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No Surprise: Mosaic’s Margins Contracted

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Margins

Overall margins for Mosaic (MOS) contracted significantly year-over-year. The company experienced negative events during the quarter leading to a significant impact on the company’s net margins.

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Performance

Overall gross margins for Mosaic fell from 14% in 1Q16 to 8% in 1Q17. The fall was primarily a result of margins for the Potash segment contracting from 30% in 1Q16 to 22% in 1Q17. This fall was expected on the back of a steep decline in potash prices as we discussed in the previous part of this series. Gross margins for the Phosphate segment remained unchanged at 7% as a percentage of sales, while the gross margins for the International Distribution segment expanded to 6% from 3% year-over-year.

With stable production costs and the steep fall in fertilizer prices, the company’s margins were expected to contract. Producers (SOIL) such as PotashCorp (POT), Intrepid Potash (IPI), and CF Industries (CF) all suffered in the recent quarter.

The EBITDA margins also contracted for the company during the quarter. They fell to 12% from 26% year-over-year. The net margins were almost flat from 15% a year ago as we can see in the chart above.

Read our analysis on PotashCorp’s 1Q17 earnings in Inside PotashCorp’s 1Q17 Surprise for more industry analysis.

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