Providers of Global Food Security
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Mosaic (NYSE: MOS) is the producer of world class phosphates on which American farmers rely for nearly half of their nutrition requirements. The company expects to add 3 million tons of annual capacity in the next 5 years and another 2 million by the end of this decade. Recently, along with Potash, the company signed a deal with Sinochem Fertilizer Macao Commercial Offshore Limited, a subsidiary of China’s Sinofert Holdings Limited to supply one million tons of potash in the first half of 2013. The price of potash under the new agreement reflects a $70 per ton reduction. Furthermore, it reported operating earnings of $560 million on its revenue of $2.5 billion for the quarter.
Although in the most recent quarter it experienced a sizable tax benefit of $179 million ( $0.42 per share), still operating earnings were $560 million as compared to $797 million in the second quarter of fiscal 2012. The potash business unit contributed $316 million and the Phosphates business contributed $245 million in operating earnings. The revenue collection was $2.5 billion for the quarter while the earnings per share was $1.47. For the quarter, Mosaic maintained a soaring cash position with $3.4 billion of cash in hand because of $322 million operating cash flow generated during the quarter. This fiscal year, accidents and mishaps were taken care of as it achieved a 13% reduction in injury rate and a 29% decline in lost-time accidents.
Since its inception in 2004, Mosaic has bought more than 18,000 acres of phosphate mine land in DeSoto County. In order to utilize the land to develop a world class phosphate mine in the county, it has planned to invest more than $1 billion in infrastructure costs over the coming 10 years. As the farm economy grows, it is expected that it will record its highest potash shipments in fiscal 2013. Expectations are that Potash shipments will be in the range of 1.5 million to 1.8 million tons for the third quarter and 55 million to 57 million tons for the fiscal 2013. Further Potash pricing is forecasted to be in the range of $370 to $400 per ton. As far as Phosphates are concerned, fiscal third quarter sales volumes are expected to be in the range of 2.5 million to 2.8 million tons with prices to be in the range of $485 to $515 per ton. Keeping in mind all these factors along with the ever growing global demand for food, the future of Mosaic sounds steady and booming to me.
Potash (NYSE: POT) has its emphasis on solid and liquid phosphate fertilizers and is currently the world’s second-largest potash producer. On the back of strong demand from India and China, potash shipments are expected to rise by another 12.0% in 2013 as compared to the previous year. Because of the contractual delays, India and China Potash prices remained weak during the second half of 2012. However, at the start of 2013, the uncertainty has weakened as China settled its contracts for 1H13 and India expected to follow in the near term. In October 2012, Potash Corp. released its third-quarter 2012 results. Sales came in at $2,143 million down by 7.7% from $2,321 million a year ago. The analysts are expecting a rebound in revenue to $8.54 billion for the fiscal 2013. Hence Potash poses a serious threat to Mosaic.
Although Indian administrative regulations are threatening, demand for the company’s products in other markets remains strong and should accelerate as the company acquires global reach to make an important contribution to global food security. The company is ecofriendly as it recycles more than 95% of its water and restores land that it uses back to its natural beauty converting them into parks, playgrounds and community amenities. Not getting bugged by the temporary short term concerns, the company has the potential to make money for investors looking for attractive investment over the long run.
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