Mosaic Company's quarterly profits dropped 4 percent over a year ago, as the big fertilizer maker faced falling prices for both its potash and phosphate-based products. And those depressed prices don't appear to be receding soon.
In fact, the company said Tuesday it will cut back potash production somewhat. With the murky near-term outlook, Mosaic's stock fell $2.01, or 3.6 percent, closing at $54.12.
Plymouth-based Mosaic, one of the world's largest fertilizer makers, Tuesday posted fiscal fourth-quarter earnings of $486 million or $1.14 per share, down from $507 billion or $1.19 a year earlier. Mosaic's profits were in line with the average forecast of analysts polled by Thomson Reuters.
Mosaic's sales of $2.7 billion also squared with analysts' forecasts, but were down from $2.8 billion a year earlier.
Mosaic runs large mines, particularly in Saskatchewan and Florida, that respectively extract potash and phosphate and process it into potassium-based and phosphorus-based fertilizer. Potash fertilizer prices were down 19 percent during the quarter over a year ago; phosphate prices fell 2 percent.
Mosaic CEO Jim Prokopanko said he expects the current price weakness to moderate over time as demand growth absorbs additional supply. Still, "we do not expect a significant recovery in potash and phosphate prices in the near term," Prokopanko told stock analysts in a conference call.
Analysts expected declining prices during the quarter, but perhaps not as negative an outlook.
"It's a little more than some were looking for," said Ken Perkins, a stock analyst at Morningstar Inc.
With the softer conditions, Mosaic will dial back the operating rate of its potash mines this summer to 75 percent of capacity, down from 95 percent during the most recent quarter. Part of that is due to scheduled maintenance, but also from curtailing production at one Saskatchewan mine. Further cuts might be made if merited, the company said.
Prokopanko told analysts that potash and phosphate prices were "lackluster for two market-driven reasons."
India, one of the world's largest potash markets, continues to use significantly less of the stuff than in recent history. "India will come back; we're just not sure when," he said.
Also, additional fertilizer supply is expected to come into the market because of several new projects around the globe.