PLYMOUTH, Minn. -- The Mosaic Company announced today net earnings of $107.8 million, or $0.24 per diluted share, for the second quarter ended November 30, 2009. These results compare with net earnings of $959.8 million, or $2.15 per share, for the second quarter ended Nov. 30, 2008.

Mosaic had net sales in the second quarter of fiscal 2010 of $1.7 billion, a decrease of $1.3 billion, or 43%, compared to the same period a year ago.

Mosaic's gross margin for the second quarter of fiscal 2010 was $307.0 million, or 18% of net sales, compared with $773.7 million, or 26% of net sales, a year ago. Second quarter operating earnings were $200.1 million compared with $682.0 million a year ago. Mosaic's second quarter results were impacted by lower potash and phosphate selling prices combined with lower potash sales volumes compared with the prior year quarter. Reflecting improved market conditions, Phosphates sales volumes were 90% higher in the quarter compared to a year ago. Potash sales volumes declined 40% compared with a year ago as purchasing activity remained soft.

"Our balanced nutrient portfolio of phosphates and potash is proving invaluable. Phosphate demand is rebounding nicely, and we anticipate positive comparative volume trends over the balance of fiscal 2010. Although potash orders remained soft, sales activity picked up toward the end of the quarter and we see this trend continuing into calendar 2010," said Jim Prokopanko, Mosaic's President and Chief Executive Officer.

Underscoring the Company's financial strength and confidence in long-term fundamentals, Mosaic announced a special dividend of approximately $580 million, or $1.30 per share, in October 2009. The dividend was paid on December 3, 2009 from cash on hand. Following this distribution cash and cash equivalents totaled approximately $2.0 billion.

Segment Realignment

On Nov. 30, 2009, Mosaic announced a realignment of its business segments to more clearly reflect the Company's evolving business model. The realignment includes moving from three to two business segments by combining the Offshore segment with the Phosphates segment. The Company initiated these changes to further align its expansive global distribution assets with its North American production assets. The segment results announced today for the prior year have been recast to reflect this realignment. The Company's website includes realigned segment data for the previous eight quarters.

Phosphates

Net sales in the Phosphates segment were $1.3 billion for the second quarter, a decline from $2.0 billion a year ago but up sequentially from $1.2 billion in the first quarter of fiscal 2010. Phosphates' second quarter gross margin was $113.2 million, or 9% of net sales, compared with $199.4 million, or 10% of net sales, for the same period a year ago. Operating earnings were $29.0 million, a decline from $135.9 million in the same period last year. Operating earnings in this year's second quarter include a pre-tax charge of $51.2 million associated with the permanent closure and write-off of certain assets in the Company's phosphate business. Gross margin and operating earnings in last year's second quarter included a $287.7 million inventory valuation write-down. The decline in operating earnings in the second quarter of fiscal 2010 compared with a year ago was primarily due to the effects of lower selling prices partially offset by higher sales volume and lower raw material costs for sulfur and ammonia. Prior year segment results have been recast to reflect the realignment of the Company's business segments.

The average second quarter DAP selling price, FOB plant, was $287 per tonne, compared to $1,086 a year ago and $278 per tonne in the first quarter of fiscal 2010.

Phosphates segment sales volumes were higher than a year ago at 3.3 million tonnes and improved 15% sequentially from the first quarter of fiscal 2010. International sales volumes of crop nutrients increased over one million tonnes from year ago levels, primarily due to strong demand from India.

Mosaic's North American phosphate production level was 2.0 million tonnes during the second quarter, an increase of 49% from year ago levels in response to increased demand.

"Phosphate sales volumes have returned to more normal levels," stated Prokopanko. "We look for improved gross margins in calendar 2010, though margin expansion may be constrained by higher raw material costs and the normal lag between our average realized prices and prevailing market prices."

Potash

Net sales in the Potash segment totaled $414.3 million for the fiscal 2010 second quarter, compared to net sales of $973.2 million a year ago, and $333.3 million in the first quarter. The Potash segment's gross margin declined to $179.9 million in the second quarter, or 43% of net sales, compared with $574.9 million a year ago, or 59% of net sales. Operating earnings were $150.6 million in the second quarter, compared to $547.5 million a year ago and $99.3 million for the first quarter. Operating earnings in the quarter were impacted by a sharp decline in sales volumes, a decrease in the average MOP selling price and the effects of significantly lower production levels, partially offset by lower Canadian resource taxes and royalties.

The average second quarter MOP selling price, FOB plant, was $370 per tonne compared to $529 a year ago and $354 per tonne in the first quarter of fiscal 2010. The lower average MOP selling price compared to a year ago was primarily the result of a decline in overall demand for MOP.

Reflecting lower demand, the Potash segment's total sales volume was 1.0 million tonnes for the second quarter, a decline of 0.7 million tonnes from a year ago, but up from 0.8 million tonnes for the first quarter of fiscal 2010. Potash production was reduced 43% to 1.1 million tonnes from year ago levels in response to weak demand in order to more effectively manage inventories. Mosaic continues to operate at lower production rates and will do so until demand improves.

Other

A foreign currency transaction loss of $22.6 million was recorded for the second quarter compared to a gain of $32.3 million for the same period a year ago. This loss is the result of the effect of a weakening U.S. dollar relative to the Canadian dollar on significant U.S. dollar denominated intercompany receivables and cash held by our Canadian affiliates.

Income tax expense was $50.4 million in the second quarter resulting in an effective tax rate of 29%, compared to $451.2 million, or an effective tax rate of 33%, for the same period last year.

A loss of $11.8 million was recorded in the second quarter for total equity earnings in non-consolidated subsidiaries, compared with earnings of $28.7 million for the same period a year ago. The reduction in equity earnings is primarily the result of weak results from Fosfertil S.A. due to a decline in phosphate selling prices, higher raw material costs and an unfavorable foreign exchange impact.

Cash flow provided by operating activities in the second quarter of fiscal 2010 was $174.8 million compared to $386.5 million a year ago. The decline in cash flow from operations was primarily due to lower net earnings. Mosaic's total debt as of November 30, 2009 was $1.4 billion, which was comparable to a year ago.

Year-to-Date

For the six months ended November 30, 2009, net sales were $3.2 billion, a decrease of 57% from $7.3 billion reported a year ago. Year-to-date operating earnings were $334.3 million compared to $2.2 billion for the same period a year ago. Year-to-date selling, general and administrative (SG&A) expenses were $164.3 million compared to $166.8 million for the same period in fiscal 2009. A foreign currency transaction loss of $9.5 million was recorded for the first half of fiscal 2010 compared with a gain of $119.0 million for the same period a year ago. Unrealized mark-to-market derivative gains, primarily on natural gas contracts, included in cost of goods sold, totaled $39.5 million compared to losses of $134.9 million the prior year. Equity earnings in non-consolidated entities was a loss of $9.3 million compared with income of $88.5 million last year. The first half of fiscal 2009 also included a $673.4 million gain on the sale of Mosaic's interest in Saskferco Products ULC in October 2008.

Market Outlook

The phosphate market began to recover during the quarter, especially in Asia and the Americas, as distributors purchased crop nutrients to meet farmer demand. Since the end of the second quarter, the average price for DAP has continued to strengthen. As of early January, prevailing market DAP selling prices, FOB plant, approximate $370 per tonne (or $380 per tonne FOB Tampa).

While the potash market has been soft for most of calendar 2009, it is beginning to gain traction with the recent settlement of contracts in China which has afforded the marketplace price discovery. In addition, recent increased potash application rates in the Americas driven by nutrient depleted soils and strong grain and oilseed prices bodes well for improved market demand for potash during calendar 2010.

The steadily improving global economy is encouraging and will have positive impacts on agriculture. This is especially true in Asia, where population and income growth are leading to increased investments in crop nutrients.

"We are pleased to see nutrient markets beginning to rebound worldwide. The demand for phosphate is growing, and we are confident potash demand will emerge as well as farmers increase nutrient applications," said Prokopanko. "As we come out of this downturn, we are confident in the long-term nutrient demand outlook. Mosaic is ideally and uniquely positioned as a leading supplier of both potash and phosphate crop nutrients, and we believe we will be a prime beneficiary of a market recovery."

The Mosaic Company is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients. Mosaic is a single source provider of phosphate and potash fertilizers and feed ingredients for the global agriculture industry.

SOURCE: The Mosaic Company.