Mosaic (MOS) earns about 27% of its revenue and 32% of its gross margin from its Potash segment. Shipments and average realized prices of potash products impact revenues for this segment. In this part, we’ll see how Mosaic’s Potash segment shipments have evolved.
Overall, 4Q15 shipments for the Potash segment declined 16% to 1,931 thousand tons, from 2,039 thousand tons in 4Q14. Most of the decline came from the international crop nutrient shipments, which declined 19% from 1,228 thousand tons to 991 thousand tons YoY (year-over-year). Potash shipments in North America also declined from 964 thousand tons to 794 thousand tons, a decline of 18%. Non-agricultural shipments also declined to 146 thousand tons in 4Q15, from 117 thousand tons in 4Q14.
The company stated that it reduced its potash production rate by 20% in 4Q15 due to seasonal lack of demand. The general weakness in demand despite the lower fertilizer prices sets a negative tone for the industry.
The FPD program
Investors must be careful when thinking about shipments since Mosaic runs a program called FPD (final price deferred). In FPD, the company ships the products, and prices for those delivered products are determined later. This gives smoothness to the company’s shipments but may not necessarily turn into revenue for the quarter. This can only happen once prices are fixed for the shipped products.
Mosaic’s guided potash shipments for 1Q16 come in at 1.5–1.9 million tons. Similar to the Phosphate segment, the 1Q16 expectations are lower compared to shipments of 2 million tons in 1Q15. This also highlights the continuing weakness in the Potash segment. For the full year, management expects the sales volume to be about 7.5–8.5 million tons.