Mosaic Profits on Rising Food Prices

Rising Food Prices Will Boost Debt-Free Mosaic Co. (NYSE: MOS) to New Highs

OCTOBER 31, 2011

BY JACK BARNES, Global Macro Trends Specialist, Money Morning

 http://moneymorning.com/2011/10/31/rising-food-prices-will-boost-debt-free-mosaic-co-nyse-mos-to-new-highs/

With so many companies – and countries – choking on the combination of slow growth and massive debt, investors are finding that there’s a definite formula for success.

You need to look for companies that have healthy cash reserves, a global presence in a high-growth sector, and whose shares are available at a bargain price. 

I’ve already found one to help get you started.

I’m talking about The Mosaic Co. (NYSE: MOS), an agricultural leader that’s positioned to benefit from the worldwide run-up in food prices.

Mosaic is the world’s leading producer of concentrated phosphate and potash, two of the primary nutrients required to grow food crops. 

One of the main reasons I really like Mosaic is that it has enough cash – $3 billion – to fund its own growth. It doesn’t need to borrow from banks to continue generating profits from crop-nutrient sales.

That’s a profitable niche, since global food prices are expected to increase 4% next year, and could climb higher on supply squeezes. Increasing food demand and poor harvests have caused sharp climbs in the price of corn and other crops. And those price increases have translated into higher prices for pork, beef and poultry. The profitable agricultural industry outlook is enticing farmers to grow more, and will create a steady profit stream for Mosaic. 

Mosaic’s shares recently hit a 52-week low; but don’t let that price dip fool you: While the market is currently pricing Mosaic for a significant slowdown in earnings, the reality is far brighter. It’s time to buy The Mosaic Co. (**). 

The Mosaic Co.

The Mosaic Co. is a young company with old roots, formed in 2004 from a merger of two giants in the crop nutrition businesses. This combination united profitable phosphate miner IMC Global Inc. with Cargill Inc., one of the world’s top producers of phosphate and nitrogen fertilizer.

The resulting Mosaic Co. has grown into the largest producer of concentrated phosphates, and one of the leading providers of potash crop nutrients. 

Mosaic’s global reach – it has operations in 10 countries and serves markets in more than 30 nations – has allowed it to accurately estimate and provide for global product demand. It’s this excellent business execution that helped Mosaic become debt-free, and then to amass a cash hoard of more than $3 billion. 

This helped the company post an excellent first quarter for fiscal 2012, the second-highest-grossing first quarter in its history. The company’s net earnings for the quarter ended Aug. 31 were 77% higher than the same quarter last year. Earnings per diluted share were $1.17, a 75% gain from 67 cents per diluted share in the first quarter 2011. 

Mosaic’s revenue now totals more than $10.3 billion in the trailing twelve months.

Fitch Ratings Inc. recently estimated Mosaic will earn $3.7 billion in EBITDA (earnings before interest, taxes, depreciation, and amortization) in fiscal 2012, a 19% gain from the $3.1 billion earned last year. 

The stock is down 18% so far this year, but this has more to do with Cargill unloading its core investment in the company – essentially dumping a big block of shares on the market.

Mosaic’s stock has rebounded from a 52-week low of $44.86 earlier this month to close at $61.96 Friday. 

At this price it’s still a bargain, giving us a chance to buy at extremely favorable prices. 

The company has a market capitalization of $20 billion. The stock is trading at a Price/Earnings (P/E) ratio of less than 8, making it cheap in comparison to the overall market’s P/E ratio of about 13 to 15.

Mosaic’s Profits Up, but Costs Higher

THE ASSOCIATED PRESS September 23, 2011, 11:57AM ET

http://www.businessweek.com/ap/financialnews/D9PUAOM00.htm
Mosaic posts higher profit, but misses view
Fertilizer giant Mosaic Co. said Friday that stronger sales in its fiscal first quarter pushed its profit up by 77 percent.

The earnings nevertheless missed Wall Street expectations and the company’s shares fell $2.84, or 4.7 percent, to $57.27 in midday trading.

For the three months ended Aug. 31, the company reported net income of $526 million, or $1.17 per share, up from $297.7 million, or 67 cents per share, a year ago.

On average, analysts expected earnings of $1.25 per share, according to FactSet.

Revenue rose to $3.08 billion from $2.19 billion. Analysts expected lower revenue of $2.85 billion.

Gross margin as a percentage of sales rose to 27.5 percent from 23.1 percent. The company said the increase was driven by improvements in phosphates and potash margins. Operating earnings rose to $729.6 million, up from $410.3 million.

Citi analyst P.J. Juvekar noted that it’s possible that “ongoing legal issues” and the shutdown of a phosphate rock mine may have increased the Mosaic’s costs in the quarter. But Juvekar also noted that the market remains favorable for Mosaic, given the tight corn and soybean markets and elevated grain prices that are pushing up farmer incomes.

Earlier this week, Standard & Poor’s said that it will add Mosaic, based in Plymouth, Minn., to the S&P 500 index after the market closes Friday. One requirement for entering the S&P index is that at least half of a company’s shares must be available to the public.

On Thursday, Mosaic said one of its shareholders, the Margaret A. Cargill Trust, plans to sell 18 million of its 42 million shares of the company, with an option to sell another 2.7 million shares if the sale goes well. The move is the latest step in unwinding ties between Mosaic and Cargill Inc.

Mosaic Appeals District Court Injunction on S. Ft. Meade Mine Extension

Sounds like they have a strong case for a stay.

________________________________________
From: Dennis Mader [mailto:protectpeaceriver@gmail.com] Sent: Thursday, August 25, 2011 9:08 PM
Hello Everyone:

As you may or may not know, Mosaic filed a notice of appeal on July 15 with the 11th Circuit regarding our second preliminary injunction which was granted on July 8. That appeal (No. 11-13277-EE) has officially begun with the filing of Mosaic’s Motion for Stay Pending Appeal, which is attached here. Eric asked that I send all of you a copy of the document; if there are any questions, please feel free to contact me.

Best,

Amber E. Williams
Paralegal
Sierra Club Environmental Law Program
1650 38th Street, Suite 102W
Boulder, Colorado 80301
(T) 303.449.5595 ext. 104
(F) 303.449.6520
amber.williams@sierraclub.org

The Florida Phosphate Committee of Continuous Existence

I stumbled across this website in my online research. It has numerous photographs of our new governor in the header at the top of the page….

The Florida Phosphate Committee of Continuous Existence
http://floridaphosphatecce.com/about.htm

In late November 1979, the Florida Phosphate Committee of Continuous Existence (FPCCE) was organized to encourage phosphate industry participation in government and key political issues. Additionally, the FPCCE would provide a source for contributing campaign funds to political candidates in the State of Florida.
In 1983, the FPCCE extended its membership base to include Associate Memberships; i.e. companies providing supplies and services to the phosphate industry. Associate Memberships enhance the FPCCE’s impact in Tallahassee by providing “Strength in Numbers.”
Today, the committee has three phosphate Member Companies and 68 Associate Member companies with the commitment to contributing over $500,000 in this election cycle.
Working closely with their lobbyists in Tallahassee from the three phosphate Member Companies, the FPCCE strives to promote stronger relationships between the phosphate industry and our elected government officials.
We thank you for your support and participation for a united industry effort!
If you are interested in becoming an Associate Member Company, please email FPCCE
SAVE-THE-DATE!

The Florida Phosphate Committee of Continuous Existence
invites you to an old fashioned
Bar-B-Q Dinner and Social
Come on down & get the scoop on issues facing our industry!

Where: The Lakeland Center
701 West Lime Street, Lakeland FL 33815
Date: Thursday, October 20, 2011
Time: 5pm until 9pm
Admission: $150 per person
Deadline: October 17, 2011
Florida Phosphate Committee of Continuous Existence (FPCCE)
P.O. Box 1384
Mulberry, FL 33860

COE Purpose and Need Letter

Protect Our Watersheds, 3PR, Manasota-88, Gulf Restoration Network and Sierra Club specify their case to the Corps of Engineers for ordering the phosphate mining industry to commission an area-wide Environmental Impact Statement. The case includes recent court decisions, prior and similar instances, USGS data, the failure of the FDEP to protect the environment, and other cogent reasons to conduct the study. This is essential reading to those who seek a broad understanding of the negative impacts of phosphate strip mining in central Florida.

Read it here: COE Purpose and Need letter(Final)