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.

FL Governor appoints Mosaic executive to Industrial and Phosphate Research Institute

If there was ever any doubt about the scientific objectivity of the Florida Phosphate Research Institute, then at least their intentions are plainly known to all now… Thanks to Governor Scott for clearing that up.

Scott appoints Mosaic executive to Industrial and Phosphate Research Institute

 http://floridaindependent.com/47377/rick-scott-mosaic-fertilizer

 By Virginia Chamlee | 09.13.11 | 4:17 pm

 Gov. Rick Scott today appointed Michael A. Daigle, director of operations planning at Mosaic Fertilizer, to the Florida Industrial and Phosphate Research Institute. The appointment marks the latest in a stream of government interaction with the company — Mosaic gave at least $15,000 to Scott’s gubernatorial campaign, and a former Jeb Bush staffer recently went to work for the company.

A phosphate mine in South Fort Meade, owned by Mosaic, was shut down in July due to potentially detrimental environmental impacts. Although the company was initially given the go-ahead from the U.S. Army Corps of Engineers to strip-mine thousands of acres of Florida wetlands, a lawsuit (brought by environmental groups including the Sierra Club) led a judge to halt production at a 700-acre tract of the mine, over fears that the mining activities were damaging two area watersheds.

In July, a U.S. judge extended that injunction — effectively banning the company from expanding production at the mine.

According to its website, the Florida Institute of Phosphate Research was originally created in 1978 as “a state agency to study phosphate issues that impact Florida’s citizens, environment and economy and to be a phosphate information resource.”

Daigle’s term begins today and ends Sept. 30, 2014.

GOP Effort To Block EPA Radiation Surveys In Florida Faces Opposition

Superfund Report – 09/05/2011
GOP Effort To Block EPA Radiation Surveys In Florida Faces Opposition
Posted: September 2, 2011
Environmentalists and a key House Democrat are pushing back against a GOP effort to block EPA from doing aerial surveys that could inform a potentially precedent-setting cleanup of an area in central Florida where the agency fears tens of thousands of people living on former phosphate mines may be exposed to dangerous levels of radiation.
At issue are approximately 10 square miles of such lands near Lakeland, FL, where EPA has taken no cleanup action despite its concerns dating back to the late 1970s over residential radiation. EPA’s concerns, made public by an award-winning series of Inside EPA articles in 2010, have prompted a negative reaction from GOP lawmakers representing the area, who say the fears are overblown.
In February, the lawmakers — including GOP Florida Reps. Dennis Ross, Gus Bilirakis, Vern Buchanan, Richard Nugent and Thomas Rooney — sent a letter to EPA Administrator Lisa Jackson in which they take issue with EPA having recently conducted a preliminary aerial survey near the area in question. The survey, which was expected to set the stage for a much more extensive flyover of the area, is considered to be a key early step in a possible cleanup process (Superfund Report, July 11).
Ross, who plans to meet with Jackson in the coming weeks to discuss the issue, is preparing to insert an amendment blocking any additional EPA survey work in the fiscal year 2012 budget bill when it is recalled to the House floor in the coming months. The amendment would block surveys “of any facility in the State of Florida in Polk county or Hillsborough county that is listed in” EPA’s Superfund database, known as the Comprehensive Environmental Response, Compensation, and Liability Information System (CERCLIS) (Superfund Report, Aug. 8).
But the measure may be countered by Rep. Edward Markey (D-MA), who has raised concerns about the Florida phosphate issue in the past. According to a Capitol Hill source, Markey continues to track the issue and may speak in opposition to the Ross amendment when it comes up on the House floor.
In addition, Florida environmentalists are urging Jackson to reject the demands of the GOP lawmakers. In a July 20 letter, the activists say they “strongly support a fully scientific review of the impacts of phosphate mining, including the aerial radiation surveys which are long overdue.”
The groups, which include the Sierra Club Florida Phosphate Committee, Protect Our Watersheds and People Protecting Peace River, say that in addition to aiding EPA’s Superfund evaluation of the former mining areas, information gleamed from the surveys should be included in the Area-Wide Environmental Impact Statement that EPA and the Army Corps of Engineers are preparing relative to proposed new phosphate mines in Florida (Superfund Report, Oct. 15).
The activists also take issue with the GOP lawmakers’ assertion that EPA’s preferred cleanup standard for the Florida sites is “arbitrary.” The activists note that the standard, which dictates that concentrations for radium-226 in soil should not exceed 5 picocures per gram (pCi/g) above what naturally occurs in an area, “is a longstanding national standard which has been used at may sites nationwide to evaluate risk.”
“It would be highly improper to apply a different rule for Florida, or to refuse to look at the data because you don’t want to know what it says, which is the underlying premise of the [GOP] letter,” the activists say. Relevant documents are available on Inside EPA.com. (Doc ID: 2374487)
In their letter, the GOP lawmakers complain that “Florida’s real estate market is already under significant duress as a result of the economic downturn” and that “potential actions by EPA stand to impede Florida’s recovery.”
But the activists challenge this assertion, saying that aerial surveys “allow a scientific evaluation of risk and can have the effect of lifting the stigma currently associated with many such sites.”
The GOP congressmen presume “that this is a debate between economics and public health,” the activists continue. “This simply isn’t true. It’s a debate between powerful narrow corporate interests and a broader regional interest in environmental, public and economic health.” — Douglas P. Guarino
© 2000-2011. Inside Washington Publishers

Douglas P. Guarino
Associate Editor
Inside Washington Publishers
(Inside EPA’s Superfund Report)
1919 South Eads Street, Suite 201
Arlington, VA 22202
703-416-8518
fax:703-416-8543
mailto:[email protected]

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:[email protected]]
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
[email protected]

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

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
[email protected]

Federal Appeals Court Rules Against Florida Polluters

Federal Appeals Court Rules Against Polluters and for Clean Water
Eleventh Circuit in Atlanta rules in Favor of EPA settlement with Earthjustice

http://earthjustice.org/news/press/2011/federal-appeals-court-rules-against-polluters-and-for-clean-water

August 3, 2011
Tallahassee, FL

A federal appeals court today struck down a challenge filed by polluting industries and upheld a historic clean water settlement between the U.S. Environmental Protection Agency and Earthjustice. The 2009 settlement requires EPA to set limits on sewage, fertilizer and manure in Florida’s waterways.

Unchecked, the phosphorus and nitrogen in sewage, manure and fertilizer are sparking repeated toxic algae outbreaks in Florida waters. See pictures of toxic algae blooms at Slideshow: Florida Nutrient Pollution and Algae Blooms and Florida Water Coalition’s website. These outbreaks are a public health threat because they can make people and animals sick, contaminate drinking water, cause fish kills, and shut down swimming areas. Most recently, the Caloosahatchee River in southwest Florida was covered with nauseating green slime and rotting fish for weeks.

“The polluters keep trying to use our public waters as their private sewers, but we intend to keep fighting them. They have to take responsibility for their mess,” said Earthjustice attorney David Guest. “Our economy depends on tourism, and nobody wants to come to Florida to look at dead fish and slime-covered water.”

“This court decision is a win for Florida’s families. We should not have to endure the public health threat posed by contaminated rivers, springs, lakes and beaches. We are talking about the water that flows from our kitchen taps. It needs to be clean.”
A who’s-who of Florida’s leading polluting industries filed a legal challenge to stop the cleanup in January. The federal court ruled against them today.

“This pollution is preventable. Several courts have now ruled that Florida needs limits on this pollution to keep our water clean.”

“The polluters have been using scare tactics, bogus science, underhanded political bullying, and campaign cash to try to get their way. Fortunately, the Clean Water Act is still a good law that protects ordinary citizens, and it prevailed today.”

Contact:
David Guest, Earthjustice, (850) 681-0031

3PR News: Comments on Army Corps of Engineers Area-wide Environmental Impact Study

Greg Martin, Reporter
Charlotte Sun

Greg,

Since the AEIS scoping report is over 2000 pp. long I have obviously not read every word of it – but I have scanned it and read a number of the comments submitted. Based on what I have read and comprehended I would offer the following remarks:

As the AEIS is shaping up I am slowly losing any faith that it will provide the kind of scientific study that we, as an environmental community, were anticipating. It appears to me that the Army Corps of Engineers is happily dancing to the tune of the phosphate mining industry:
1. The scope of the study has been narrowed down to only 4 mines: Mosaic’s Ona, Wingate East, Desoto and CFI’s South Pasture Extension. How is this justifiable?
NEPA defines cumulative effects as “the impact on the environment which results from the incremental impact of the action when added to other past, present, and reasonably foreseeable future actions…” According to my calculations the sum total acreage of the four mines the ACOE is including in the “area-wide impact study” is 48,500. The mining overlay in my county, Hardee, alone is around 130,000 acres. (At the industry’s request and with the compliance of our County Commission an additional 9,000 acres were added to the overlay in 2010) This does not count the overlay in DeSoto County which was also expanded by 17,000 acres in 2010, for a total of 26,000 acres. So, in those two counties alone you have 156,000 acres, and that does not include Manatee and Hillsborough Counties. I would consider it “reasonably foreseeable” that the industry intends to mine all that property given the astronomical profits they are enjoying on agricultural fertilizer. Yet the Corps of Engineers has announced they will be only considering less than a third of that in this study. Actually, since county governments are so compliant with the industry and so willing to expand their mining overlays at their behest, then I think the amount of land mined could actually be much more than that. I’ll attach the map titled “Proposed Mining Limits” which Mosaic drafted during the “global settlement” discussions with Charlotte County in 2007. You will see that they would really like to gobble up practically the entirety of Hardee County (400,000 acres).
2. The comments in the recent scoping report from the ACOE included over 2000 respondents from Polk and Hillsborough Counties, or roughly 75% of total comments. These respondents are almost universally employed by the phosphate industry or people who are doing business with the industry. I read a great many of these comments. The vast majority plea for the economic necessity of the industry and are willing to forgive any impacts to the environment. They regard environmental advocates as hostile to the industry and a threat to their livelihoods and the existence of the industry. This is the pattern at almost every conference or phosphate mine hearing I’ve ever attended over the past 10 years. Every meeting is stacked with employees of the industry who passionately defend their employers as environmental “stewards” of the land. Yet, those claims fly in the face of a great deal of the scientific data gathered by objective sources such as USGS and others, and defies common sense, in my opinion, considering that almost 600 square miles of central Florida has been mined over the years and much of that remains unreclaimed (non-mandatory lands) and 40% of that in clay slimes. Some of these respondents who support the industry feel, for example, that it’s preferable to live on unreclaimed phosphate land than it is on natural unmined land. I am sure many of these are the same people who are attacking the EPA for conducting aerial surveys for radioactivity on their property because they don’t even want to know if there’s radioactivity around their homes.
So, I don’t see much hope for the AEIS as it is shaping up. Given the narrow scope of the project and the foreshortened time-frame for its accomplishment (one year) I don’t think it will have any validity whatsoever as an Area-wide Environmental Impact Study. In their comments Mosaic argues for “no new data” either, so at the rate things are going it wouldn’t surprise me if the ACOE complied with that as well. Not to mention that the company that’s actually conducting the study (CH2MHill)is allegedly a customer of Mosaic.

Hope these remarks help with your article.

Yours Truly,
Dennis Mader
Director, 3PR (People for Protecting Peace River)

Charlotte Sun Calls for Settlement with Mosaic

Time to talk about outcomes of Mosaic suit

Charlotte Sun Herald, Editorial 08/07/11

OUR POSITION: Environmental groups should dust off phosphate compact and sit down with Mosaic.
The Sierra Club is winning — but it may lose. The powerful environmental group, which is the lead plaintiff in a federal court challenge to a Mosaic Fertilizer permit issued by the U.S. Army Corps of Engineers for a 10,856-acre expansion of its South Fort Meade phosphate mine, recently won a preliminary injunction preventing any more mining until the court rules.
The July 8 injunction issued by Judge Henry Lee Adams Jr. contains pointed language taking the Corps to task for not abiding by Clean Water Act and National Environmental Protection Act regulations in its review of Mosaic’s permit application and “violated its duty to independently evaluate and verify Mosaic’s information.” The Corps is in the process of conducting a regional environmental impact study, having acknowledged that the mine in question, known as the Hardee County Extension of the South Fort Meade Mine, plus 11 other mines at various points in the permitting pipeline, “may result in significant cumulative environmental impacts in the future.”
The Sierra Club is winning — but it may lose.
Now is the time to talk.
We share the concerns expressed by environmental groups, including ManaSota 88 and Protect the Peace River, the Sierra Club’s fellow plaintiffs, about downstream impacts on the Peace River and Charlotte Harbor watersheds from phosphate mining at the Hardee County Extension and elsewhere. Our community’s current and long-term economy is only as healthy as those two bodies of water.
We stand shoulder to shoulder with them on demands regarding water quality and quantity, setbacks from ecologically sensitive areas and ongoing monitoring. We have repeatedly called on the company to be a better corporate neighbor, not only in its home base, where its jobs and charitable giving generate tremendous goodwill, but in the coastal communities whose residents see little upside but plenty of downside to digging up the Heartland. In fact, we backed the so-called “phosphate compact” between Mosaic and coastal counties because the company agreed to far exceed existing state regulations related to all three concerns, in addition to other concessions. Sarasota and Lee counties scotched the deal after it was OK’d by Charlotte County, which had spent about $12 million challenging Mosaic permits elsewhere in Bone Valley.
Now Mosaic faces yet another appeal, an areawide review, lost revenue and higher costs at a time when prices for phosphate-based fertilizer are favorable for making money — lots of it. Mosaic estimated its 2012 costs would climb by $200 million as a result of the injunction. That’s a nice place to start talking.
The Sierra Club and Mosaic have shown a willingness to talk in this case. A mediator got the sides to agree to short-term mining on a 200-acre swath of the extension that saved scores of jobs — for a few months. But now the plaintiffs have to decide what they want. What some want — an end to mining in Florida — isn’t going to happen. We think the Sierra Club wants to win. A win would be an agreement by Mosaic for unprecedented mining setbacks, monitoring, conservation and reclamation in Hardee and elsewhere. More than the state will ever require, given the industry’s power and economic impact. More than the Sierra Club can reasonably expect to win in court, where victory in the long run is more dubious.
The Sierra Club is winning — but it may lose. It’s time to talk.