaries were $30.9 million
for the third quarter, compared with $5.5 million for the same period a year
ago. Mosaic's equity earnings in Saskferco Products Inc. increased to $23.3
million for the third quarter from $0.8 million for the same period last year,
primarily the result of higher nitrogen selling prices. Equity earnings in
Fosfertil S.A. were $6.0 million for the third quarter compared to $4.0
million for the same period last year.
Mosaic ended the third quarter with $1.1 billion in cash and cash
equivalents. Cash flow from operations was $1.5 billion for the nine months
ended February 29, 2008, an increase of $1.1 billion from a year ago.
Mosaic's total debt as of February 29, 2008 was $1.7 billion compared to $2.6
billion as of February 28, 2007, resulting in a debt-to-EBITDA ratio of 0.7
for the twelve months ended February 29, 2008, an improvement from 5.4 a year
ago.
Year-to-Date
For the nine months ended February 29, 2008, net sales were $6.3 billion,
an increase of 55% compared with last year. Year-to-date operating earnings
were $1.6 billion compared with $256.5 million for the same period a year ago.
Year-to-date SG&A expenses were $227.6 million compared with $213.9 million
for the same period in fiscal 2007. A foreign currency transaction loss of
$70.3 million was recorded for the first nine months of fiscal 2008, compared
to a gain of $44.9 million for the same period a year ago. Equity earnings in
non-consolidated entities increased year-to-date to $88.2 million from $24.8
million last year.
Outlook
The environment for Mosaic's core Phosphate and Potash businesses looks
extraordinary despite the recent turbulence in commodity markets.
World grain and oilseed production increased to a record 2.5 billion
tonnes last year. Farmers responded to higher prices last year by increasing
planted acreage and by boosting yields. The increased production was not
strong enough to keep up with demand. World grain and oilseed stocks are
expected to decline 39 million tonnes during the 2007 - 2008 crop year despite
high prices and a record crop last year according to the U.S. Department of
Agriculture estimates.
Global demand is being driven by traditional drivers of population and
income growth in developing regions such as China, India and Latin America.
Mosaic believes these are steady and long term drivers. Biofuels add a boost
to the grain and oilseed demand growth and are expected to continue to impact
demand due to increases in U.S. ethanol production.
Prices for a wide array of agricultural commodities have climbed to record
or near record levels in response to these tight fundamentals. Futures
markets indicate that this is not a one year phenomenon. Market fundamentals
are encouraging farmers to increase agriculture production worldwide. The low
grain and oilseed stocks and the high crop prices are enticement for farmers
to increase production and yields and in some regions such as the Americas and
Africa, farmers can bring more land into production.
"We are bullish on the fundamental drivers of our sector and see this
momentum continuing," said Jim Prokopanko. "With our Phosphates and Potash
businesses and international footprint, we are well positioned to serve our
customers and meet the growing demand for crop nutrients globally."
Mosaic's realized DAP price, FOB plant, for the fourth quarter of fiscal
2008 is estimated to be $710 to $730 per tonne. Partially offsetting the
benefit of these higher projected prices will be higher raw material costs,
principally ammonia and sulfur. Mosaic's fourth quarter average realized MOP
price, FOB plant, is estimated to be $305 to $325 per tonne.
Sales volumes for both Phosphates and Potash businesses in the fourth
quarter are each anticipated to range from 2.2 to 2.4 million tonnes. These
estimates for the fourth quarter are within annual sales guidance ranges
previously provided.
In a separate release today, Mosaic announced further expansion of its
Saskatchewan potash mines.
About The Mosaic Company
The Mosaic Company is one of the world's leading producers and marketers
of concentrated phosphate and potash crop nutrients. Mosaic is a single
source provider of phosphates and potash fertilizers and feed ingredients for
the global agriculture industry. More information on the company is available
at http://www.mosaicco.com.
Mosaic will conduct a conference call on Friday, April 4, 2008 at 10:00
a.m. EDT to discuss third quarter earnings results. Presentation slides and a
simultaneous audio webcast of the conference call may be accessed through
Mosaic's website at http://www.mosaicco.com/investors. Additionally, the
conference call-in number is 888-680-0892 and the passcode is 44890826. This
webcast will be available up to one year from the time of the earnings call.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, statements about future financial and
operating results. Such statements are based upon the current beliefs and
expectations of The Mosaic Company's management and are subject to significant
risks and uncertainties. These risks and uncertainties include but are not
limited to the predictability of fertilizer, raw material and energy markets
subject to competitive market pressures; changes in foreign currency and
exchange rates; international trade risks including, but not limited to,
changes in policy by foreign governments; changes in environmental and other
governmental regulation; adverse weather conditions affecting operations in
central Florida or the Gulf Coast of the United States, including potential
hurricanes or excess rainfall; actual costs of closure of the South Pierce,
Green Bay and Fort Green facilities differing from management's current
estimates; accidents involving Mosaic's operations, including brine inflows at
its Esterhazy, Saskatchewan potash mine as well as potential mine fires,
floods, explosions or releases of hazardous or volatile chemicals, as well as
other risks and uncertainties reported from time to time in The Mosaic
Company's reports filed with the Securities and Exchange Commission. Actual
results may differ from those set forth in the forward-looking statements.
The Company has presented above EBITDA and the ratio of Debt-to-EBITDA,
which are non-GAAP financial measures. Generally, non-GAAP financial measures
are supplemental numerical measures of a company's performance, financial
position or cash flows that either exclude or include amounts that are not
normally excluded or included in the most directly comparable measure
calculated and presented in accordance with U.S. generally accepted accounting
principles ("GAAP"). EBITDA and the Debt-to-EBITDA ratio are not measures of
financial performance under GAAP. Because not all companies use identical
calculations, our calculations of EBITDA and the Debt-to-EBITDA ratio may not
be comparable to other similarly titled measures presented by other companies.
Moreover, EBITDA and the Debt-to-EBITDA ratio as presented in this press
release are different than similarly titled measures used for purposes of
financial covenants in our senior secured bank credit facility and other
covenants relating to our indebtedness, all of which require different
adjustments, both positive and negative, that were the result of negotiations
with the lenders. In evaluating these measures, investors should consider that
our methodology in calculating such measures may differ from that used by
other companies.
EBITDA is frequently used by securities analysts, investors, lenders and
others to evaluate companies' performance, including, among other things, cash
flows and profitability before the effect of financing and similar decisions.
The Debt-to-EBITDA ratio is frequently used by securities analysts, investors,
lenders and others to evaluate companies' financial risk and leverage.
Because securities analysts, investors, lenders and others use EBITDA and the
Debt-to-EBITDA ratio, Mosaic's management believes that our presentation of
these non-GAAP financial measures affords them greater transparency in
assessing our financial performance and leverage. EBITDA and the
Debt-to-EBITDA ratio should not be considered as a substitute for, nor
superior to, measures of financial performance, financial risk or leverage
prepared in accordance with GAAP.
SOURCE The Mosaic Company
