UPDATE 4-High prices help Mosaic offset mine, shipping woes

Wed Mar 30, 2011 7:46pm EDT

* EPS $1.21 vs. Street forecast $1.07

* Revenue up 30 percent to $2.21 bln, but misses Street

* Volumes dip, but higher selling prices lift margins

* 'Operational struggles' in potash unit - CEO

* Shares slip almost 1.5 percent in after-hours trading (Adds details on conference call; updates shares)

By Ernest Scheyder

NEW YORK, March 30 (Reuters) - Higher prices for phosphate and potash fertilizers offset a drop in volumes and operational challenges, helping Mosaic Co (MOS.N) post a better-than- expected quarterly profit.

The company's revenue jumped 30 percent to $2.21 billion, although Wall Street had expected $2.34 billion, according to Thomson Reuters I/B/E/S. That pushed shares down almost 1.5 percent in after-hours trading.

Mosaic is majority owned by agribusiness giant Cargill Inc [CARG.UL] and is closely tied to the booming agricultural sector. The fertilizers that Mosaic mines and processes help farmers grow more food.

"We had an absolutely record-shattering third quarter helped by strong market conditions," Chief Executive Jim Prokopanko told Reuters.

But several hiccups dented results. The company's potash unit experienced "operational struggles" when some miners ran into salt seams, not potash rock, Prokopanko said.

And in the phosphate unit, some product sitting in port the last week of the quarter had to be recorded as sold in the fourth fiscal quarter because it had not been shipped yet.

"We've caught up with any delays in shipping and we're fine now," Prokopanko said.

The company also said its potash operating earnings were higher than potash gross margins. That is usually impossible to accomplish under standard accounting rules, but Prokopanko said a $38.2 million insurance payment boosted the operating earnings.

The payment was for sales lost while a new hoist was installed at a Canadian mine, Prokopanko said.

RESULTS

During the fiscal third quarter ended Feb. 28, Mosaic earned $542.1 million, or $1.21 per share, compared with $222.6 million, or 50 cents per share, in the year-ago period.

Analysts expected earnings of $1.07 per share.

Volumes of phosphate, a compound that helps plant cells build walls and is primarily mined in Florida, fell 4.1 percent. Phosphate sales, though, were helped by a 62 percent price increase.

Volumes of potash, another popular fertilizer that Mosaic is spending billions to boost production of, fell 1 percent. Potash prices increased 1 percent.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on Mosaic's earnings: r.reuters.com/zys78r

Graphic on recent price swings in potash and phosphate:

r.reuters.com/saf58r

Graphic on global potash supplie1s, click on:

link.reuters.com/beq55n

Reuters Insider interview of Mosaic CEO Prokopanko:

link.reuters.com/xap58r

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Cargill has announced a plan to sell off its ownership stake in Mosaic using a complex transaction that will start in May. [ID:nN15270240]

Interest in June $85 and $100 call options for Mosaic's shares surged ahead of Mosaic's earnings release. June is the first full month after Cargill's exit gets under way. [ID:nN30159308]

The shares of the Plymouth, Minnesota-based company fell almost 1.5 percent to $79.28 in after-hours trading. The stock has traded between $37.68 and $89.24 in the past 52 weeks.

The company plans to hold a conference call on Thursday morning to discuss the results. (Reporting by Ernest Scheyder; editing by Andre Grenon, Richard Chang and Andre Grenon)

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