美盛公司 (MOS) 2002 Q2 法說會逐字稿

Participants will be able to listen only until the question and answer portion of the conference call. At the request of IMC Global today's conference is being tape-recorded. If anyone has any objections they may disconnect at this time. I would now like to introduce your host Mr. David Prichard, Vice President of Investor Relations. Sir, you may begin.

Thank you, operator and good morning to everyone. We are pleased to have you with us this morning. I am David Prichard with IMC Global your moderator for the conference call this morning regarding our 2002 second quarter and first half results issued earlier this morning. I am joined today by Mr. Douglas Pertz, our Chairman and Chief Executive Officer, Mr. Reid Porter, Executive Vice President and Chief Financial Officer, and Mr. Robert Qualls, our Vice President and Controller. If you have not received or seen our results press release and finical tables yet as of today, you can call my assistant Mr. Vicky Bunker at 847-739-1817 and the materials will be sent to you right away. Today they also include some supplemental charts that we will be talking about a little later on into this morning's conference call. This information is also available via First Call and the IMC Global website www.imcgobal.com and again that includes six supporting slides that we will be talking about this morning; you can access them on the home page of our website.

Finally, this conference call will be accessible on a replay format through Friday August 2, by calling 402-220 XL 37 or as an audio web cast again accessible through IMC Global's website. As is our custom, we plan some opening comments before we turn to your questions. First Reid Porter, who will discuss our financial results and the highlights for the quarter. He will be followed by Douglas Pertz, who will discuss operating highlights, key corporate developments and the overall outlook for IMC Global. As a reminder, this conference call will contain forward-looking statements that involve risks and uncertainties. Those statements are based on current expectations and actual results may differ materially. At this time, I am pleased to turn the call over to our Executive Vice President and Chief Financial Office, Mr. Reid Proter.

Thanks David and good morning. Earlier today, we reported net income from continuing operations of 6 cents per share for the second quarter of 2002. This compared with earnings of 4 cents for the same period last year. The earnings improvement versus the prior year was primarily in our Phosfeed business as improving market conditions resulted in lower phosphate idle plant and raw materials costs. These results were partially offset by increased interest expense. IMC Phosfeed reported net sales of 362 million with gross margins of 15 million. The margin improvement from approximately break-even in 2001 was primarily driven by significant re-reduced down costs lower purchase ammonia costs and modestly higher phosphate prices.

These improvements were partially offset by increased phosphate mining costs and inefficiencies from a previously disclosed turbogenerator outage at our New Wales plant. Purchased ammonia prices averaged $118 for short-ton for the quarter versus $167 per ton last year partially offsetting favorable ammonia prices. Sulfur prices averaged $46 per long-ton were about $6 per long ton higher than the second quarter of 2001. That prices continued their upward trend on a sequential quarter basis. In the second quarter of 2002, prices averaged $135 per short-ton. This price reflects a slight improvement from the second quarter of the prior year reflecting improvement particularly in the international markets and China in particular.

IMC Potash reported net sales of 249 million and gross margins of 66 million. Increased sales volumes largely offset by reduced prices resulted in margins essentially the same as last year. In the North American market, we experienced increased demand of 8 percent while sales in the export market increased 9 percent compared with the prior year. Potash prices at $73 per short-ton fell 6 percent from last year's level due to heavy competition in the domestic market.

Potash's gross margins for the quarter were slightly ahead of prior year as improved production cost and lower natural gas costs offset the potash price decrease. Douglas will go into much greater detail on both the performance and outlook of our Phosfeed and Potash businesses. Now I would like to comment on our consolidated results in several corporate items.

Net sales for the second quarter were 588 million and gross margins were 76 million. We generated operating earnings of 57 million, an increase of 40 percent compared with last year. Interest expense for the quarter was 43 million, an increase of 7 million over the prior year. This increase reflects the full quarter impact of re-financing activities completed in May of last year.

Other income and expenses which net to an expense of 10 million primarily reflect the noncash impact of unfavorable currency translation due to the strengthening of the Canadian dollar during the quarter. Sales of Canadian based IMC Potash are largely US dollar denominated and IMC hedges its Canadian dollar costs to eliminate foreign exchange risk of impacting the gross margin and operating earnings lines in our income statement. However a change in exchange rate does create a loss or gain that is reflected in other expense on the consolidated income statement when IMC Potash US dollar receivables are translated in the Canadian dollars.

These same receivables are then translated back to US dollars in IMC's consolidated balance sheet, but this translation impact is booked directly to stockholders equity instead of the income statement. As a result in the quarter, foreign exchange translation resulted in a 5 cents noncash charge versus 2 cents in the previous year.

As you know, we are actively pursuing the sale of the remaining parts of our IMC Chemicals business with the objective of maximizing shareholder value. We previously projected completing this sale by June 30th of this year. We are still in discussions with a number of parties regarding the sales of the three business segments of IMC Chemicals and negotiations have progressed to different stages with each segment. These discussions have resulted in us revising our expectations of the estimated sale date to December of this year and in revising down our estimate of gross proceeds from the sale of these remaining businesses to $100 million. In doing so, we have recognized, in the second quarter, a loss of 54 million or 47 cents per share associated with this continued business. As we had stated before, we remain committed to maximizing value in the divestiture of the business.

Turning to cash flow, EBITDA was 92 million in the second quarter, an improvement of 20 percent when compared to the same period last year. For the first six months, EBITDA was 182 million up 10 percent versus the prior year. Net capital expenditures from continuing operations of 29 million for the second quarter and 55 million for the first half were up slightly, about 5 million versus prior year results. Cash spending control initiatives remain in place on capital spending. We expect net capital expenditures for 2002 to increase about 15 million to 120 million for the year. This continues to demonstrate that we are on the road to stronger cash flow generation as the phosphate industry [indiscernible] begins to take hold. Lastly, I would like to update you on the status of our acquisition activities. I am sure you all have seen the announcements that we released last month indicating the completion of the acquisition of the transportation and terminaling assets of Freeport Sulfur through a 50/50 joint venture with Savage Industries. The JV is financed through equal 10 million equity contributions from IMC Phospates and Savage as well as a 34 million non- recourse bank loan. We are pleased with this strategic transaction as over a long term it will provide IMC with a more direct less costly delivery of the key raw material for our phosphate production. In addition, concurrent with acquisition IMC Global and its subsidiaries resolved all outstanding litigations with Freeport and terminated a 9-year-old sulfur supply [indiscernible] contact. I would now like to turn the discussion over to Douglas.

Thanks Reid and good morning. Our second quarter results of 6 cents per diluted share was slightly ahead of the 5 cent consensus estimate and higher than 4 cents per share both a year ago and in the first quarter of 2002. The quarter represents an important turning point for IMC as we start and we will continue reporting improved year-over-year earnings and cash flow results owing primarily to improving phosphate market fundamentals. The underlying performance of our phosphate, feed, and potash operations in the quarter were perhaps masked by the unfavorable impact of some 7 cents per share on the previously disclosed noncash impact of foreign currency translation and the 60 day outage each caused by the failure of the Florida phosphate turbogenerator, which has since been successfully restarted. Without these factors our results would have likely been 13 cents per share.

Second quarter results, nonetheless, demonstrated strong earnings leverage with revenues, gross margins, and operating earnings increasing 16, 26, and 40 percent respectively. What a difference a year makes in the phosphate business. As in the first quarter, second quarter headlines again on an even larger year-over-year jump in phosphate earnings and profits. The best results that we have seen in two years. Revenues rose 24 percent with gross profits of $15 million compared break even results a year ago.

Phosphate volumes were up 20 percent in the quarter on demand improvements both domestically and in the export market, but strongly supported by reduced IMC year over year idle capacity. Riding the international demand is China with 2002 imports playing out as we have anticipated. The increased China demand together with strong demand from Brazil and Mexico pushed the benchmark export DAP price the last week to over $170 per metric ton, its highest level in about 2 years and this is with very limited demand from India.

As Reid indicated, during the quarter we continued to benefit from lower ammonia and natural gas prices that were partially offset by higher sulfur costs. Idle plant costs were reduced year over year by $14 million in the second quarter and $27 million in the first half of 2002. During all of the 2002 and since last August 1, our Louisiana plants have operated at a higher rate in the first half of last year, but still at a reduced rate with Faustina and Taft idle were about 1.6 million tons of concentrate capacities still idle.

We expect to continue to incur idle plant costs of about $10 million per year for these idle plants as they continue to remain down well into 2003. Rock cost increased in the quarter versus a year ago due to higher reclamation, electricity, and maintenance costs partially offset by increased production levels. Our rock cost in the second quarter were slightly lower than first quarter. As reported in the quarter our main turbogenerator in New Wales failed and was down for almost 8 weeks. Though was put back into service in the third week of June, we still incurred increased one-time expenses in the quarter for outside purchased power, the purchase of sulfuric acid and other related items.

Our second quarter Potash results were essentially flat versus a year ago. Higher revenues from increased shipments were offset by lower prices resulting in unchanged gross margins. Our 8 percent increase in volumes came from essentially equal improvements in both domestic and export markets. Despite our year-over-year domestic volume increase in the quarter, IMC's market share is down slightly year to date versus 2001 at just under 50 percent and year to date domestic MOT sales are also slightly down versus last year. Increased competition driving for a higher market share and cash flow in the nicely profitable potash business plus a later than expected [indiscernible] planting seasons were the primary reasons that the IMC led price increase in mid April was not realized. IMC and other competitors have announced another $4 per ton fall price increase effective mid September.

Our strong improvements in operating earnings 40 percent in the second quarter and 22 percent in the first half are primarily due to improved phosphate results driven by the cycle recovery. These improvements will realize with only minimal average quarterly DAP price increase. For example the average DAP price in the quarter was $135 per short-ton up only $3 over last year. With current export pricing at $170 per metric ton and domestic [indiscernible] pricing at $145 per short-ton, the current comparable average price realization to IMC would about a $146 for short-ton or up over $10 per ton.

Now let's turn to the outlook in the second of year. We begin the second half of 2002 with lot of optimism about the direction of global phosphate market in terms of pricing and taking supply demand picture and better volumes.

I think it is fair to say that we are feeling better today about the phosphate cycle recovery than at the end of the first quarter and certainly since the beginning of 2002. After a seasonal price fall off in April and May strong phosphate demand from the US late spring season and most importantly a return in Chinese DAP imports have provided the impetus for an acceleration in DAP export prices up to about $170 per metric ton today, a level we have not seen in two years.

If you look, we refer to figure two of the charts that are attached to your earnings release or from your website. In the first half of 2002, we estimate the Chinese DAP imports reached about 2 million metric tons or double a year ago level when Chinese imports were reduced due to abnormally low quotas. Again, see figure three of the chart. When a equally strong second half expected as is the case with biochem cargo contract shipment approaching 1.8 million metric tons along, Chinese DAP imports in 2002 should reach and will more likely exceed the 4 to 4.2 metric ton level up over 1 million tons versus last year, which is an estimate that IMC leading industry consultants have forecast for many quarters following China's WTO session.

You know, I often get asked if China can be counted on for this level or more of DAP imports over next several years. Part of the answer it is technical and the with WTO related [PRQ port] agreements confirm that there will be more adequate quotas over the next five years starting at 5.67 million tons this year. The rest of the answer and the overriding issue is also positive in that increasing underlying China market demand is there. On a recent trip to China in June it was strongly confirmed after a good spring season, the Chinese farmers were continuing to increase the requirements for phosphate fertilizer and that the domestic phosphate industry cannot and will not fill this import gaps. As industry consultants forecast, China imports will continue to increase from 2002 levels over the next several years approaching the five-million-ton range. Again as shown in figure 3 of the charts attached to the earnings release.

On the supply side, [indiscernible] remains almost essentially sold out for most of the balance 2002 given its current contract commitments. Other US producers appear comfortable owing to the third quarter and it is very possible now that a slight seasonal dip in the DAP price in the third quarter likely experienced [indiscernible] in April may not occur or at least to the degree earlier thought. It is also forecasted that India will not materially increase demands during this pre rabi season timeframe. If India does materially increase import demand pricing should stay firm and could increase even further. The increase world demand and tighter supply demand balance have improved industry capacity utilization rates from about 68 percent at the bottom of the cycle last year to between 70 and 71 percent in 2002. Please reference figure 4 of the charts provided.

Industry consultants forecast that utilization rates will continue to improve over the next several years and reach levels of above 75 percent by 2004. During the last cycle these levels of 75 percent and above resulted in prices of $200 per metric ton and higher as experienced in 1995 through 1998. Please see figure 5 of the charts for this review of utilization levels. Again industry consultants project utilization rates and pricing to reach these levels and above as the cycle could recover over the next three years.

Domestic Central Florida and River DAP spot prices have risen considerably in recent weeks and remain firm at higher levels of $145 per short ton in Florida and $163 plus per short ton on the River as we start shipping product to meet some of your requirements domestically. Our DAP plants are running at very high rates, while we still have about one third of our Faustina DAP granulation shut down as well as all of Taft. As I said earlier we expect to continue to idle these plants, well into 2003.

Reporting a continued type domestic supply environment US DAP producer inventories were at the lowest levels in over a decade at the end of June. See figure 6 of the chart supplied.

IMC will continue to enjoy lower idle plant and natural gas costs in the second half, although idle plant costs will not be as pronounced as in the first half because we restarted some Louisiana DAP productions last August. Sulfur costs are increasing again in the third quarter. Also ammonia prices are falling spurred by a startup of a new Trinidad ammonia facility now shipping products into the Gulf. DAP ammonia prices peaked at about $137 per metric ton earlier in the second quarter, but recently we closed on [indiscernible] deliveries at $116 per metric ton. Let me say a word about the reported sulfur shortage. The resulting loss of 100,00 tons of DAP and MAP production, and higher plant cost that we experiencing as a result of July. The confluence of factors including lower refinery rates, and extended turnarounds delayed Venezuelan product, reduced Mexican imports and lower than expected Canadian sulfur availability have caused this temporary sulfur shortage. Sulfur tonnage is increasing as we speak, and this issue will begin to abate in August. We believe we can offset on our cost including July if nothing more than by the fact that phosphate prices are higher at the start of the third quarter than our earlier forecast projected. And ammonia costs are getting down. Long term we think the formation as Reid has said of our new sulfur joint venture with Savage Industries and our ability to contract directly through all off our close to 3 million tons per year sulfur through refiners rather than through Freeport will give us much greater control of our supplies and lead to lower annual sulfur cost. We are also pleased to settle our outstanding litigation with Freeport and to terminate sulfur supply agreement through which we are paying a premium price on a significant amount of our sulfur.

Turning to Potash, despite a slightly lower first half performance primarily due to lower pricing we still expect IMC Potash to have a somewhat better 2002 from improved volumes and lower production costs. Pricing has clearly been a disappointment in Potash so far this year. With [strong mind] we shipped down the schedule in the third quarter. Industry levels should improve and help set the stage for some success with announced September domestic price increase of $4 per ton. On the export front [Canpotex] still sees somewhat higher 2002 sales volumes primarily from accrued demand in China and Brazil with sales levels that was more in line with 1998 and 1999 ones. Export prices are firm with the slight increase still being tested in Brazil. Our K-Maga special E potash sales are up nicely this year in fact significantly more than a MOP increases supported by increased marketing efforts. This unique market mix product contributes strong profitability and it has just been recently approved for organic farming. In closing and to reiterate my comments in today's earnings release we expect a stronger second half of the year at IMC led by improving phosphate results. The second half year-over-year comparables of both phosphate pricing and earnings should dramatically improve. China's demand will continue to be strong in the third and fourth quarters. Phosphate results should show second half improvements with the third quarter affected by normal nine-week shutdowns. And year-over-year interest expense comparisons will improve. We see the fourth quarter shaping up to be a break out quarter in terms of EPS and cash flow improvements versus earlier quarters of 2002. As stated in our release based on first quarter results we expect full year earnings to be in the 25-35 cents per share range. The strength of the phosphate price recovery continues to be the driving force for strong earnings growth. As stated earlier first half 2002 average pricing, $135 per short ton was flat versus 2001 first half. However current spot pricing utilization we equate to prices over $146 per short ton. As we stated in the past, INC is uniquely leveraged to the DAP cycle recovery with a $10 increase in DAP price resolving in 30 cents per share increase in earnings on an annual basis, all records being equal. With that let me turn it back to David for your questions and answers.

Thank you Doug and Reid, and we will now turn to our Q&A session and will again ask, as I do every quarter, it usually falls on deaf ears, that you try to limit yourself to one question only so that everyone who wants to ask a question will have a chance to do so in the time that we have available. With that operator, you can now begin the Q&A session.

Thank you. At this time we are ready to begin the question and answer session. If you would like to ask a question, please press star 1 on your touchtone phone. You will be announced prior to asking a question. To withdraw your question press star 2. Once again to ask a question please press star 1 on your touchtone phone now. Our first question comes from Don Carson from Merrill Lynch.

Yes, thank you. Douglas, this is a question on earnings guidance as it relates to some of your comments. You made the comment that Q4 could shape up to be a breakout quarter. Would that suggest earnings above the range or are you giving and what is it exactly in Q4 that makes you think you could have a breakout quarter?

I think when we talk about a breakout quarter, we are not suggesting something outside of what we are given as earnings recommendations or expectations for the year. I think it is too premature to do that. I think what we are suggesting though is that in comparisons to prior years, our earnings as well as in comparison to what we have seen as earnings this year and expectations on a seasonal basis that we would expect to see in the fourth quarter that we would anticipate that we would start really seeing the separation and the two improvements associated with the cycle recovery and we anticipate that based on what we have seen with cycle recovery so far this year that we will start seeing much more of the impact in that timeframe.

You said that phosphate prices are the key factor here, which is somewhat obvious but at the low end of your range, does that assume some dip from current spot prices of 146 and I am just wondering if you can [indiscernible] know, give the [indiscernible] between that 25 and 35 in terms of your phosphate pricing expectations.

Well, I think that if we saw a pricing at current levels or in higher, that we would be at the high end of the range and we would be able to -- obviously if it goes beyond that we can see even more. I think that we have built in some fallback as I mentioned earlier in the third quarter of pricing, that we're comfortable may happen similar to what we saw in the April, early May timeframe. But we anticipate we will continue to see the upper trend in a stronger pattern in the second half of the year than we clearly did in the upper trend in the first half.

Okay, thanks.

Does that answer that.

Yes, thank you.

I think, I would just would like to comment, that I agree Don, I think it is apparently obvious and let everybody can understand all those, not necessarily reflected in our stock price that the cycle recovery will have a tremendous impact on earnings but at the same time I think it is important to emphasize and that is why I ended my comments with that we as IMC are uniquely leveraged to that. We are not only starting to see and will continue to see even a greater degree of the impact of higher pricing. But we also saw in the quarter more than others in the industry, improved volume because of bringing up of additional capacity.

Okay, thanks Doug.

Our next question comes from Duffy Fisher, Goldman Sachs.

Yes, good morning, Doug, I was hoping that you could elaborate a little bit more of what you saw in China, your trip there in June, specifically the internal prices for DAP in China, you know kind of on a year-over-year basis and you know may be sequentially, you know what kind of movement have they seen, you know, in internal Chinese prices.

Duff you know, off the top of my head, I have to ask Steve, [indiscernible] or Steven Hoffman to give you more specific details on the prices. But what we did see in China was the ending of a very strong and a positive spring season at low inventory levels coming out of the season an increase in domestic pricing through most of the different regions in China during the course of the spring season. And therefore starting out in a position in which low inventory rates would provide the basis for a pretty good start to the fall season, which, you know, shipments are working up for imports, going into the season. We also saw after we visited another DAP plant, we saw that there is going to continue to be and a widening of the gap in domestic production capacities to fill that import gap and that they will continue to be that gap in requirements that the domestic market can't fill and those imports will need to fill going forward. And that there is still a higher demand to pay a premium and demand for imported DAP that has consistency and has the nutrient content in it, than there is for domestic product.

Okay, first half this year, what do you think your DAP market share is in the US.

That is an interesting question, Duffy. There have been some differences in the way that the industries has been reporting phosphate market share in North America and In fact the industry associations no longer have a good feel on it because of the difference between what is produced locally and what is export shipped. So the simple answer is, we have been tracking on our own export shipments but we don't think that is necessarily what others are reporting nor is what is probably accurate. And we are looking for the industry associations, specifically TFI, is now working with the members to get a more accurate way of tracking North American market share which we hope by the middle - sometime this quarter to get a better handle on as an industry. Our estimates are that our market share has at least maintained its position.

Fair enough, thank you.

Our next question comes from John Moon from Deutsche Bank Securities.

Yes, good morning. A couple of questions. The first is: I was wondering if you could review for us this quarter of the criterion that you would use for restarting Faustina and Taft because clearly pushing that well out in the 2003 kind of conflicts with your optimistic view of the markets. My second question is: Is the write down of the Chemical asset, and in terms of the likely sale, I was wondering if either Reid or you Doug, could give me some clarity on to the reason for the delay and at the write down as well or could we anticipate further write downs for the Chemical asset.

Let me take the first one, I will let Reid to take the second one, and maybe jump in as well. I think what we are seeing is very consistent with what we said in the past. And that while we are seeing the pricing come back, we want to make sure that we see a sustained pricing level and supply demand balance well into the recovery before we bring back our higher cost production at Faustina and Taft. And we are reemphasizing that and making sure that what we do is get to a position well in the next year. And you know what that means at this point in time, we will await and see but well in the next year we want to make sure that we see is a sustained recovery in the supply demand balance. We don't want others to bring on other excess capacity but at this point in time we are in a reasonable shape on that with the only probably wild card being [indiscernible] I think as to when and if they come back. But it is not our intent as we stated in 2003 at this point in time until we see a sustained recovery in pricing beyond the levels that they are at today.

The second question, John, on chemicals. Do you want to take it?

This is Scott. What is remaining in INC Chemicals is soda ash and [indiscernible] business in California, sodium bicarbonate business in Colorado and an Italian business. We are in various stages of negotiating agreements with each of them. The indications of interest we have are in the range of the estimate for gross proceeds. We now have evaluated, it isn't over till it is over John, and you know, we are obviously uncertain where we can get that and we would expect some rule up when we finally sell the businesses. But the 100 million gross proceeds is our best estimate now and we think a fair estimate of the value of the businesses.

Doug, I want to come back to the Faustina and Taft issues. Are you backing off in any way from indication of price of what point you would start up those plants at all?

I think we never said at what price. I think that is not right and we have not gone out, I think, John, in the past, never said that there is a specific price that we do it at, and we are being consistent John, in suggesting that until there is a sustained recovery at hand, that suggests the supply demand balance has been in a good strong position and continues to improve for a sustained period of time, that is when we bring it back and rather not be out there, quoted in the marketplace with a specific price. Right.

Thanks.

Just to follow up, we think that the potash business is probably at the bottom and we see some signs of it, pricing to be improving at the end of this year and hopefully going forward from there as well. Some excess supply that came on, some new supply that came on over the last year and a half appears to be tightening. And in fact some of them may actually be going away for at least a short ton [indiscernible], and pricing should continue to improve with new contracts at the end of this year. And that I think has helped us to not rush into selling this so that we can assure that we maximize shareholder value both now and going forward. Next question.

Our next question comes from [David Riscoe] from Salomon Smith Barney.

Hi, good morning. Wanted to talk about the potash segment. There are just a couple of issues here. On the international side it looks to be like that one of your competitors [indiscernible] Corporation which also released numbers today. Their volumes were down internationally. Now as a member of Canpotex, I thought everyone just sort of sliced up the total volumes and so therefore if the percentages are fixed and their numbers are down, how did your number increase. That would be the international question. Then the second question would be, also when your competitor [indiscernible] Corporation, their domestic volumes were down. The question really becomes on the domestic side, you know, there your competitors earnings have consistently come down and you know, things are getting, I think a little bit more difficult for one of the other key players in the industry and the question becomes, what happens in a competitive dynamic year? Because you know, in terms of battles for market share. The PCS people seemed to have gotten hit fairly hard in this particular quarter and I am just curious as to how you see things playing out going forward if it looks as difficult as it seems to me at this moment. Thank you.

That's a multi-pronged question. I can try and answer several of these. We have a little bit of a disadvantage because, you know, we have not heard PCS's numbers nor we have had a chance to thoroughly review them. In general, I think address some of the differences. Even within Canpotex there were tiny differences in terms of allocations and shipments and offtakes within that which may account for a piece of that. Our numbers included all of our potash sales. So it's not only Canpotex sales, but it is also MOT sales from our US operations, which would make a difference on that. And which would also include PCS, it would also include their sales both first and second quarter from their new Brunswick operations which were outside of Canpotex as well. And if you had noticed in their first quarter they had significant sales outside of Canpotex from their new Brunswick operations that were reported separately and which showed that their numbers were dramatically different in the first quarter for potash sales, export than ours were as a result of those differences. So from quarter to quarter there are differences associated with that. On top of that, our numbers also include our K-Maga sales as well as our [SOP] especially sales as well that are outside of Canpotex and outside of the MOP. Both our SOP and K-Maga, and particularly K-Maga as I said in my comments were up significantly in the quarter year-over-year and to the first half year-over-year. And in fact, in the first half of this year our MOP sales are down domestically versus prior year where our SOP and our [Special E] K-Maga sales are up double digit versus the prior year. There will be a lot of differences as we go on with that. To specifically talk to the issue of what's going on in the marketplace. As I think we stated before we very much are trying to gain back some of the price in the marketplace that we would like to see year-over-year that has been lost. You know, we did that with the April led price increase which is a little bit unique in the industry to have a potash price increase in the season. There has also been an additional price increase so that the industry together has announced in mid September. As we stated in our numbers here to date, our MOP sales here to date are down versus last year and in fact our market share is down versus last year as well only slightly but it is down versus last year. So if you look at those two things we clearly think that there are other competitors in the marketplace looking for the earnings, the cash flow associated with this product which is very attractive.

Is it going to get more difficult?

When you say more difficult, I think that what we will see as a result of inventories being down some at least from where they've been that I think it will have a good shot at seeing at least a portion of the industry price increase in September come through.

Super. Thank you.

Our next question comes from [Scott Mears] from Newcastle Partners.

Hi guys.

Hi Scott.

Two questions. One, what was the average price for DAP in the quarter domestic and export.

Well, again the blended price is 135 that we have in our statement.

That's the blended realized that price that we have. I think pricing is in this.

Scott, the average DAP domestic price in the second quarter was, you know, just short of a $140 and the average international DAP price in the second quarter was in the low 130s about you know, 130 to 133.

And then the current - just say in the current price is 170 domestic.

No, international export is 170 metric ton currently. And domestically on the River about 163 and domestically short ton and domestically in Florida while at 145 short ton.

I am just trying to make that numbers apples to apples.

Yeah, that's what we tried in our comments to convert those back to apples to apples realized equivalent. Now, they aren't necessarily equivalent because they have to be that over an extended period of time, but last quarter the average realized price, blend of all minus discounts etc., was $135 per short ton. What we are suggesting is today based on the current spot price again we are not necessarily suggesting this will stay at this price either it could go up or down. It is about a $146 per short ton.

Blended?.

Blend of the 170 with the discount of the blend of the 145 domestic short ton price at Florida. In summer conservatively in the $146 per short ton average.

Okay, if it holds at us you should do better than, I guess, it seems like your guidance is conservative [indiscernible]

Again it's a question of whether.

We haven't given any guidance for the third quarter.

The question is whether it holds, the question is where pricing goes, you know, this is a matter of forecast by both analysts in our industry and others try and speculate where pricing is going. We try to give you the information in our charts to give you the best we can in terms of that, but who knows what's going to happen to the pricing.

Okay, and the other question was on the discontinued [indiscernible]. What was the EBITDA of that business this quarter?

It's annually, this year again with reference to Doug's pricing of soda ash pricing being very depressed this year we had about 15 million in EBITDA for the year projected.

At year to date or full year you are saying?

Full year.

But so far we are running at 7.5 million in that business.

Little less than a year to date.

Okay.

The operator, next question please.

Our next question comes from Dave Silver of JP Morgan.

Yes, hi. I have a couple of question.

Who are you with again?

I don't know I [indiscernible] around look on the sign in front of the building.

Welcome back.

I have a couple of questions for you. First one would be marketing in Latin American this fall. Second would be, maybe an operational question with regarding sulfur. So I have heard a couple of earnings updates or conference calls from AdCam and feed producers and they were talking about, you know, some issues marketing in Latin American. From your perspective, you know, as a marketer of phosphate and potash we are heading into the - what would be their planning season. Can you talk about, you know, what you see in terms of demand and also their ability to pay, you know, as their main selling season comes up?

We've seen extremely strong demand increases in South America led by Brazil. You know, I don't know the number today. [indiscernible] can you help me - double digit increases in fertilizer demand.

GMAP and potash.

We are very pleased with them and in fact just recently we've not been able to supply some of the phosphate requirements they had. So that the season has started very positively and very strong for them there. We are not in the business like many others in the feed business to provide credit. So all of our sales had been through from that season and uncredited.

In addition as you know David from the past we have, you know, virtually none, minimal business exposure in Argentina. Really Brazil is the single biggest customer in Latin America by a large factor and we've had I think some improving results in Chile also but we've done very, very little business with Argentina. And historically that's not been a large DAP market for Phosfeed in any way.

Okay.

Progressively so far.

Okay, great. The second question maybe more operational regarding sulfur. I mean I know it has been a while since we have had to talk about it, but we did have kind of a spot shortage this year and longer term, you know, your charts point to increasing phosphate demand around the Gulf there. There is plenty of idle phosphate capacity that could be started up in the future to meet that demand. I am just wondering if it's from a strategic perspective, you know, operational flexibility does it makes sense to maybe dust off the liquid sulfur joint venture that was talked about a couple of years ago. And, you know, are they any other kind of longer term issues you see in terms of I guess availability, you know, for price of sulfur as you, you know, look to ramp up some of your idle capacity going forward? Thanks.

What you are referring to is not liquid joint venture but is solid sulfur joint venture with Cargill, CF, and us regarding what we call Big Ben Transfer Company, BBTC, that is still going forward and going to a permitting process right now. And to your point right now liquid sulfur in the Gulf and phosphate production are fairly well balanced and fairly tight. So alternative options for either liquid sulfur from Venezuela and elsewhere or bringing in solid sulfur are both in our plans to keep sulfur availability abundant and hopefully keep sulfur pricing in line.

And I think it will be much closer to this both in terms of the buying, who the suppliers are and our discount structure was a result of the change in the way we are going directly now rather than Freeport.

Okay, great. Thanks a lot.

Operator I think we have time for maybe one more call. I know there are a number of calls at the top of the hours so is there another call in the queue.

Next question comes from Debby Fisher from Goldman Sachs.

Hey guys. I just wanted to go back to a question that Dave raised and that's basically what pricing in potash. And as I just look at, you know, say your reported numbers change year-over-year if we go back to 01, I mean Q1 would be up 3 then down 5, down 5, up 1. This year starts out down 3 and down 4. You know, our friends up in Canada, you know, have gone through similar downward trends. You know, the question is a lot of people, you know, myself included think that this, you know, [indiscernible] especially chemical product. You know, what's to say that this, you know, tide gets stemmed.. You know, can you kind of talk about that how can we get that pricing back and why is an investor, you know, [indiscernible] sit back and say well maybe this just, you know, stress becomes more of a hybrid and we continue to lose price, you know, over the next six to eight quarters.

But I think it's a combination of things. One of them, there are three or four players now, you know, [indiscernible] issue to be talking about price on this but there are three or four players. There is only limited capacity and there was also an international demand that continues to balance off with going into the domestic marketplace.

So this is more story than we need to get to international demand up basically to sop up some of the excess supply that is coming into the US. I am afraid if not coming into the US but there should be exported from North America that is staying here, is that a better way to look at it?

I think if you look in the historical basis in which this market domestically has reacted to supply and demand. We will continue to see that the supply and demand will get back in the balance as we go into the latter part of this year and in the next year. And that will then reflect into where pricing goes in the future. The fundamentals of the North American potash business and of the world potash business haven't changed at all. And in fact, I think what we will see is, as we will get back to that industry structure lends both in terms of how the international players with the domestic and puts it back into perspective that would suggest the pricing will get back into the level fairly consistent noncyclical type of structure started in the past.

Okay, I sort of buy that if you could step back, if the structure hasn't changed, what's caused say the last couple years of weakness? Has it been, you know, the supply, has gone up and therefore needs to come down or is it been that that we've seen demand drop off. And therefore we need to see demand recovery?

Though the demand had dropped of some but not dramatically. There has been only a limited amount of demand I think if you looked at the North American marketplace in demand it's down slightly. You see they are down slightly or flat for the first half of this year. As we said earlier our MOP sales are down slightly in line or actually slightly below the marketplace for this year, in the first half of this year. Hence our marketshare is down slightly this year. That's how the industry has worked with the producers, supply demand balancing in the past. That is indeed what is happening. There are other producers that are in the market and going after additional market share and obviously the earnings associated with that. However, that is limited by the amount of capacity and the inventory there and we think they will continue to balance out as the structure hasn't changed.

Fair enough, thanks fellas.

We can certainly continue that later but I think we have used up about a 60 minutes and I know lot of you have other calls at the top of the hour so I think we will close it down at this point and on behalf of everyone and IMC thank you for participating in our quarterly call and we will see you next quarter. Have a good day.

This concludes our conference for today, thank you for attending. All parties may disconnect at this time.