FIRST QUARTER HIGHLIGHTS
-- First quarter earnings were $76.1 million, or $0.18 per diluted share.
This compares to a reported $41.1 million, or $0.16 per diluted share
in last year's first quarter, and to $49.2 million, or $0.11 per
diluted share for the combined operations of the former Cargill Crop
Nutrition and IMC Global Inc. on a pro forma basis.
-- Net sales for the quarter were $1.40 billion. This compares to a
reported $0.72 billion in last year's first quarter and to
$1.46 billion on a pro forma basis for same period a year ago.
-- First quarter reported gross margins include mark-to-market non-cash
gains on derivative contracts of $61 million. These non-cash gains
were partly offset by non-cash foreign currency transaction losses of
$39 million below the operating profit line.
-- Phosphate results improved versus prior year results. The average
diammonium phosphate (DAP) price realization of $240 per tonne
increased $22 versus the comparable prior year period. This was
partially offset by higher raw material, water treatment and other
operating costs.
-- Potash volumes were down during the seasonally slow first quarter, and
were also negatively affected by low inventories and planned plant
shutdowns. The average potash selling price of $141 per metric tonne
increased $49 versus the prior year pro forma period and increased $3
per tonne versus Mosaic's fourth quarter.
-- Offshore results were weak primarily due to continued poor farm
economics in Brazil.
-- The outlook for fiscal 2006 remains positive. During the remaining
three quarters, Potash shipments are expected to improve compared to
the first quarter and prices are expected to remain at near record
high levels. Phosphate prices are also expected to remain near
historic highs, though phosphate margins may come under pressure due
to rising raw material costs.
PLYMOUTH, Minn., Oct. 3 /PRNewswire-FirstCall/ -- The Mosaic Company
(NYSE: MOS) announced today that net earnings were $76.1 million, or $0.18 per
diluted share ("per share"), for the quarter ended August 31, 2005.
"Mosaic continues to make progress on many fronts. During the first
quarter, our Phosphate business showed continued improvement, aided by a
strong pricing environment. Our Potash business continues to benefit from
record high prices, though sales volumes were soft due to a seasonally slow
first quarter, planned summer maintenance and downtime related to our capacity
expansion projects," said Fritz Corrigan, President and Chief Executive
Officer of Mosaic.
Net sales in the first quarter were $1.40 billion, nearly double net sales
for the same period a year ago, but a decline of 4% compared with pro forma
results of the two companies for the same period during the prior fiscal year.
The increase in reported net sales compared with last year was primarily a
result of the combination of Cargill Crop Nutrition and IMC Global Inc. that
occurred on October 22, 2004. The decline in the pro forma net sales was
mainly due to lower volumes in our Potash segment, which were partially offset
by higher prices.
Operating earnings for the first quarter were $192.0 million compared with
$57.0 million for the same period a year ago and 76% higher compared with pro
forma results for the same period last year. Non-cash mark-to-market
derivative gains contributed $61.3 million to operating earnings. Selling,
general, and administrative (SG&A) expenses of $57.0 million were recorded in
the first quarter compared with $31.0 million for the same period a year ago
and $53.2 million on a pro forma basis. This is in line with Mosaic's
expectations.
Non-cash foreign currency transaction losses totaled $39.0 million. This
was caused primarily by the strengthening of the Canadian dollar against the
United States dollar. This impacts the carrying value of the United States
dollar denominated net assets of Potash, for which the Canadian dollar is the
functional currency.
Mosaic ended the quarter with $201 million in cash and cash equivalents.
Mosaic's total debt at the end of August 2005 was $2.6 billion, resulting in a
debt to total capital ratio of 39.3%.
Potash
The Potash segment's total volume was 1.7 million tonnes during the first
quarter, which was lower than anticipated during the seasonally slow summer
period when downtime was taken for planned maintenance and capacity expansion
projects. In addition, low beginning inventories resulting from high prior
period sales also contributed to the low volume in the first quarter. Record
high potash prices led to net sales of $267.7 million for the first quarter of
fiscal 2006. Gross margins were $107.1 million and operating earnings were
$98.5 million during the first quarter. These results included non-cash mark-
to-market derivative gains of $26.1 million.
The average selling price at Mosaic's mine sites, including all potash
products, was $141 per tonne compared with $92 per tonne on a pro forma basis
in the first quarter during the prior year period. The average potash selling
price increased $3 per tonne compared with fiscal 2005 fourth quarter results.
Existing long term industrial potash contracts with prices that do not rapidly
adjust to current market prices, adversely affected our average selling price.
These below market contracts, which were entered into prior to the business
combination, accounted for 15% of total volume. Contract prices under most of
these contracts will increase beginning in January 2006, but are expected to
remain below our average selling price.
Phosphates
Mosaic's Phosphates business segment's first quarter net sales were
$856.5 million. Total fertilizer and feed phosphate shipments were
2.9 million tonnes and the average DAP selling price at Mosaic's plant sites
was $240 per tonne, an increase of $22 compared with the same period a year
ago. However, costs per tonne also increased compared with a year ago, mainly
because of higher ammonia prices and ongoing water treatment costs. Water
treatment costs were approximately $10 million during the quarter, an increase
of $10 million compared with the same period last year and $1 million compared
with the fourth quarter of fiscal 2005. First quarter gross margins for
Phosphates were $136.9 million with operating earnings of $106.9 million.
Phosphates had non-cash mark-to-market derivative gains of $35.2 million in
the first quarter.
Offshore
Mosaic's Offshore business segment's net sales were $340.0 million for the
first quarter, a decline of $22.2 million versus the prior year period. The
first quarter operating loss of $8.2 million was offset by equity income of
$8.1 million. The first quarter operating loss was primarily the result of a
continuing weak Brazilian farm economy, including low soybean prices, regional
drought conditions, high input costs and the appreciation of the Brazilian
real.
Nitrogen
Mosaic's Nitrogen business segment's net sales were $24.2 million for the
first quarter, a decline of $34.1 million versus the prior year period. The
first quarter operating earnings were $0.3 million. Nitrogen equity earnings
from Mosaic's Saskferco investment were $5.5 million for the first quarter
compared with $2.8 million for the same period a year ago.
First quarter Nitrogen volumes were 0.2 million tonnes, a decline of 46%
compared with year ago levels as high prices resulted in delaying purchases
from prospective customers.
Equity Earnings
Total equity earnings in non-consolidated subsidiaries, including
Fosfertil and Saskferco, were $14.2 million for the quarter, an increase of
45% over last year's results for the same period. Mosaic's equity investment
in Fosfertil had strong returns as prices for its products have not been as
negatively impacted by local market conditions because of existing supply
agreements.
Observations and Outlook
Mosaic remains optimistic about its prospects for fiscal year 2006. "The
phosphate market is strong right now and with our annual summer maintenance
downtime behind us, we expect improved potash volumes for the remainder of the
year." Corrigan said. "For fiscal 2006, our focus remains on cash generation
and reducing costs, including the capture of synergies. Clearly we are going
to focus on costs in all aspects of our business."
Despite a weak Brazilian market, potash exports are expected to remain at
high levels as a result of strong demand from Asia, particularly China and
India. Domestic potash sales were seasonally slow in the first quarter, but
are projected to be higher in the remaining three quarters of fiscal 2006.
Potash prices are expected to remain near record-high levels. In addition,
Mosaic's Esterhazy expansion, announced in April, is expected to be on-stream
by the fall of 2006 and is expected to add approximately 360,000 tonnes of
capacity per year. Under the terms of an existing agreement with Potash
Corporation of Saskatchewan, PCS has exercised its right to participate in the
Esterhazy expansion and fund 25% of the capital costs in exchange for the
right to 25% of the new capacity for the remainder of the contract.
For the Phosphates segment, DAP prices are expected to remain at or near
current high levels, but raw material prices are expected to increase further
because of higher energy prices. U.S. phosphate export volumes are expected
to decline in the second half of the fiscal year compared with current high
levels, though industry supply is also expected to decline because of
production losses resulting from Hurricane Katrina and anticipated plant
closures in the United States.
"The recent hurricanes in the U.S. Gulf region have resulted in reduced
phosphate supply of more than 400,000 tonnes," said Corrigan. "Thankfully our
two phosphate plants in Louisiana suffered only minimal damage and were back
at nearly full production by the end of September. This will keep the
phosphate market tighter than expected. At the same time, we are concerned
about the impact of higher natural gas prices that have already affected
ammonia prices. Water treatment costs are projected to remain high in the
second quarter, though they are expected to decline in the second half of
fiscal 2006 if rainfall levels in central Florida are near normal," Corrigan
added.
Given the continuing challenges in the Brazilian farm economy, Mosaic
expects a decline in second quarter operating earnings in its Offshore segment
compared to strong results a year ago. However, equity earnings from
Fosfertil and the company's Yunnan investment in China are expected to remain
strong.
Mosaic's synergy savings remain on track to reach the company's stated
goal of $145 million on an annual run-rate basis by the end of fiscal 2007.
As of the end of August 2005, annualized synergies reached $87 million. The
closure of Mosaic's Kingsford mine in mid-September and IMC's former Lake
Forest headquarters in October, will help reduce mining and overall costs and
assist in achieving annual synergy run-rate levels of $90 to $110 million by
the end of fiscal 2006.
Mosaic anticipates capital spending in $350 million to $400 million during
fiscal 2006 in line with prior guidance. Significant projects underway
include Mosaic's Esterhazy expansion mentioned above, construction of a single
super phosphate facility in Argentina, expenditures to improve operating rates
at the Colonsay potash mine, and several other investments dedicated to
capture the Company's synergy expectations.
About The Mosaic Company
The Mosaic Company is one of the world's leading producers and marketers
of concentrated phosphate and potash crop nutrients. For the global
agriculture industry, Mosaic is a single source of phosphates, potash,
nitrogen fertilizers and feed ingredients. More information on the company is
available at http://www.mosaicco.com .
Mosaic will conduct a conference call on Monday, October 3, 2005, to
discuss 2006 1st quarter earnings results. The call will begin at 11:00 a.m.
Eastern Daylight Time (10 a.m. Central Daylight Time) and will last no longer
than 60 minutes.
Conference Call Phone Number: 800-901-5241
International Phone Call-In Number: 617-786-2963
Participant Passcode: 57227112
Additionally, a Webcast of the conference call, both live and as a replay,
can be accessed by visiting Mosaic's web site at
http://www.mosaicco.com/investors . This Webcast will be available up to one
year from the time of the earnings call.
A replay of the audio call will be available through 6:00 p.m. Eastern
Standard Time on Monday, October 31. Please call 888-286-8010 to access the
replay and use passcode 12083832.
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, the predictability of fertilizer markets and raw material
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 and changes in environmental and
other governmental regulation. Such statements are based upon the current
beliefs and expectations of The Mosaic Company's management and are subject to
significant risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements.
Consolidated Statement of Operations
(in millions except per share amounts)
The Mosaic Company (unaudited)
Three months ended
August
2005 2004
Net sales $1,403.6 $724.8
Cost of goods sold 1,154.8 642.6
Gross margins 248.8 82.2
Selling, general and administrative expenses 57.0 31.0
Other operating income (0.2) (5.8)
Operating earnings 192.0 57.0
Interest expense 38.3 7.6
Foreign currency transaction (gain) loss 39.0 1.6
Other (income) expense, net (0.9) (0.3)
Earnings from consolidated companies
before taxes 115.6 48.1
Provision for income taxes 51.5 13.6
Net earnings of consolidated companies 64.1 34.5
Equity in earnings of nonconsolidated
companies 14.2 9.8
Minority interests in (earnings) loss
of consolidated companies (2.2) (1.2)
Net earnings before the cumulative effect of
a change in accounting principle 76.1 43.1
Cumulative effect of a change in
accounting principle - (2.0)
Net earnings $76.1 $41.1
Diluted earnings per share $0.18 $0.16
Weighted average number of shares outstanding 433.9 250.6
Proforma Consolidated Statement of Operations
(in millions except per share amounts)
The Mosaic Company (unaudited)
Three months ended
August
2005 2004
(actual) (proforma)
Net sales $1,403.6 $1,457.2
Cost of goods sold 1,154.8 1,300.4
Gross margins 248.8 156.8
Selling, general and administrative expenses 57.0 53.2
Other operating income (0.2) (5.8)
Operating earnings 192.0 109.4
Interest expense 38.3 42.1
Foreign currency transaction (gain) loss 39.0 18.0
Gain on sale of securities - (9.2)
Other (income) expense, net (0.9) 3.7
Earnings from consolidated companies
before taxes 115.6 54.8
Provision for income taxes 51.5 12.5
Net earnings of consolidated companies 64.1 42.3
Equity in earnings of nonconsolidated
companies 14.2 8.9
Minority interests in (earnings) loss
of consolidated companies (2.2) (2.0)
Net earnings $76.1 $49.2
Diluted earnings per share $0.18 $0.11
Weighted average number of shares
outstanding 433.9 429.7
Consolidated Financial Highlights
(dollars in millions)
The Mosaic Company (unaudited)
Three months ended Favorable/
August (Unfavorable)
2005 2004 Amount %
Net sales:
Phosphates $856.5 $363.5 $493.0 n/m
Potash 267.7 5.9 261.8 n/m
Nitrogen 24.2 58.3 (34.1) (58%)
Offshore 340.0 362.2 (22.2) (6%)
Corporate/Other (a) (84.8) (65.1) (19.7) n/m
$1,403.6 $724.8 $678.8 n/m
Gross margins:
Phosphates $136.9 $34.9 $102.0 n/m
Potash 107.1 0.3 106.8 n/m
Nitrogen 1.5 4.0 (2.5) n/m
Offshore 12.2 43.3 (31.1) (72%)
Corporate/Other (a) (8.9) (0.3) (8.6) n/m
$248.8 $82.2 $166.6 n/m
Operating earnings (loss):
Phosphates $106.9 $30.3 $76.6 n/m
Potash 98.5 0.2 98.3 n/m
Nitrogen 0.3 3.1 (2.8) (90%)
Offshore (8.2) 23.6 (31.8) n/m
Corporate/Other (a) (5.5) (0.2) (5.3) n/m
$192.0 $57.0 $135.0 n/m
(a) Includes elimination of intercompany sales.
n/m - Not meaningful
Key Statistics
The Mosaic Company (unaudited)
Three months ended Favorable/
August (Unfavorable)
2005 2004 Amount %
Sales volumes (000 metric
tons) (a):
Phosphates (b) 2,869 733 2,136 291%
Potash 1,700 - 1,700 100%
Nitrogen 206 380 (174) (46%)
Offshore 3,015 2,112 903 43%
Average price per metric ton (c):
DAP $240 $218 $22 10%
Potash $141 $- $141 100%
(a) Sales volumes include tons sold captively. Phosphates volumes
represent dry product tons, primarily DAP.
(b) Includes captive sales tons to Offshore.
(c) FOB plant/mine.
The Mosaic Company
Selected Non-GAAP Financial Measures and Reconciliations
(unaudited)
The following table summarizes the calculation of EBITDA and provides a
reconciliation to net income:
(dollars in millions)
EBITDA Calculation
Three months ended Three months ended
August 31, 2005August 31, 2004
Net Earnings 76.1 41.1
Interest 50.3 7.6
Income taxes 51.5 13.6
Depreciation, Depletion & Amortization 74.3 23
Amortization of Debt Financing Fees 1.2 -
Amortization of Fair Market Value
Adjustment of debt (12.0) -
Amortization of Mark to Market Contracts (4.5) -
EBITDA 236.9 85.4
The following table summarized the calculation of Net Debt to Capital:
(dollars in billions)
Numerator
Gross Debt 2.6
Total Cash 0.2
Net Debt 2.4
Denominator
Book Value of Equity 3.5
Total Debt 2.6
Capital 6.1
Net Debt to Total Capital 39.3%
SOURCE The Mosaic Company
-0- 10/03/2005
/CONTACT: Media Contact, Linda Thrasher, +1-763-577-2864, Investor
Contact, Douglas Hoadley, +1-763-577-2867, both of The Mosaic Company/
/Web site: http://www.mosaicco.comhttp://www.mosaicco.com/investors /
(MOS)
CO: Mosaic Company
ST: Minnesota, Florida
IN: CHM
SU: ERN ERP CCA
SH-AM
-- CGM025 --
5000 10/03/200507:30 EDThttp://www.prnewswire.com