The Mosaic Company Reports Fourth Quarter And Full-Year 2015 Results
Announces $75 million accelerated share repurchase
Company Release - 02/11/2016 06:45
PLYMOUTH, Minn., Feb. 11, 2016 /PRNewswire/ -- The Mosaic Company (NYSE: MOS) today reported fourth quarter 2015 net earnings of $155 million, down from $361 million in the fourth quarter of 2014. Earnings per diluted share were $0.44 and included both a negative $0.16 impact from notable items and a benefit of $0.07 per share from adjusting the full year effective tax rate accrual. Mosaic's net sales in the fourth quarter of 2015 were $2.2 billion, down from $2.4 billion last year. Operating earnings during the quarter were $204 million, down from $365 million a year ago, impacted by lower potash and phosphate prices and volumes, as well as lower potash production, partially offset by cost savings.
"Our fourth quarter results reflect the cyclicality and seasonality of our business," said Joc O'Rourke, President and Chief Executive Officer. "Our progress on cost savings initiatives and strategic investments has positioned Mosaic to optimize performance in the current macroeconomic environment. At the same time, our prudent balance sheet management allows us to take advantage of opportunities to create long-term value. Repurchasing shares at the bottom of the cycle is high on the priority list."
Cash flow provided by operating activities in the fourth quarter of 2015 was $302 million compared to $347 million in the prior year. Capital expenditures plus investments in the Ma'aden Wa'ad Al Shamal Phosphate Company ("MWSPC," also known as the Ma'aden joint venture) totaled $398 million in the quarter. Mosaic's total cash and cash equivalents were $1.3 billion and long-term debt was $3.8 billion as of December 31, 2015.
Full-Year 2015 Results (unaudited)
"Mosaic grew full-year earnings per share in this challenging environment by focusing on cost control and executing share repurchases in accordance with our stated goals," said Rich Mack, Mosaic's Executive Vice President and Chief Financial Officer.
For the 12 months ended December 31, 2015, net income was $1.0 billion, or $2.78 per diluted share, compared to $1.0 billion, or $2.68 per diluted share in 2014. Net sales were $8.9 billion, down from $9.1 billion a year ago. Full-year operating earnings were $1.3 billion, roughly flat with last year, as lower sales volumes and prices in potash combined with lower phosphate margins, were largely offset by lower expenses.
Full-year selling, general and administrative (SG&A) expenses were $361 million compared to $382 million in 2014. Net cash provided by operating activities was $1.8 billion and capital expenditures including investments in MWSPC were $1.2 billion, resulting in free cash flow of approximately $580 million, before dividends.
Business Highlights – Full-Year 2015
The remaining potash expansion at Mosaic's Esterhazy K3 site progressed on time and on budget with expected commissioning in 2017. When fully operational, Esterhazy K3 is expected to further reduce the Company's on-going costs of production and provide the ability to eliminate brine inflow management costs and risk.
Mosaic completed the integration of the Archer Daniels Midland Company's ("ADM") Brazil and Paraguay fertilizer distribution business acquired in December of 2014. Over time, the Company expects this acquisition to increase annual distribution from approximately four to six million metric tonnes of crop nutrients in key agricultural regions.
The MicroEssentials® expansion continued to progress on time and on budget and is expected to add an incremental 1.2 million tonnes, bringing total capacity to 3.5 million tonnes by the end of 2016.
Mosaic made equity contributions of $225 million to MWSPC to develop, own and operate integrated phosphate production facilities in the Kingdom of Saudi Arabia. The joint venture is expected to be the lowest cost producer of finished phosphates globally.
Mosaic made excellent progress on aggressive cost savings initiatives which are positively impacting operating results:
MOP cash costs per tonne of production declined by 16 percent from the prior year, benefiting from closures of high cost operations, lower spending and a weaker Canadian dollar.
Phosphate rock cash production costs were near a five year low, as the Company effectively mitigated the effects of inflation.
SG&A expenses declined six percent from the prior year to a six year low, despite a larger business footprint.
Mosaic made significant progress on achieving balance sheet targets and providing meaningful capital returns to shareholders:
Mosaic repurchased approximately 15.6 million shares for an aggregate amount of $698 million during the year.
In March 2015, the Company's Board of Directors approved an increase in the annual dividend to $1.10 from $1.00 per share. During 2015, Mosaic paid $385 million in dividends.
Mosaic ended the year with $1.3 billion of cash and cash equivalents on the balance sheet.
Mosaic entered into settlement agreements with federal and state regulators to resolve longstanding claims relating to the Company's management of certain waste materials generated at fertilizer manufacturing facilities in Florida and Louisiana.
Mosaic ended 2015 with a record low annual recordable injury frequency rate for the second consecutive year.
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Potash
"Mosaic's actions to optimize our potash production by closing high-cost facilities and aggressively managing costs are delivering results," O'Rourke said. "High retailer inventories at the beginning of 2015, the volatility and devaluation of foreign currencies against the U.S. dollar, and additional industry production capacity put pressure on potash prices. We expect a more stable operating environment in 2016 as a result of solid demand and recently announced supply adjustments."
Net sales in the Potash segment totaled $572 million for the fourth quarter, down from $763 million last year, driven by lower shipment volumes and a lower average price. Gross margin was $155 million, or 27 percent of net sales, compared to $327 million, or 43 percent of net sales a year ago. Excluding Canadian resource taxes, gross margin rate was 37 percent of net sales, down 12 percentage points from the fourth quarter of last year. The year-over-year decrease in gross margin was driven by lower selling prices and volumes, a lower operating rate, partially offset by benefits from foreign currency and cost savings initiatives.
The fourth quarter average MOP selling price, FOB plant, was $254 per tonne, down from $295 per tonne a year ago. The Potash segment's total sales volumes for the fourth quarter were 1.9 million tonnes, compared to 2.3 million tonnes a year ago.
Potash production was 1.9 million tonnes, or 70 percent of operational capacity, down from 2.6 million tonnes, or 91 percent of operational capacity a year ago, reflecting Mosaic's previously announced decision to curtail production.
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