Mosaic’s (MOS - Analyst Report) profit jumped in third-quarter 2014, buoyed by higher sales volumes and pricing in its core phosphate business. The company saw higher demand for phosphate and potash in the quarter.

Mosaic’s profits shot up around 62% year over year to $201.9 million or 54 cents per share in the reported quarter from $124.4 million or 29 cents a share a year ago.

Barring one-time items, earnings per share were 56 cents per share, missing the Zacks Consensus Estimate of 59 cents.

Revenues rose roughly 18% year over year to $2,250.7 million on double-digit sales gains across phosphate and potash businesses, but lagged the Zacks Consensus Estimate of $2,313 million.

The Minnesota-based fertilizer maker's shares were down 1.6% in pre-market trading.

Segment Highlights

Revenues from Mosaic’s larger Phosphate segment climbed around 21% year over year to $1.7 billion in the quarter on higher volumes and increased finished product prices. Average selling price rose around 6% to $461 per ton in the quarter from $436 per ton last year.

The segment’s gross margin jumped around 52% to $294 million, aided by higher pricing and volumes. Segment sales volumes went up roughly 22% year over year to 3.3 million tons.

Potash division’s sales rose around 13% year over year to $593 million in the quarter as a 15% fall in prices was more than offset by higher shipment volumes. Sales volumes jumped roughly 29% year over year to 1.8 million tons while selling price fell to $291 per ton from $342 per ton a year ago. Gross margin declined 29% year over year to $131 million, impacted by lower pricing.

Financials

Mosaic exited the quarter with cash and cash equivalents of roughly $3 billion, down 11% year over year. Long-term debt jumped nearly four-fold year over year to around $3.8 billion. Mosaic’s capital expenditure was $188 million in the reported quarter. Operating cash flow was $489 million in the quarter compared with an outflow of $45 million a year ago.

Mosaic repurchased 55.1 million shares worth $2.6 billion as of Oct 27, 2014. The company returned $469 million to its shareholders during the reported quarter.

Outlook

Moving ahead, Mosaic envisions continued strong demand for phosphates and potash.

Mosaic expects sales volume for its phosphates business to be between 2.5 million and 2.8 million tons in the fourth quarter compared with 3.4 million tons achieved a year ago. Average selling price for the quarter is expected to be in the band of $430 to $450 per ton.

The segment’s gross margin for the quarter is expected to be in the mid-teens percent. Operating rate is expected to be 70%-80%, reflecting the company’s move to cut phosphate production due to higher costs.

Mosaic expects sales volume from its potash business in the range of 2 million to 2.3 million tons in the fourth quarter versus 1.9 million tons a year ago. Average selling price for the quarter is expected in the range of $275 to $295 per ton. The segment’s gross margin is expected to be in the mid 30% range. Operating rate has been forecast in the 85%-90% range.

Mosaic, in Mar 2014, completed its takeover of CF Industries’ (CF - Analyst Report) phosphate business for $1.4 billion. Mosaic is progressing well with the integration of the acquired business and is on track to achieve $40 million to $50 million in annual synergies (before-tax) in 2015.

Moreover, Mosaic expects to complete its takeover of Archer Daniels Midland's (ADM - Analyst Report) fertilizer distribution business by end-2014. The buyout is expected to accelerate Mosaic's existing growth plans in Brazil and expand its annual distribution capability in one of the world’s rapidly growing agricultural regions.

Mosaic also noted that its phosphate joint venture project in Saudi Arabia is advancing according to plan. The company expects capital expenditure, including the Saudi Arabia project, to be in the band of $1 billion to $1.2 billion for 2014. It also remains focused on achieving $500 million in annual operating cost savings over the next five years.    

Mosaic is a Zacks Rank #5 (Strong Sell) stock.

A better-ranked stock in the fertilizer space is Intrepid Potash, Inc. (IPI - Snapshot Report), sporting a Zacks Rank #2 (Buy).

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