The Mosaic Companys CEO Discusses Record Setting Safety Results
The Mosaic Company reported first quarter 2014 net earnings on Tuesday of $218 million, compared to $380 million a year ago.
In its quarterly statement, the company also reported earnings per diluted share were $0.54 in the quarter compared to $0.89 last year. Mosaic's net sales in the first quarter of 2014 were $2.0 billion, down from $2.3 billion during the same period in 2013.
Operating earnings during the quarter were $267 million, down from $491 million a year ago, as higher phosphate and potash sales volumes were more than offset by lower realized prices. On a combined basis, notable items, including a discrete tax benefit and a mark-to-market loss in value of the forward share repurchase agreement, had a negligible effect on the quarter.
“Mosaic delivered another quarter of solid results amid improving global demand for both phosphate and potash,” said Jim Prokopanko, President and Chief Executive Officer. “While weather continued to create challenges in the operating environment, strong global demand for phosphates pushed prices and margins higher during the first three months of the year, and our early positioning of potash in North America allowed for significant volume growth.
“Our long list of strategic accomplishments continued to grow in early 2014. We reached agreements to repurchase an additional 8.2 million of Mosaic's shares, bringing our total repurchase commitments to 12 percent of our 2013 year-end shares. In addition, we completed the acquisition of CF Industries' phosphate business in Central Florida and announced an agreement to acquire ADM's fertilizer distribution business in Brazil. We are also implementing plans to generate cost savings of one-half billion dollars over the next five years, ensuring Mosaic remains a low-cost producer.”
Cash flow provided by operating activities in the first quarter of 2014 was $627 million compared to $579 million in the prior year. First quarter 2014 cash flows reflect strong sales volumes and declining inventory levels. Capital expenditures totaled $275 million in the quarter. Net cash used in investing activities was $1.6 billion, leaving Mosaic's total cash and cash equivalents at $2.5 billion and long-term debt at $3.0 billion as of March 31, 2014.
An Unwavering Commitment to Health and Safety
As well as reporting “solid” financial results, Prokopanko also discussed the company’s resolute commitment to sustainability and employee safety. “Mosaic’s enduring and unwavering commitment to sustainability begins with the health and safety of our people—and I am pleased to report that fiscal 2013 was Mosaic’s best year ever for safety performance,” he said.
“In particular, I’d like to highlight the performance of our Canadian potash expansion program, where we are employing many short-term contractors to expand our Esterhazy, Saskatchewan mining operations. Mine expansions are high-risk environments, and contractors must be thoroughly trained in Mosaic’s safety standards before they begin work.
“To date, we’ve performed 20,000 contractor orientations, and we have recorded more than 10 million hours worked on expansion projects. Even with so many new people, we’ve reduced our recordable injury frequency rate from 2.68 in fiscal 2011 to 1.0 in fiscal 2013. Our safety training efforts have also led to increased risk awareness among contractors and employees, and a corresponding, fourteen-fold increase in near-miss reporting in fiscal 2013 versus fiscal 2011.”
Growing global demand for potash and phosphate, alongside the company’s commitment to sustainability and social responsibility set’s The Mosaic Company in good stead for the rest of 2014.
Copper, iron ore surge as Chinese investors unleash demand
The reopening of major industrial economies is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011 on Thursday.
In the wake of mounting evidence of inflation fuelled by higher raw materials prices, investors are also increasingly focused on when the U.S. Federal Reserve might start throttling back its emergency support.
Many banks say the rally has further to run, particularly for copper, which will benefit from rising investment in new energy sectors. Copper is at the highest in a decade, fueling bets it will rally further to take out the record set in February 2011. Steel demand is surging as economies chart a path back to growth just as the world’s biggest miners have been hampered by operational issues, tightening ore supply.
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” said Commerzbank AG analyst Daniel Briesemann. “The decarbonization trends in many countries, which include switching to electric vehicles and expanding wind and solar power, are likely to generate additional demand for metals.”
Trading house Trafigura Group and several major Wall Street banks including Goldman Sachs Group Inc. and Bank of America Corp. expect copper to extend gains.
Copper rose as much as 1.6% to $10,108.50 a ton on the London Metal Exchange before trading at $10,080 as of 4:07 p.m. in London.
Benchmark spot iron ore prices rose to a record, while futures in Singapore and China climbed.
The boom comes as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Instead, those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs.
Spot iron ore with 62% content hit $201.15 a ton on Thursday, according to Mysteel. Futures in Singapore jumped as much as 5.1% to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed 8.8% higher.
Erik Hedborg, Principal Analyst, Steel at CRU Group commented: “Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise. Iron ore producers are enjoying exceptionally high margins as well, around two thirds of seaborne supply only require prices of $50 /dmt to break even.”
Still, some analysts including Commerzbank’s Briesemann expect a short-term correction as metals become detached from fundamentals. There’s also a risk that China could engage in policies that may cool demand for iron ore and copper.
The metals rally has boosted concerns about short-term Chinese demand. Some manufacturers and end-users have been slowing production or pushing back delivery times after costs surged, while weaker-than-expected domestic consumption has opened the arbitrage window for exports.
Tin climbed as much as 2% to $30,280 a ton on the LME, boosted by rising orders for the soldering metal. Tin is at the highest since May 2011, with a 48% gain this year making it the best performing metal on the LME.