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Mosaic Rises as Surging Prices Help Boost Profit (Update2)

 By Christopher Donville

April 4 (Bloomberg) -- Mosaic Co., the world's second- largest fertilizer maker, gained the most in more than three weeks after fiscal third-quarter profit topped analyst estimates because of rising crop-nutrient prices.

Mosaic has quadrupled in the past year as farmers increased purchases of phosphate, potash and nitrogen crop nutrients to boost yields and replenish global grain stockpiles. Chief Executive Officer James T. Prokopanko is expanding output from potash mines in Canada's Saskatchewan province to take advantage of higher prices that helped profit surge 12-fold.

``The numbers are almost other-worldly when you see earnings up many-fold compared to just a year ago,'' Ben Johnson, an analyst at Morningstar Inc. in Chicago, said today in an interview. Mosaic's profit reflects ``a tremendous amount of pricing momentum.''

Mosaic, based in Plymouth, Minnesota, rose $10.55, or 10 percent, to $115.07 in New York Stock Exchange composite trading. The gain was the biggest since March 11.

Net income in the three months through February increased to $520.8 million, or $1.17 a share, from $42.2 million, or 10 cents, a year earlier, Mosaic said today in a statement. Sales gained 68 percent to $2.15 billion.

Excluding certain items, profit was 99 cents a share. The average estimate of six analysts surveyed by Bloomberg was 88 cents.

Price Gains

Mosaic said its average factory selling price for diammonium phosphate fertilizer almost doubled in the quarter to $487 a metric ton from a year earlier. The average potash price rose 53 percent to $221 per ton.

``We are delivering record results by effectively executing against the backdrop of an exceptional agricultural environment,'' Prokopanko said in the statement. Mosaic said prices will extend gains this quarter.

The company said it will expand potash production from mines in Saskatchewan by 49 percent to 15.5 million tons a year in the next 12 years. Phosphates and potash make up more than three- quarters of the company's revenue, according to Bloomberg data. Nitrogen-based fertilizers account for the remainder.

Mosaic expects the average price for diammonium phosphate to rise to $710 to $730 per ton in the current quarter and potash to increase to $305 to $325.

`Age of Shortage'

``We have entered an age of shortage, and when there are shortages, supplies will go to the highest bidders,'' Frank Husic, chief investment officer of Husic Capital Management of San Francisco, said today in an interview on Bloomberg Radio.

Other fertilizer makers gained on Mosaic's news. Potash Corp. of Saskatchewan Inc., the largest fertilizer maker by market value, rose C$3.90, or 2.3 percent, to C$172.57 in Toronto Stock Exchange trading. Agrium Inc. rose C$3.26, or 4.9 percent, to C$70.01.

Global crop prices have gained as rising incomes in China and India stimulate demand for livestock feed to produce more meat. Grain prices also have climbed because of increased production of ethanol and other alternative fuels.

``The bottom line is markets are asking farmers to step on the accelerator and rev up the engines of production,'' Michael Rahm, Mosaic's vice president of market analysis, said today on a conference call.

Grain Records

Corn futures on the Chicago Board of Trade rose to more than $6 a bushel for the first time ever yesterday. Soybeans climbed to an all-time high of $15.8625 a bushel on March 3, and wheat reached a record $13.495 a bushel on Feb. 27.

Canpotex Ltd., a trading association owned by Mosaic, Potash Corp. and Agrium, said March 27 that buyers in India agreed to buy potash for $625 a ton, including ocean-freight costs, more than doubling last year's price. Canpotex said April 2 it would raise the price of standard-grade potash for buyers in Southeast Asia 38 percent to $725 a ton.

Net income for the quarter was the highest since Mosaic was formed in the October 2004 merger of Cargill Crop Nutrition and IMC Global.

Mosaic is developing a ``shareholder-distribution plan'' that may include dividends and share buybacks, Chief Financial Officer Lawrence Stranghoener said on the call.

To contact the reporter on this story: Christopher Donville in Vancouver cjdonville@bloomberg.net.

Last Updated: April 4, 2008 16:56 EDT


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