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TheStreet Open House

Mosaic Updates Fiscal Second Quarter 2013 Guidance

Stock quotes in this article: MOS





PLYMOUTH, Minn., Nov. 13, 2012 /PRNewswire/ -- In advance of upcoming investor conferences, The Mosaic Company (NYSE: MOS) announced today an update of the near-term price and volume guidance, as well as an update of the Company's full year effective tax rate guidance.

Since the Company announced its fiscal second quarter guidance on October 2, 2012, international crop nutrient market demand has weakened, primarily as a result of distributors delaying purchases to avoid price risk. The Company believes this demand is simply delayed, but that sales volumes may not pick up until calendar 2013.

"The long-term positive outlook for crop nutrient demand has not changed; high commodity prices are driving record farm returns and making our products more affordable than ever before. These strong fundamentals are expected to drive record global phosphate and potash shipments in calendar 2013," said Jim Prokopanko, President and Chief Executive Officer. "In the short term, however, we are seeing lower than expected shipments to the export market, in spite of very strong demand in North America for the fall application season. As a result, we have lowered our volume guidance for both the Phosphates and Potash segments in the second fiscal quarter of 2013 while also tightening the price forecasts to the upper end of the previously announced ranges."

In potash, the delay in signing long-term supply contracts with China and India has resulted in weakening price expectations, leading other international buyers to delay purchases to avoid price risk. The midpoint of the Company's previous guidance for second quarter potash volumes of 1.6 to 1.9 million tonnes already excluded shipments to China and India. The current guidance range of 1.3 to 1.4 million tonnes reflects lower near-term demand in other international countries as well. In part because of the decline in international shipments and changes in product mix, our realized price expectations are now at the high end of the prior range, at $435 to $450 per tonne.

In phosphates, international distributors' cautious sentiment with respect to potash is spilling over as buyers are avoiding phosphate price risk, and delaying purchases in spite of low reported producer inventories. The Company has lowered second quarter volume guidance to 2.9 to 3.1 million tonnes from 3.0 to 3.4 million tonnes. Realized prices are expected to be in the upper end of the prior range, at $535 to $550 per tonne.

Additionally, the Company will decrease the amount of unrecognized tax benefits reported on the balance sheet by approximately $200 million in the second fiscal quarter, due to the resolution of tax audit activity. As a result, the Company now expects its effective tax rate for full year fiscal 2013 to be in the mid-teens, including the impact of this benefit, and in the mid 20 percent range for the second half of fiscal 2013.

The Company continues to expect the gross margin rate for phosphates to be approximately flat with the first fiscal quarter.  Assuming no benefit from foreign exchange in the potash segment cost of goods sold, low operating rates will continue to pressure the gross margin rate in the second quarter, currently expected to be in the low to mid 40 percent range.

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