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Mosaic cuts FY'16 fertilizer sales forecast after Q1 earnings slump

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Mosaic cuts FY'16 fertilizer sales forecast after Q1 earnings slump

U.S. fertilizer group Mosaic Co. said May 4 that it expected to invest lessand sell lower volumes of potash and phosphate in 2016 than previouslyanticipated, after first-quarter net earnings dropped 12.89% to US$256.80million, or 73 cents per share.

Top-line revenue at the Plymouth, Minn.-based company fellto US$1.67 billion from US$2.14 billion in the same quarter of 2015, as lowerfertilizer prices and slightly less production hit income.

Crop prices have fallen by about 15% on average since summer2015, according to figures from Potash Corp. of Saskatchewan Inc., leaving farmers withless cash to spend on fertilizer.

Mosaic also slashed its full-year 2016 forecasts forfertilizer sales and investment spending, despite CEO Joc O'Rourke's predictionthat the market could improve in the second half.

"We see stronger markets and anticipate better resultsin the second half. We expect improved profitability to be driven by lower rawmaterial costs, combined with an acceleration in shipment volumes in bothphosphate and potash," O'Rourke said.

"We believe our efforts to lower costs and reducecapital spending will further enhance our profitability and cash flow."

It now expects to sell up to 8 million tonnes of potash in2016, down from the previous forecast of up to 8.5 million tonnes.

It also cut the forecast volume of phosphates sales to asmuch as 9.75 million tonnes, compared to 10 million tonnes previously.

The company also cut its 2016 CapEx forecast to US$800million to US$900 million, down from US$900 million to US$1.1 billionpreviously expected.

Capital expenditures have already fallen sharply. CapExtotaled US$235.6 million in the first three months of this year, compared toUS$229.5 million in the same period of 2015.

Cash and cash-equivalents totaled US$1.1 billion as of March31, and long-term debt outstanding was US$3.8 billion.

Potash producers, who are in the middle of negotiations withChinese buyers over contract potash prices for the coming year, have been hitby lower overall fertilizer demand stemming from the downturn in theagricultural market.

Mosaic's biggest North American rival, Potash Corp. ofSaskatchewan, reported a slump in net earnings in April, and cut itsown revenue forecasts for 2016.