Mosaic Exposed To Pricing Pressure, Agriculture Weakness

On Jun 10, we issued an updated research report on fertilizer maker Mosaic (NYSE:MOS) .

Mosaic saw lower profits in first-quarter 2016, hurt by reduced phosphate and potash prices. Adjusted earnings matched the Zacks Consensus Estimate. Sales fell by double digits on lower volumes and pricing, but managed to beat expectations. The company expects sales volumes for phosphates and potash to fall year over year in second-quarter 2016. It also cut its volume guidance for the full year.

Mosaic anticipates phosphates sales volumes in the band of 2.3–2.6 million tons for the second quarter versus 2.8 million tons for the same quarter of 2015. Potash sales volumes have been projected in the range of 1.9–2.2 million tons for the second quarter versus 2.3 million tons a year ago.

For 2016, phosphates sales volumes are now expected in the range of 9–9.75 million tons, down from 9–10 million tons expected earlier. Potash sales volumes are anticipated in the band of 7.5–8 million tons, down from the prior view of 7.5–8.5 million tons.

Mosaic is facing a challenging business environment in agriculture and there is a continuous negative sentiment among agriculture investors that can create uncertainty in the near term. Lower crop prices are weighing on U.S. farm income. Lower farm income unfavorably impacts grower’s input purchasing decisions. Depressed crop pricing has created an uncertainty on nutrient consumption.

The near-term outlook for the fertilizer space still remains cloudy due to insipid economic growth in certain developing markets such as Brazil. Agricultural market conditions remain weak in Brazil, a key market, given the volatile economic and political environment in that country.

Mosaic is also exposed to a still challenging pricing environment. Agricultural commodity prices in general remain weak. Weak farm commodity pricing may weigh on demand for nutrients in the short haul.

Moreover, potash prices remain under pressure due to elevated supply. Global capacity expansion and lower farm income continue to exert pressure on fertilizer prices.

Mosaic carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

Better-ranked companies in the basic materials space include Albemarle Corporation (NYSE:ALB) , Innospec Inc. (NASDAQ:IOSP) and Koninklijke DSM N.V. (OTC:RDSMY) . While Albemarle and Innospec carry a Zacks Rank #1 (Strong Buy), Koninklijke DSM holds a Zacks Rank #2 (Buy).


ALBEMARLE CORP (ALB): Free Stock Analysis Report

KONINKLIJKE DSM (RDSMY): Free Stock Analysis Report

INNOSPEC INC (IOSP): Free Stock Analysis Report

MOSAIC CO/THE (MOS): Free Stock Analysis Report

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