HenryTo
Site Admin
Joined: 06 Aug 2004
Posts: 11740
Location: Los Angeles, California
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 Posted: Tue Jul 19, 2011 11:57 am Post subject: Mosaic (MOS) |
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Morningstar on MOS' fiscal 4Q earnings:
| Quote: | | After Monday's market close, Mosaic MOS released fourth-quarter results that slightly exceeded our expectations. We plan to marginally raise our fair value estimate to account for the continuing runup in fertilizer prices. Despite a slight dip in crop prices, farm economics remain excellent. Consequently, fertilizer companies have been able to extract consistently higher prices from customers in recent quarters, backed by strong demand (as farmers look to boost yields in a high crop price environment) and fertilizer inventories below historical levels. Mosaic's net sales for the quarter rose nearly 54% year over year, with gains in both phosphate and potash. We don't think fertilizer prices will push tremendously higher over the near term, but if prices stay elevated near current levels (as we expect), Mosaic will reap higher average annual selling prices in fiscal 2012. In our opinion, it will take multiple growing seasons to return grain inventories to more comfortable levels. On the cost side, operating rates hovering around 90% in phosphate and potash were countered by higher input prices for ammonia and sulfur, as Mosaic's gross margin fell to 35% from 37% in the prior-year period. The company's phosphate costs are set to rise this year, as Mosaic continues a legal battle in Florida concerning its South Fort Meade phosphate mine. Earlier this month, an injunction prevented mining at an extension of South Fort Meade, and the company is estimating an additional $200 million in costs for fiscal 2012 related to purchases of phosphate rock from third parties and unabsorbed fixed costs. As an integrated producer of phosphate fertilizers, Mosaic benefits greatly from its access to low-cost rock at South Fort Meade, as high-cost noninte grated producers typically serve to set a price floor for phosphate fertilizers. We're still assuming full mining at South Fort Meade will resume eventually, but the injunction is unqualified bad news for Mosaic in the short term. As such, we plan on raising our fiscal 2012 phosphate costs per ton. |
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