UPDATE 3-Mosaic notches bigger profit, eyes share buyback

Thu Mar 28, 2013 12:46pm EDT

* Third-quarter EPS 81 cents vs 64 cents year earlier

* Plans stock buyback; wary of possible Potash-ICL deal

* Sees 4th-qtr potash volumes of 2.3 mln-2.6 mln tonnes

By Rod Nickel and Bhaswati Mukhopadhyay

March 28 (Reuters) - U.S. fertilizer producer Mosaic Co reported a 26 percent rise in third-quarter profit, driven by higher potash and phosphate volumes and said it wants to buy back shares later this year, lifting its stock 1.3 percent on Thursday.

Mosaic also said it expects a robust U.S. planting season, as farmers aim to maximize output to capitalize on high grain prices. But Chief Executive Jim Prokopanko said extended winter weather and potential spring flooding may drag the area planted to corn below the 96 million acres Mosaic is expecting.

"We are still a long way from the game really getting started," he said in an interview. "It's going to be weather dependent."

The U.S. Department of Agriculture on Thursday estimated U.S. corn plantings at 97.3 million acres.

Heavy snow this winter has already hampered rail movement of Western Canadian potash to port by Canadian National Railway Co and Canadian Pacific Railway Ltd, Prokopanko said. Mosaic is one of three potash miners in the Canadian province of Saskatchewan, along with Potash Corp of Saskatchewan and Agrium Inc.

Shares of the Plymouth, Minnesota-based company, which is the world's largest producer of finished phosphate products, was up 1.6 percent at 59.61 shortly after midday on the New York Stock Exchange.

Net profit attributable to Mosaic in the third quarter rose to $344.6 million, or 81 cents per share, from $273.3 million, or 64 cents per share, a year earlier.

The results for the latest quarter included a negative impact from items, including antitrust settlements and adjustments for asset retirement obligations amounting to 7 cents per share.

Net sales rose 2 percent to $2.24 billion.

Analysts had expected, on average, earnings per share of 88 cents and revenue of $2.29 billion, according to Thomson Reuters I/B/E/S.

SHARE REPURCHASE PLANNED

Mosaic, which this month announced a $1 billion, 4-year investment in a phosphate production project in Saudi Arabia with Ma'aden and Saudi Basic Industries Corp JSC, also intends to buy back shares this year.

About 129 million shares of Mosaic that are held by some shareholders of giant agribusiness company Cargill Inc , or about 30 percent of Mosaic, will automatically convert to common shares starting in late November, unless they are sold earlier.

Mosaic has the means to buy anywhere from one-third of those shares to all of them, which would cost about $7.5 billion depending on the share price and debt costs, Prokopanko said.

"That, we think, is within our capacity," he said, referring to Mosaic's current cash position of more than $3 billion and unused borrowing room.

Tax restrictions on the shares expire in late May.

With so many shares in play, Mosaic could be a slightly more attractive takeover candidate, Prokopanko said.

Meanwhile, the world's largest potash producer by capacity, Potash Corp, has set its sights on acquiring No. 6 producer Israel Chemicals Ltd, raising some concerns for Mosaic.

"Hypothetically we would have some issues with that," Prokopanko said. "We'd be curious how we'd be able to resolve that."

Potash Corp is a partner with Mosaic and Agrium in Canpotex Ltd, the offshore selling agency for potash that the three companies mine in Western Canada.

Mosaic is seeing strong demand in most of its markets and expects inventories to draw down in coming months, Prokopanko said. It expects global 2013 potash shipments to be at the high end of its estimated range of 55 million to 57 million tonnes.

Mosaic said it expects to sell 2.3 million to 2.6 million tonnes of potash in the current quarter, ranging from $350 to $380 per tonne - down from the third quarter's $385 per tonne. It sold 1.8 million tonnes in the third quarter that ended Feb. 28, sharply higher over the year-earlier quarter.

The company expects average selling prices for phosphates to be flat in the current quarter, with sales volume ranging from 2.6 million to 2.9 million tonnes. It sold 2.6 million tonnes of phosphate in the third quarter.

Key potash consumers China and India stayed out of the market for most of 2012's second half, bruising earnings for the big producers. China agreed to a new supply contract with Canpotex on Dec. 31, midway through Mosaic's quarter, and a deal was announced with India on Feb. 7.

"Inventories of potash were built up ... and now that India and China are back in the market, it is not surprising that management expects those producer inventories to come down," said analyst Jeffrey Stafford of Morningstar.