TORONTO (miningweekly.com) – Plymouth, Minnesota-based crop nutrients producer Mosaic Company on Tuesday reported a 70% drop in third-quarter profit as the prevailing cautious market defers buying in expectation of lower prices, following the unexpected July unravelling of the world's largest potash cartel, the Belarus Potash Company (BPC).
Net earnings for the three months ended September 30 totalled $124-million, or $0.29 a share, down from $417-million, or $0.98 a share, during the same period of 2012.
Net sales were down 28% year-on-year to $1.9-billion.
“Lower potash and phosphate prices, a late North American fall application season and cautious dealer behaviour led to this quarter’s weaker results,” Mosaic president and CEO Jim Prokopanko said.
He added that Mosaic expected pricing to remain challenging into 2014, followed by a cyclical reversion, as demand growth would absorb the additional supply of phosphate and potash.
Mosaic in September cut its third-quarter sales and price outlook for potash and phosphate, as the crop nutrient markets softened after the breakup of BPC, which resulted in prices dropping.
Mosaic said, at the time, the distributors' cautious sentiment regarding potash was spilling over as buyers were in a ‘wait-and-see’ mode.
During the period, Mosaic sold 1.38-million tonnes of potash, below its guidance of 1.45-million to 1.65-million tonnes and below its year-ago levels of 1.8-million tonnes. The company recorded an average realised price of $342/t for muriate of potash, which was higher than its guidance of between $330/t and $340/t, but 24.5% lower year-on-year.
The company sold 2.7-million tonnes of phosphate, at the higher end of its guidance of 2.6-million to 2.7-million tonnes, and lower than the 2.9-million tonnes recorded in the same period a year earlier.
Mosaic's average selling price for diammonium phosphate was $436/t, which was within the company’s guidance range of $430/t to $440/t, and sharply lower from $533/t a year earlier.
The NYSE-listed company said it planned to run its potash mines below 65% of capacity throughout the fourth quarter, allowing for maintenance at its Esterhazy mine, in Saskatchewan, and it would run its phosphate operations at about 80% of the total capacity.
Further, Mosaic on Tuesday also announced that as part of its portfolio optimisation, it would sell its salt operation and close the potash mine located in Hersey, Michigan, and that it would exit the underperforming Argentina and Chile distribution businesses to focus on growing the company’s presence in Brazil.
At the end of last month, Mosaic announced that it had struck an accord to buy CF Industries’ phosphate assets for $1.4-billion, which would include $200-million for asset retirement obligation escrow funds.
Rival PotashCorp last month also reported a 45% drop in third-quarter profit to $356-million, or $0.41 a share.
Mosaic’s NYSE-listed stock traded as low as $45.49 a share early in the afternoon.