Mosaic Trades Down Following Light Guidance

The Mosaic Company reported mixed fiscal third quarter results for 2012 on Thursday, which, as expected, missed investor estimates on seasonal volatility and economic uncertainty that caused deferred buying from risk-averse buyers. But investors are paying even more attention to the company's fourth quarter guidance, which is sequentially lower. The company reported earnings per share of $0.64, 2 cents below consensus estimates and down 47 percent on last year's comparable quarter of $1.21. A notable impact of $0.08 per share came from losses in foreign currency translation, the company said. Most of the miss was driven by weaker than expected volumes in the potash segment, which declined by 27 percent and offset favorable pricing. Higher volumes shipped by the company's phosphate segment were offset by higher than expected raw material costs. Record high ammonium prices, as well as a Faustina and Fort Meade outage-related shortage, caused the depressing margin in the segment, which otherwise saw 13 percent higher sales. The company reported it has resolved these shortages. This mixed dynamic yielded sales that, at $2.2 billion for F3Q12, were down just 1 percent on the same quarter in the previous year. Lower volumes shipped reflect the deferred purchases due seasonal lulls and risk aversion from buyers, the company explained. Fertilizer sales were stunted due to falling crop prices and uncertainty caused by the European debt crisis. Going forward, the company expected the tide to turn, as buyers returned and farm economics strengthen throughout the world. US demand may see uptick on signs of economic recovery higher farming income, and a lack of inventory buildup among buyers. A milder winter in North America also means fields are accessible for nutrient application earlier, which could displace volume shipped in the nearer term. Overseas demand is expected to pick up significantly as well due to a recent Chinese settlement creating a bottom on pricing and returning volumes, Brazil's raised crop prices due to draught, and a strengthening Indian currency that should offset lower government subsidies. Due to the lower than expected shipments in the third quarter, the company believes it has the supply to capture increased demand in the fourth quarter. Nonetheless, forecasted shipments in both potash and phosphates, respectively at 1.7 to 2.2 million and 2.3 to 2.7 million, may disappoint investors as they point sequentially lower. Investors are apparently chiming in on that note, as MOS trades at 56.60, down just under 3 percent on yesterday's close.