Mosaic Miss Earnings

Mosaic $MOS an name that we own in the DWCM portfolio reported lower earnings on Wednesday which sen it shares lower creating in my mind a buying opportunity.  As discussed here in many posts I am a big proponent of agriculture names long-term.  With the global population continuing to expand at a rapid rate and the growth in China, food is going to have to come from somewhere and in order to harvest those crops there is going to be a strong need and demand for fertilizers, seeds, and equipment.


As mentioned I saw this weakness as a buying opportunity not only for Mosaic but Potash as well and doubled down on our DWCM position.  Mosaic has great fundamentals with almost no debt, a high cash yield, and maintains a solid economic margin meaning it more than covers it cost of capital.


Highlights of the quarter from Dow Jones Newswires

• fiscal third-quarter profit slumped 50% as higher raw- material costs and slow farmer buying cut into the fertilizer producer's margins.
• The result faced a tough comparison against earnings a year earlier, when record demand, combined with supply uncertainties, helped lift up the fertilizer market.
• Mosaic, and other fertilizer producers, continue to paint a rosy outlook for the industry, but they have struggled in recent months amid a standoff with customers. Farmer demand has been sluggish amid high prices, and dealers have been slower-than-usual in securing supplies. Mosaic and competitors have in recent months curtailed production in response.
• Net sales in the company's potash segment was $553 million for the third quarter, down 27% compared with $758 million a year ago.
• "The Potash segment's operating results reflect delayed purchases, as buyers remained cautious," Mosaic CEO Jim Prokopanko said in a statement.
• Still, the company expects "near-record" global potash shipments in the quarter, and a very strong North American application season. U.S. farmers are widely expected to plant the most corn acreage since World War II this year.
• Mosaic was split off from agribusiness giant Cargill Inc., which had owned a two-thirds stake in Mosaic last spring. Its earnings have mostly climbed over the past year as worldwide demand for fertilizer lifts sales, though economic uncertainty caused a profit slip in the second quarter. The company has also cut phosphate production temporarily.
• The company has still signaled optimism about its future growth prospects and last month said it would double its shareholder dividends for 2012.

• For the quarter ended Feb. 29, Mosaic posted a profit of $273.3 million, or 64 centsa share, down from $542.1 million, or $1.21 a share, a year earlier. The latest quarter included about 8 cents a share in charges tied to negative currency effects and other items. Revenue slid 1.1% to $2.19 billion.
• Analysts polled by Thomson Reuters expected a 74-cent per-share profit on $ 2.13 billion in revenue.
• Gross margin narrowed to 23.8% from 38.5%.
• Phosphate sales grew 9.3% as the average selling price decreased 1.3%. Potash sales dropped 27%, while prices increased 26%.