October 2, 2008 / 2:07 AM / in 9 years

UPDATE 2-Mosaic quarterly profit soars, but misses forecast

(Adds details on results, CEO comments, updates share price move)

By Euan Rocha

NEW YORK, Oct 1 (Reuters) - North American fertilizer company Mosaic Co (MOS.N) said on Wednesday its fiscal first- quarter profit almost tripled, driven by a boom in the global agricultural sector and the soaring price of potash- and phosphate-based crop nutrients.

But the company’s shares plummeted more than 17 percent to $55.45 in trading after the closing bell as earnings fell short of Wall Street’s expectations.

“It (earnings) met our expectations, but some analysts had different calculations I suppose. We’re very pleased with the results that we posted,” said Jim Prokopanko, in an interview with Reuters.

The company warned it plans to sharply reduce phosphate production over the next several months, due to high inventory levels.

However, Mosaic noted that global potash market conditions continue to remain tight, due to healthy demand and low inventory levels.

Net income in the quarter ended Aug 31 was $1.18 billion, or $2.65 a share, up from a year-ago’s profit of $305.5 million, or 69 cents a share.

Plymouth, Minnesota-based Mosaic is majority owned by the privately-held Cargill, which is a leading U.S. grain and meat exporter, a top energy trader, and a biofuels producer.

Mosaic said its quarterly revenue more than doubled to $4.32 billion.

Wall Street had forecast fiscal first-quarter earnings of $2.94 a share, on revenues of $4.01 billion, according to Reuters Estimates.

Mosaic’s profit missing analysts’ expectations also impacted its peers Potash Corp (POT.N) and Agrium (AGU.N); shares of the two companies in post-market trade fell 8.3 percent and 6.2 percent, respectively.

Shares of fertilizer companies surged in the first half of 2008 as grain prices soared. However, since mid-June the sector has seen its valuations tumble due to a sell-off in commodities and a pull-back in grain prices, among other factors.

MIXED OUTLOOK

Mosaic said inventories for North American potash producers declined to record low levels in August 2008 and strong global demand continues for potash.

“We’re seeing in the industrial side of the potash business very strong demand ... Not new demand, but demand from our competitors customers,” said Prokopanko.

Canada’s Potash Corp, the world’s largest potash producer, has an ongoing workers strike at three of its mines, which account for 6 percent of global potash capacity.

Moasic said to better balance inventory levels and supply chain demands, it plans to reduce planned phosphate production by 500,000 tonnes to 1 million tonnes over the next several months.

However, the company said it expects phosphate fundamentals to remain positive and demand to rebound once inventory levels are normalized.

Mosaic trimmed its phosphate sales volume forecast for fiscal 2009 to a range of 8.0 to 9.0 million tonnes, with the majority of the reduction expected in the second quarter. Its potash sales volume outlook for fiscal 2009 is unchanged at 8.2 to 8.6 million tonnes.

“Momentum has slowed in the phosphates business near-term due to the combined effects of soft seasonal demand, higher customer inventory levels and falling raw material costs,” said Prokopanko.

“We might not have to cut back a million tonnes, but we will do whatever is necessary to balance the (inventory) pipeline.”

Reporting by Euan Rocha; Editing by Andre Grenon and Bernard Orr

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