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Inside Mosaic’s Margins for 1Q17 and Fiscal 2017

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Gross margins

For 1Q17, analysts estimate that Mosaic (MOS) will report gross income of $181 million—down from $237 million in 1Q16. This would result in a margin contraction from 14% in 1Q16 to 11% in 1Q17. While the gross margin for 1Q17 is expected to contract, we’ll look at the estimates for fiscal 2017 for the larger picture.

For fiscal 2017, analysts estimate a gross income of $891 million for Mosaic—up from $780 million in fiscal 2016. This would also result in a gross margin expansion from 10.9% to 12.1% YoY (year-over-year). We should note that while the company’s sales are estimated to grow by 3% YoY, its gross income is estimated to rise 14% in fiscal 2017, which indicates cost optimization at the level of cost of goods.

Peers (SOIL) such as Potash Corporation of Saskatchewan (POT), Agrium (AGU), and CF Industries (CF) have also worked to lower their costs of operations.

Operating margins

We’ll use EBITDA (earnings before interest, tax, depreciation, and amortization) as a measure of operating performance. Mosaic’s EBITDA income in 1Q17 is estimated to come in at $270 million, down from $409 million one year previously. Its first quarter EBITDA margins, based on these estimates, will likely contract from 24% to 16%. However, the EBITDA margin for fiscal 2017 is estimated to move slightly higher, up to 16.6% from 16.2% one year previously.

Next, we’ll discuss the earnings per share estimates for Mosaic.

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