The Mosaic Company (MOS) today reported first quarter fiscal 2010 earnings per share of 23 cents, well below the Zacks Consensus Estimate of 33 cents and the year-ago earnings of $2.65.

Sales

Net sales in the quarter were $1,457.2 million, declining roughly 66% year over year. The decline was broad-based across all the business segments and is mentioned in details below.

Phosphates sales were $814.4 million, declining roughly 69% year over year. The decline was due to the lower average diammonium phosphate (DAP) selling price, although the sales volume remained the same. The average DAP selling price was $276 per ton, compared to $1,013 in the year-ago quarter. Sales volume remained roughly flat year over year at 2.1 million tons. Production volume declined 13% year over year to 1.8 million tons.

Potash sales were $333.3 million, declining approximately 66% year over year. The decline was due to lower average muriate of potash (MOP) selling price and lower sales volume. This can be attributed to careful buying by customers due to volatile grain and oilseed prices and a lack of normal contracting activity as a result of the economic slowdown.

The average MOP selling price was $382 per ton, compared to $488 in the year-ago quarter. The decline can be primarily attributed to lower average export price and a shift in sales volume mix owing to a greater percentage of non-agricultural sales. Total sales volume was 0.8 million tons versus 1.9 million tons in the year-ago quarter. Production volume declined 59% year over year to 0.8 million tons.

Offshore sales declined roughly 55% year over year to $468.1 million. The decline was primarily due to lower selling prices.

Mosaic has a practice of reporting intersegment revenues under the Corporate/Other segment. Corporate/Other sales were $158.6 million in the reported quarter, declining approximately 46% year over year.

Margins

Gross margin declined 2,290 basis points (bps) year over year to 15.2% in the quarter. The decline was due to lower net sales. Selling, general and administrative (SG&A) expenses as a percentage of net sales increased 350 basis points year over year to 5.6%.

Lower gross margin coupled with higher SG&A expenses as a percentage of sales were primarily a drag on the company’s operating and net margins. Operating margin stood at 9.2%, declining 2,660 bps year over year. Net margin declined 2,050 bps year over year to 6.9% at the end of the reported quarter.

Balance Sheet and Cash Flow Items

Mosaic’s cash and cash equivalents were $2,598.7 million at the end of the first quarter, compared to 2,703.2 million in the prior quarter. Cash flow from operations was $172.4 million, compared to $561.5 million in the year-ago quarter. The company’s outstanding total debt stood at $1,390 million at the end of the reported quarter.

Outlook

Mosaic has provided guidance for the second quarter and full fiscal year 2010. For the second quarter, phosphates sales volume is expected between 1.8 and 2.2 million tons. Average DAP selling price is estimated in the range of $265 to $305 per ton.

For fiscal 2010, capital expenditure is estimated at $1.0 billion to $1.2 billion. SG&A expenses should range between $350 million and $370 million. Effective income tax rate should be in the high 20% range for the year.

The Mosaic Company is one of the world’s leading producers and marketers of concentrated phosphate and potash crop nutrients for the global agriculture industry.
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