Mosaic profit misses Street on potash sales drop

NEW YORK Wed Mar 28, 2012 5:27pm EDT

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NEW YORK (Reuters) - Mosaic Co (MOS.N) posted a stark drop in quarterly profit as farmers bought less potash fertilizer and costs jumped in the phosphate fertilizer segment.

High prices for potash kept many customers from buying ahead of the spring planting season, which begins shortly in North America.

The results seem to invalidate Mosaic's decision in February to cut potash production by 20 percent in a bid to boost prices.

Potash and phosphate - Mosaic's two main products - are the second- and third-most important fertilizers that farmers apply, after nitrogen.

While farmers will need to buy potash as they seed their fields, the quarterly results spooked investors on Wall Street. The Minnesota-based company's shares dropped 2.9 percent to $56.52 in after-hours trading.

For the fiscal third quarter ended February 29, Mosaic reported net income of $273.3 million, or 64 cents per share, compared with $542.1 million, or $1.21 per share, in the year-ago period.

By that measure, analysts expected earnings of 74 cents per share, according to Thomson Reuters I/B/E/S.

Revenue fell 1 percent to $2.19 billion. Analysts expected $2.13 billion in revenue.

Potash volumes fell 200,000 tonnes to 1.8 million tonnes during the quarter, as the price for the nutrient jumped to $453 per tonne from $358 per tonne in the year-ago period.

"Buyers remain cautious," CEO Jim Prokopanko said in a statement.

In the company's phosphate segment, sales rose 17 percent, but an outage at a Louisiana ammonia plant sent costs up by $10 million, draining profit.

"Longer term, we believe the phosphate market provides us with significant opportunities, with strong grower economics driving record shipments in both 2012 and 2013," Prokopanko said.

Despite the obstacles, Prokopanko said many of the issues that have plagued the company are now behind it.

Key among them was an agreement last month that settled a lawsuit between Mosaic and the Sierra Club that essentially allows the company to expand production at a major phosphate mine in South Fort Meade, Florida. The lawsuit had been a major overhang on the stock and unnerved many investors.

The U.S. Department of Agriculture will release its annual report on expected corn plantings this Friday. An average of analysts' estimates in a Reuters poll pegged U.S. corn seedings at 94.72 million acres - the largest since 1944.

That would be great news for Mosaic, as corn requires large amounts of phosphate and potash fertilizers to grow well.

(Editing by Andre Grenon)

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