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Mosaic (MOS)

Q1 2012 Earnings Call

September 29, 2011 10:00 am ET


Richard N. McLellan - Senior Vice President of Commercial

Laura Gagnon - VP, IR

James C. O'Rourke - Executive Vice President of Operations

James T. Prokopanko - Chief Executive officer, President, Director and Member of Executive Committee

Michael Rahm -

Lawrence W. Stranghoener - Chief Financial Officer and Executive Vice President


Michael Piken - Cleveland Research

P.J. Juvekar - Citigroup Inc, Research Division

Elaine Yip - Crédit Suisse AG, Research Division

Bill Carroll

James Sheehan - Deutsche Bank AG, Research Division

Mark R. Gulley - Ticonderoga Securities LLC, Research Division

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Fai Lee - RBC Capital Markets

Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division

Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division

Ben Isaacson - Scotia Capital Inc., Research Division

Vincent Andrews - Morgan Stanley, Research Division



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Good morning, ladies and gentlemen, and welcome to the Mosaic Company's First Quarter Earnings Conference Call. [Operator Instructions] Your host for today's call is Laura Gagnon, Vice President, Investor Relations of The Mosaic Company. Ms. Gagnon?

Laura Gagnon

Thank you, and welcome to our first quarter earnings call. With us today are Jim Prokopanko, President and Chief Executive Officer; Larry Stranghoener, Executive Vice President and Chief Financial Officer; Mike Rahm, Vice President, Market and Strategic Analysis and other members of the senior leadership team. We've decided to take a few more minutes of your time with our prepared remarks today to allow a review of our global markets. After my introductory comments, Jim will share our views on Mosaic's results and competitive position. Mike will review global supply and demand trends, and Larry will review our first quarter financial results and outlook. The presentation slides we are using during the call are available on our website at

We will be making forward-looking statements during this conference call. The statements include, but are not limited to, statements about future financial and operating results. They are based upon management’s beliefs and expectations as of today’s date, September 29, 2011, and are subject to significant risks and uncertainties.

Actual results may differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ materially from those in these forward-looking statements are included in our press release issued yesterday and in our reports filed with the Securities and Exchange Commission.

Now I'd like to turn it over to Jim.

James T. Prokopanko

Thanks, Laura, and welcome everyone. Last week, we prereleased our first quarter results in conjunction with our S&P inclusion offering. As Larry will review with you later, the results reflect the continued fundamental strength of our markets. In fact, this was one of the best first quarters in the history, only surpassed by the extraordinary conditions in 2008. This quarter's strength reflects both favorable market conditions and our focus on execution as we continue to position Mosaic for long-term success. While global GDP trends are uncertain and financial markets are extremely volatile, agricultural markets continue to provide attractive opportunities both near and longer term. We remain confident of our positive outlook.

Calendar 2011 is expected to result in yet another year of record U.S. farm income. We believe grain and oilseed prices will continue to reflect growing global demand and the requirement for farmers to increase production to meet that demand. In this environment, we continue to expect strong return for farmers leading to continuing strong results for Mosaic. In addition to strong earnings, we've continued to execute our strategy to capitalize on the positive long-term fundamentals of our business. One of our stated goals for fiscal 2012 is to strengthen our relationships with customers. During this quarter, we completed our annual North American customer survey and achieved a best-in-class rating, the highest score we've received since we started measuring.

In Potash, we continue to invest in growing our volumes. Our 5 million tonne expansion program will allow us to remain one of the top potash producers in the world. With over a century of reserves, these brownfield expansions provide economical access and high returns on our investments. We invested $200 million in the first quarter and our aggressive potash expansion program continues to be on time and on budget. The next scheduled capacity comes online in fiscal 2013 at our Esterhazy mine where mechanical construction is nearly complete.

The operational excellence campaign that we have successfully deployed in phosphates is now being applied in potash with a focus on improving production rates. This has allowed us to complete the seasonal maintenance turnaround at Esterhazy ahead of schedule, and we are on track with our Colonsay turnaround occurring in our second fiscal quarter.

In Phosphates, we continue to improve operating and production efficiency. As an example, total phosphate rock production was up an impressive 20% year-over-year, primarily as a result of a 37% increase in production at our Four Corners mine. As an update on our South Fort Meade litigation, we recently moved a second dragline into Polk County to mine various remnant parcels, while we wait to hear from the federal district court on our permit. Over the past 60 days, we have also advanced several matters with the 11th Circuit Court of Appeals, including a motion for limited stay to allow Aplenzin only mining, a request for the 11th Circuit to reinforce its prior ruling, and a full appeal of the preliminary injunction. We hope to hear from both courts soon.

In the interim, however, our mining operations in Florida have really stepped up their production levels, which together with phosphate rock from our Miski Mayo joint venture and without incremental third-party purchases, have significantly mitigated the impact of the reduced production at South Fort Meade. We expect this will be the case for the remainder of fiscal 2012.

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