Well said. I noted that 70% figure mentioned last night on Fast money. A little due diligence shows that the bulk of profits come from Potash. No sense trying to time a purchase until the dust settles.
Mosaic (NYSE: MOS )
Following yesterday's bulldozing of the fertilizer sector it's starting to look like potash companies (a type of fertilizer) are the ones in need of help in the growth department. Mosaic, and many potash players, large and small, were taken for a wild ride on news that Russia's Uralkali is no longer planning to hold back production to keep prices potash prices up and will sell its potash at spot market prices, likely sending potash prices and margins much lower.
The news can be crippling for companies that deal primarily with potash, like Interpid Potash (NYSE: IPI ) , which generated more than 80% of its gross revenue from potash in the first-quarter ($82.7 million of $99.3 million). Being a smaller company to begin with, Intrepid Potash has less versatility and could really see its margins pinched.
Mosaic, on the other hand, was hammered nearly as hard as Intrepid Potash, but has multiple factors working in its favor. For starters, it received $1.7 billion of its $2.7 billion in net sales in its most recent quarter from phosphates – the remaining $1 billion came from potash. While Mosaic may see some margin contraction in its potash segment, it's not Mosaic's primary revenue generator.
Also, with more diversity and better cash flow comes the ability for Mosaic to be more flexible than its smaller peers. Mosaic has the liberty of adjusting its production mix as needed to maximize margins and reduce expenses. Plus, after yesterday's thumping, shareholders are now receiving a 2.3% yield that doubled in 2013.
Over the long run the need for food and higher crop yield is only increasing which makes fertilizer companies like Mosaic a smart play.