Mosaic Co., one of the best-performing stocks in the country over the past couple of years, proved again Friday that there's gold in the fertilizer business.
Ripe market yields strong third quarter for Mosaic
The Plymouth-based fertilizer maker has increased earnings nearly twentyfold from last year, with no sign of slowing down.
April 5, 2008 at 1:31AM
In a release sprinkled with words such as "extraordinary" and "exceptional," the global producer of phosphate and potash reported third-quarter operating earnings of $647.4 million -- or nearly 20 times last year's $34.2 million.
As a result, Mosaic shares jumped 10 percent Friday, to close at $115.07.
The Plymouth-based company, whose largest shareholder is commodities trader and food processor Cargill Inc., began 2007 at about $20 per share. Surging global demand for corn, wheat, soybean and other agricultural commodities has driven up fertilizer demand and prices much faster than the expenses of fertilizer producers.
"We are delivering record results by effectively executing against the backdrop of an exceptional agricultural environment," said Jim Prokopanko, Mosaic's chief executive.
In a prepared statement, the company said that the environment for its core phosphate and potash businesses "looks extraordinary, despite the recent turbulence in commodity markets." And analysts agreed Friday that there is no end in sight to Mosaic's surging stock price.
"Earnings are growing faster than the stock has been moving," said Edlain Rodriguez of Merrill Lynch in New York.
"We haven't reached a price limit yet, and what we're seeing right now in the market is pretty sustainable for the next several years," Rodriguez said.
"These [fertilizer] companies are in the sweet spot right now. Demand is extremely strong, because farmers on a global basis are trying to maximize yield. We don't know where the [price limit] is."
Analysts also expect increased quarterly earnings from Mosaic competitors such as PotashCorp, Agrium and CF Industries Holdings.
For the first nine months of the fiscal year ended Feb. 29, Mosaic's operating earnings rose by 600 percent, to $1.6 billion on sales that rose 55 percent, to $6.3 billion.
The results were achieved despite significantly higher costs for sulfur and ammonia, two primary raw materials for phosphates.
Mike Rahm, Mosaic's vice president of market analysis and strategic planning, told analysts in a conference call that the momentum is not expected to abate in the near future.
"Global grain and oilseed demand during the past two years is growing at almost double the historical rate," he said. "Demand growth is accelerating as a result of strong traditional drivers for food, seed and fiber, as well as for the increasing demand for biofuels. That is what makes this cycle different from those of the past. Grain and oilseed stocks will decline 39 million tons during the 2007-2008 crop year, despite high prices and a record crop last year. Biofuels get a lot of the credit for the faster demand growth, but it is still very much a food game."
Separately, Mosaic said Friday that it was expanding its Saskatchewan, Canada, potash mines.
Neal St. Anthony • 612-673-7144
California-based Better Place Forests bought 112 acres in Scandia to offer more eco-friendly memorial options, an industry Emergen Research expects to generate $1.2 billion a year by 2030.
