The Mosaic Company MOS recently stated that it will close the idled Plant City phosphates production facility in Hillsborough County, FL. The team responsible for maintenance activities will stay on site and undertake compliance and closure responsibilities over the next several years.
Per Mosaic, the decision of closure reaffirms its commitment toward low-cost operation. Plant City has been operational since 1975. It produced roughly 1.3 million tons of finished phosphates in 2017, which was the last year of the plant’s operation.
In late 2017, the facility was idled as it was one of the higher cost phosphates facilities under the company’s Florida operations. Also, global phosphate market conditions partly led to the decision.
Notably, the company expects to recognize a non-cash charge of up to $390 million in the second quarter related to the permanent closure of the facility. This will include an increase of the asset retirement obligation liability and asset write-offs. Moreover, cash payments required per year to manage the plant closure over the next five years are likely to be in line with the payments incurred in 2018.
Mosaic intends to mitigate a part of closure costs by assessing innovative approaches to water management along with repurposing portion of the facility for productive usage.
Shares of Mosaic have lost 16.8% in the past year compared with the industry’s 6.6% decline.
In May, Mosaic lowered its adjusted EBITDA and adjusted earnings guidance for 2019, considering higher costs related to the impact of new tailings dam regulations in Brazil, the impact of production curtailments, increased Canadian resource taxes and delayed recovery in phosphate margins.
For 2019, it expects adjusted EBITDA in the range of $2-$2.3 billion compared with previous view of $2.2-$2.4 billion. It also expects adjusted earnings per share in the range of $1.50-$2.00 compared with the prior guidance of $2.10-$2.50.
Zacks Rank & Key Picks
Mosaic currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are Materion Corporation MTRN, Flexible Solutions International Inc FSI and AngloGold Ashanti Limited AU. These stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Materion has an expected earnings growth rate of 27.3% for 2019. The company’s shares have gained 22.4% in the past year.
Flexible Solutions has a projected earnings growth rate of 342.9% for the current year. The company’s shares have surged 142.5% in a year’s time.
AngloGold has an estimated earnings growth rate of 90.6% for the current year. Its shares have rallied 106.5% in the past year.
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