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The Mosaic Company Earnings: 5 Things You Need to Know
Margins continue to expand 1
Potash lower production costs as company operated plants at 90% capacity in anticipation of planned turnarounds and higher demand in coming months improved selling prices as potash markets recovered Mosaic’s potash gross margin jumped to 40% from 33% a year ago, thanks to: Expansion underway at Mosaic’s low-cost Esterhazy potash mine. Source: Company website
Phosphates Low input costs boosted phosphates gross margin by a percentage point to 21% despite flat revenue. Phosphates contributed 50% to Mosaic’s operating earnings in Q2. Source: Mosaic Q2 earnings presentation
Costs in control 2
Restructuring efforts paying off Mosaic’s selling, general, and administrative expenses were flat despite 4% higher revenue and greater business footprint (backed by acquisitions) compared to last year. 2015 target: SG&A expenses of $360-$380 million. Company incurred $382 million in 2014.
Integration of acquired business on track 3
International distribution segment growing Integration of Archer Daniels Midland’s fertilizer distribution business in Brazil and Paraguay acquired last year is complete. The acquisition pushed segment sales up by 17.5% in Q2. Mosaic’s distribution capacity in the region is projected to jump 50%.
Ma’aden joint venture to cost more 4
Wa'ad Al Shamal Phosphate Company Capital cost of JV project in Saudi Arabia -- in which Mosaic holds 25% stake --to be $8 billion, or 7% higher than initial estimates. At the time of agreement, Mosaic outlined $1 billion cash investment. Construction underway at Ma’aden JV site. Source: Mosaic Q2 earnings presentation
Sales volumes guidance revised 5
Weak expected Q3 to blame Mosaic upgraded full-year phosphates sales volumes slightly, but downgraded potash volumes. Data source: Company earnings release. Chart by author
Foolish takeaway While Mosaic doesn’t give out full-year sales and profit guidance, it appears to be on track to a solid year. The fertilizer markets may be under pressure, but the company’s cost-reduction efforts and growth initiatives should push its margins higher in 2015 and beyond.
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