Can Mosaic Get The Sustainable Price Leverage It Needs?
Stephen Simpson, CFA
Stephen Simpson, CFA
Thu, Jul. 14, 12:56 PM
- Shares of North American potash companies are sharply higher as Belarusian Potash Co. announces a deal with a consortium of Chinese firms to sell potash at $219/metric ton for 2016, a 30% discount from last year.
- With potash prices hovering near decade lows due to excessive capacity and soft demand, analysts say the long-delayed China contract is in line with market expectations and positive for potash producers aiming to meet their projections for demand.
- The other major potash sellers, Russia's Uralkali and Canada's Canpotex - owned by Potash Corp. (POT +2.5%), Mosaic (MOS +3.9%) and Agrium (AGU +3.7%) - typically settle Chinese contracts at the same price as Belarus, and the absence of the contract with China, the world’s largest buyer of potash, has depressed demand and sales volumes.
- Belarus agreed in June to sell 700K metric tons of potash to India at $227/metric ton.
Wed, Jul. 13, 12:47 PM
- Mosaic (MOS +1.7%) says it will idle its Colonsay potash mine in Saskatchewan for the remainder of 2016 and halt current turnaround activities, causing the layoff of 330 employees.
- MOS says the move is intended to allow it to meet customer demand while adapting to challenging potash market conditions.
- Annual production at the Colonsay mine is 2.6M metric tons.
Mon, Jun. 27, 2:32 PM
- Belarusian Potash Co. says it signed a deal to supply 700K metric tons of potash to India for $227/ton, a price that analysts say beats expectations and indicates renewed demand for the product.
- It is the first time since 2009 that India reached an agreement before China, which may affect the price of the Chinese contract; last year, China agreed to buy at $315/ton and India later signed a deal for $332/ton.
- India’s signing price was “generally in line” with expectations, RBC Capital's Andrew Wong says, adding that having a contract in place" will help the potash market form a bottom for prices, although we see limited potential for upside improvement."
- North American potash producers are trading lower: POT -6.7%, AGU -4.3%, MOS -8.3%, IPI -11.4%.
Thu, Jun. 23, 8:58 AM
- Potash Corp. (NYSE:POT) +3.2% and Mosaic (NYSE:MOS) +2.6% premarket following reports that Belarus may cooperate with Russian potash producer Uralkali for the first time since a dispute ended the alliance between the world's two biggest potash producers in 2013, triggering a fall in global prices that have not yet fully recovered.
- Belarus Pres. Lukashenko hinted at cooperation during an event in Minsk but did not discuss his conditions; the previous joint venture was based in Minsk, at that time a crucial condition for Belarus and the main concern for Uralkali.
- Lukashenko also said Belaruskali had signed a new potash supply contract with India, although the company later said it was still finalizing the deal; aside from Belaruskali and Uralkali, POT, MOS and Germany's K+S (OTCQX:KPLUY) supply potash to India.
- Other relevant tickers: AGU, CF, IPI, ICL, CNHI, SQM, UAN, IPHS, EVGN
Thu, Jun. 2, 12:58 PM
- North America's top potash producing triumvirate of Potash Corp. (POT +2.3%), Mosaic (MOS +2.5%) and Agrium (AGU +0.6%) are doubling down on a production cut strategy they hope will lift prices from their lowest levels since mid-2007, even as some industry observers warn that the strategy threatens their long-term profitability and props up weaker rivals.
- POT CEO Jochen Tilk tells Reuters the miner is sticking with its tighter supply strategy, saying "the reason it works well is the resources in potash are more concentrated than any other commodity."
- Some suggest the group should adopt Saudi Arabia's oil strategy, boosting production to drive out higher-cost competitors, with the goal of maximizing profit over time - "that's more sustainable than trying to artificially maintain the price by closing [low-cost] facilities," says Bryan Agbabian, head of agricultural equities at Allianz Global Investors.
- "What I fear for some of these companies with high dividend payout ratios, is that they can curb production for a brief period of time, but if they do it in perpetuity they're going to have to face another dividend cut," says Stone Asset Management's Moshin Bashir.
Thu, May 19, 12:41 PM
- Potash supply contracts with Chinese buyers should be settled in 2-4 weeks, setting a much-needed global price floor, Potash Corp. (POT +2.6%) CEO Jochen Tilk tells Reuters.
- The CEO expects Chinese buyers to settle first with Belaruskali and Russia's Uralkali, as is typical, followed by a contract with the Canpotex group owned by POT, Mosaic (MOS +1.5%) and Agrium (AGU -0.6%).
- Tilk also says POT's $1 annual dividend is sustainable, noting that the company's capital spending is set to decline next year.
- Now read Potash Corp.: Is this a buy point?
Wed, May 4, 2:48 PM
- Mosaic (MOS -1.6%) is lower after reporting in-line Q1 earnings and reducing guidance for FY 2016 phosphate and potash sales volumes.
- MOS says it expects Q2 total sales volumes for its phosphates segment of 2.3M-2.6M metric tons, lower than 2.8M sold in the year-ago quarter but higher than the 2.2M sold in Q4 2015; for FY 2016, MOS forecasts the realized price at $335-$355/ton and gross margin at ~10%.
- MOS sees Q2 sales volumes for the potash segment of 1.9M-2.2M metric tons compared to 2.3M last year and 1.5M in Q4 2015; for the full year, MOS forecasts a realized price of $180-$200/ton and a gross margin in the mid to high teens.
- Full-year phosphate sales volume is projected at 9M-9.75M metric tons, while full-year potash sales volume is seen at 7.5M-8M metric tons.
- MOS also cuts its 2016 capex guidance to $800M-$900M from its previous estimate of $900M-$1.1B.
- Now read Mosaic to outlast lower prices
Tue, Apr. 19, 12:49 PM
- Potash Corp. (POT +4.5%) and Mosaic (MOS +3.1%) are downgraded to Underweight from Equal Weight at Barclays, which says low potash prices along with pressure from new capacity will "substantially limit" earnings prospects for the two companies.
- Barclays thinks potash prices may be reaching a bottom but at a lower level than it had expected, and has grown increasingly concerned that the looming Chinese contract settlement could see a more sizable reduction - approaching $70/ton - on last year's $315/ton price given current pricing across Brazil and southeast Asia and the slow pace of imports into India.
- The firm maintains Overweight rating for Agrium (AGU +3.1%) and CF Industries (CF +5.7%) but slightly lowers its respective price targets to $94 from $96 and to $40 from $43.
- Now read Potash Corp.: More pain ahead as there is no bottom in sight
Thu, Apr. 14, 11:16 AM
- Potash (POT -2.4%), Mosaic (MOS -3.5%), Intrepid Potash (IPI -8.2%) and CF Industries (CF -1.3%) are downgraded to Underperform from Market Perform at Cowen, which cites the risk of a further deterioration in the grain environment and the belief that nutrient prices and margins still have room to fall.
- Cowen expects an increase in U.S. corn acreage to 93.6M acres from 88M acres, plus anticipated gains in Brazilian and Argentine output, to cause a sizeable drop in corn prices and 2017 corn acreage, which would weigh on ag company shares.
- The firm cuts its price targets for POT to $14 from $16, MOS to $23 from $32, and CF to $25 from $44; Agrium (AGU -3.7%) and CVR Partners (UAN -3.2%) are maintained with Market Perform ratings but with reduced price targets of $86 and $8, respectively.
- Now read Potash Corp. credit rating cut at S&P on fertilizer market weakness
Mon, Apr. 4, 3:49 PM
- Potash (POT -3.9%) and Mosaic (MOS -4.1%) are downgraded to Sector Perform from Sector Outperform at CIBC, which says potash markets could remain soft for the foreseeable future due to price competition among the producers.
- Potash prices have continued to decline in recent weeks, meaning POT's 2016 earnings guidance announced barely two months ago already looks shaky, the firm says, adding that it believes the company will reduce the low end of its $0.90-$1.20 EPS outlook.
- CIBC also is concerned about POT's dividend, even though it already has been lowered this year; the firm calculates the payout ratio at 131% in 2016 and 78% in 2017.
- Now read How Potash can fertilize future profits in your portfolio
Tue, Mar. 1, 12:36 PM
- Moves by potash producers from idling mines to bartering with farmers may pay off soon for the hard-hit industry, company execs tell a BMO investor conference.
- Potash Corp. (POT +3.6%) CEO Jochen Tilk says he expects potash demand to pick up after significant supply cuts, and the company is doing its part to cut capacity by recently shutting down its newest mine in New Brunswick and announcing temporary shutdowns at two other Canadian mines.
- In a bid to cope with farmers' limited access to credit in Brazil, which has hurt demand there, Mosaic (MOS +2.6%) CEO Joc O'Rourke says his company is bartering with the farmers, allowing them to use crops as collateral to borrow money for fertilizer purchases.
- Potash sells for less than $300/metric ton in the U.S. Midwest, down from nearly $450 a year ago, according to data published by Raymond James.
- Also: AGU +2.4%.
Wed, Feb. 17, 10:59 AM
- India has halted potash imports and delayed negotiations for next year's purchases until at least June, Reuters reports, as droughts have hurt demand in one of the world's biggest fertilizer consumers.
- The decision is India's first pause in potash imports in years and will be tough on suppliers already reeling from weak demand as China and Brazil also cut back on their buying.
- Spot prices of potash are at eight-year lows of ~$230/metric ton, down by more than 25% Y/Y; major suppliers to India include Uralkali, Potash Corp. (POT +5.6%), Agrium (AGU +2.3%), Mosaic (MOS +7.2%) and Uralkali.
Mon, Jan. 25, 1:06 PM
- Potash Corp. (POT -6.8%) plunges to 52-week lows as J.P. Morgan analysts say lower nutrient prices likely will prompt management to cut dividend payments.
- "Our base case is that [POT] will reduce it because the dividend was set during a period of cyclical strength and a higher level of earnings and industry structure conditions that does not resemble today’s business landscape," analysts led by Jeffrey Zekauskas write, expecting POT will reduce its annual dividend to $1 from the current $1.52 and downgrading shares to Neutral from Overweight.
- Bernstein analyst Jonas Oxgaard also expects the dividend will be reduced, saying "the fear of [POT] going into financial distress and having bigger problems than paying dividends likely outweighs any reward the company is getting from the dividend at this stage."
- Also: MOS -5.5%, AGU -2%, IPI -3.2%.
Fri, Jan. 22, 11:36 AM
- Potash Corp.'s (POT +1.6%) suspension of production at its Picadilly mine in New Brunswick due to weak market conditions could lead the company to shelve plans to build a new west coast shipping terminal with Canpotex partners Mosaic (MOS -1.8%) and Agrium (AGU +1.6%), POT CEO Jochen Tilk says.
- The decision earlier this week allows Canpotex to "indefinitely defer" a decision on constructing the C$900M Prince Rupert terminal, Tilk told a CIBC investor conference yesterday, saying "We certainly don’t anticipate making that decision in the next 10 years, so we’re very good with our port facilities on the west coast and on the east coast."
- Tilk also said POT’s board would discuss the company’s dividend next week; analysts have speculated that POT will reduce its dividend.
Nov. 24, 2015, 3:11 PM
- Potash Corp. (POT +1.5%) is preparing a new takeover approach for K+S (OTCQX:KPLUY), which likely would come next spring, Reuters reports, citing German investor newsletter Platow Brief.
- POT on Oct. 5 withdrew its €7.9B takeover proposal for K+S, citing the decline in global commodity markets and a lack of engagement by K+S management.
- Also: AGU +1.7%, MOS +1.8%, IPI -1%.
Oct. 30, 2015, 12:58 PM
- News this week included weak results and guidance from Intrepid Potash (IPI -5.4%), Potash (POT -2.8%), Bunge (BG -0.9%).
- Coming next week are earnings from Agrium (AGU -1.6%), Mosaic (MOS -2.1%) and CF Industries (CF +0.5%). While analysts have already sharply reduced estimates for the trio, Jaguar Analytics reminds POT and BG had also already seen big cuts, but still missed expectations and slashed guidance further.
The Mosaic Co. engages in the production and marketing of concentrated phosphate and potash crop nutrients for the global agriculture industry. It offers phosphate & potash based crop nutrients and animal feed ingredients. The company engages in every phase of crop nutrition development, from... More
Sector: Basic Materials
Industry: Agricultural Chemicals
Country: United States
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