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    Mosaic Co (MOS)

    CFO Change
    Board Change

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    Business Description

    The Mosaic Company is a leading producer and marketer of concentrated phosphate and potash crop nutrients, serving customers in approximately 40 countries . The company operates through three main business segments: Phosphates, Potash, and Mosaic Fertilizantes, producing and selling crop nutrients, animal feed ingredients, and industrial products . Mosaic accounts for approximately 12% of global annual phosphate production and 13% of global annual potash production .

    1. Potash - Operates mines and production facilities in Canada and the U.S., producing potash-based crop nutrients, animal feed ingredients, and industrial products. Sells Canadian potash outside the U.S. and Canada through Canpotex .
    2. Phosphates - Includes mines and production facilities in Florida and Louisiana, a 75% interest in the Miski Mayo Phosphate Mine in Peru, and a 25% interest in the Ma’aden Wa’ad Al Shamal Phosphate Company in Saudi Arabia. Produces phosphate crop nutrients and animal feed ingredients .
    3. Mosaic Fertilizantes - Primarily operates in Brazil, including five phosphate rock mines, four chemical plants, and a potash mine, along with distribution operations in South America .
    4. Crop Nutrient Blends - Offers a variety of blended crop nutrient products tailored to specific agricultural needs .
    5. Performance Products - Provides specialized products designed to enhance agricultural productivity and efficiency .

    Q3 2024 Summary

    Initial Price$28.95July 1, 2024
    Final Price$27.05October 1, 2024
    Price Change$-1.90
    % Change-6.56%

    What went well

    • Mosaic Biosciences is experiencing accelerated growth, with products now being used on 9 million acres globally. The company sees this business as a potential growth engine with promising products in the pipeline, such as nitrogen fixation materials and phosphorus solubility enhancers.
    • Mosaic is on track to achieve $150 million in annual run-rate cost savings by the end of 2025, enhancing profitability. Additionally, investments like the HydroFloat project at Esterhazy are expected to increase production capacity by 400,000 tons next year.
    • The company expects strong demand for fertilizers in 2025, driven by factors like nutrient depletion from large crop yields, increased biofuel demand, and supply constraints from competitors, positioning Mosaic favorably in the market.

    What went wrong

    • Mosaic faced operational challenges, including electrical issues at the Esterhazy and Colonsay potash mines, resulting in production losses and uncertainties in meeting production targets.
    • The company recorded a $32 million bad debt reserve due to a Brazilian customer's bankruptcy filing, negatively impacting EBITDA and highlighting increased credit risks in the region.
    • Potential increases in potash supply from competitors in Russia and Laos, along with demand uncertainties, may lead to market oversupply and pressure on potash prices, affecting Mosaic's future revenues. ,

    Q&A Summary

    1. Potash Demand and Mosaic's Capacity
      Q: What is your outlook for potash demand and Mosaic's capacity in 2025?
      A: Mosaic expects potash market demand to grow by 1.5 to 2 million tons in 2025, driven by recovery in markets like Indonesia and Malaysia. Supply increases may come from Russia's EuroChem and Uralkali, and expansion in Laos, but these have significant uncertainties. Mosaic plans to add 400,000 tons of capacity at Esterhazy through the Hydrofloat project coming online midyear 2025, enabling Esterhazy and Belle Plaine to produce around 9 million tons.

    2. Phosphate Run Rate and Normalized Earnings
      Q: What is the expected phosphate production run rate and impact on normalized earnings?
      A: Mosaic anticipates achieving a phosphate production run rate of 7.8 to 8.2 million tons annually after completing turnarounds by the end of this year. Conversion costs are expected to decrease by $20 to $30 per ton from 2023 levels, sustaining on an annualized basis. Rock costs are around $55 per ton, with minor upside potential. This improved run rate and cost structure should positively impact normalized earnings in 2025 and beyond.

    3. Phosphate Pricing and Market Outlook
      Q: Are there concerns about phosphate affordability impacting demand and pricing?
      A: While phosphate prices are high, Mosaic believes the market remains constructive due to limited supply. No significant new capacity has been announced that would alter this outlook in the near term. High phosphate prices are also supported by elevated raw material costs for ammonia and sulfur. Unless there are fundamental changes on the supply side or raw material costs, Mosaic does not foresee major pricing shifts.

    4. India Phosphate Demand and Subsidy Impact
      Q: How are India's subsidies affecting phosphate demand, and what is the outlook?
      A: India experienced unmet demand for DAP due to low farmer prices at $360 per ton and high international prices around $640 per ton, leading to a gap not bridged by government subsidies. This resulted in an estimated 2 million-ton reduction in DAP shipments in 2024. Mosaic expects adjustments in farmer prices and government subsidies in 2025, enabling importers to meet the strong farmer demand.

    5. Brazilian Farmer Activity and Fertilizer Demand
      Q: What is the current state of farmer activity and fertilizer demand in Brazil?
      A: Despite challenges from commodity price headwinds and credit constraints, Brazilian farmers are showing improved sentiment and economics. For the upcoming safrinha corn, farmers have sold 67% of their crops, 7% higher than last year. They have purchased over 60% of their fertilizers, ahead of the same time last year. This indicates increasing fertilizer demand and positive market activity.

    6. China Phosphate Production
      Q: Has China's overall phosphate production risen, and what are the implications?
      A: China is forecasted to produce more phosphate-related products in 2024 than in previous years, including increases in products like LFP and P4 used for herbicides like glyphosate. There is also an increase in DAP, MAP, TSP, and SSP production, driven by higher local consumption and the adoption of GMO crops requiring intensified fertilizer management.

    7. Biosciences Products and Pipeline
      Q: What progress has Mosaic made in its Biosciences products and pipeline?
      A: Mosaic's Biosciences business is experiencing exciting growth, with products covering 9 million acres. Major products like Par Code and BioPass improve nutrient use efficiency. The pipeline includes promising developments such as nitrogen fixation materials in final field trials and products enhancing phosphorus solubility. These innovations could become a growth engine for Mosaic.

    8. Brazil Fertilizantes Growth Outlook
      Q: Do you expect higher growth rates in Brazil's Fertilizantes market going forward?
      A: Mosaic expects the Brazilian fertilizer market to continue growing, supported by improving farm economics and barter ratios. Although Mosaic focuses on margin over volume, the upcoming Pomerance investment will add 1 million tons of distribution capacity in northern Brazil by mid-2025, enhancing growth opportunities.

    9. Belarus/Russia Potash Exports
      Q: Have there been any signs of potash export curtailments from Belarus or Russia?
      A: Mosaic has not observed any evidence that Belarus or Russia have reduced potash export rates, despite reports suggesting potential curtailments. Shipments from Belarus have remained consistent over the last quarter. Mosaic remains prepared to adjust its strategy if changes occur, leveraging its resilient supply chain.

    Guidance Changes

    Quarterly guidance for Q4 2024:

    • Potash Segment Sales Volumes: 2.2 million to 2.4 million tons (no prior guidance)
    • Potash Segment Prices: $200 to $220 per ton (no prior guidance)
    • Phosphates Segment Sales Volumes: 1.6 million to 1.8 million tons (no prior guidance)
    • Phosphates Segment Prices: $570 to $590 per ton (no prior guidance)

    Annual guidance:

    • Phosphate Production Run Rate: 7.8 million to 8.2 million tons by year-end (no change from prior guidance )
    • Cost Management: $150 million annual run rate cost savings target by the end of 2025 (no change from prior guidance )
    • Capital Expenditures: $200 million reduction in CapEx for the year (no change from prior guidance )
    • Mosaic Biosciences: Biological products used on 9 million acres (no prior guidance)

    Key Metrics

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    Executive Team

    NamePositionStart DateShort Bio
    Philip E. BauerSenior Vice President, General Counsel, and Corporate SecretaryJanuary 2023Philip E. Bauer has been with Mosaic since 2007, managing legal support for various business activities. He was promoted to his current position in January 2023. Before joining Mosaic, he was a partner at an international law firm .
    Bruce M. Bodine Jr.Chief Executive Officer, President, and DirectorJanuary 2024 (CEO)Bruce M. Bodine Jr. was appointed CEO in January 2024 and President in August 2023. He has been a Director since 2023 and has extensive experience in the mining industry, having been with Mosaic since its formation in 2004 .
    Clint C. FreelandExecutive Vice President and Chief Financial OfficerNovember 2023Clint C. Freeland joined Mosaic as Senior Vice President and CFO in June 2018 and was promoted to Executive Vice President and CFO in November 2023. He will resign from this position on December 31, 2024, and continue as a Senior Advisor until his retirement in July 2025 .
    Walter F. Precourt IIISenior Vice President and Chief Administrative OfficerNovember 2023Walter F. Precourt III joined Mosaic in 2009 and has held various leadership positions. He was elected to his current role in November 2023, overseeing Human Resources, Public Affairs, Procurement, and Shared Services .
    Corrine D. RicardSenior Vice President - Digital StrategyJanuary 2024Corrine D. Ricard has held various leadership roles at Mosaic and was elected as Senior Vice President - Digital Strategy in January 2024. She transitioned to Senior Advisor on October 1, 2024, and is expected to retire at the end of 2024 .
    Karen A. SwagerExecutive Vice President - OperationsNovember 2023Karen A. Swager was elected as Executive Vice President - Operations in November 2023. She is responsible for enterprise-wide operations, including EHS and the North America Supply Chain organization. She has held various leadership positions at Mosaic .
    Yijun ("Jenny") WangExecutive Vice President - CommercialJanuary 2024Yijun ("Jenny") Wang was elected as Executive Vice President - Commercial in January 2024. She has held several strategic marketing roles at Mosaic and serves on the Board of Directors of Canpotex Limited .
    Luciano Siani PiresExecutive Vice President and Chief Financial OfficerJanuary 1, 2025Luciano Siani Pires will assume the role of Executive Vice President and CFO on January 1, 2025. He joined Mosaic as CFO Designate on November 18, 2024, and has previously held leadership positions at Vale S.A. He served on Mosaic's Board of Directors from 2018 to 2022 .

    Questions to Ask Management

    1. Given the repeated operational challenges due to hurricanes and electrical issues affecting your phosphate production, how confident are you in achieving the annualized run rate of 7.8 to 8.2 million tons by year-end, and what specific measures are you implementing to mitigate future weather-related disruptions?

    2. With the recent improvement in Brazilian farmer economics and activity, how sustainable do you believe this recovery is considering the past headwinds from commodity prices and credit constraints, and what strategies are you employing to mitigate ongoing credit risks in this key market?

    3. Despite supply from Russia and Belarus returning to pre-war levels, you mentioned that potash prices have likely hit bottom and are beginning to trend higher. What gives you confidence in a price recovery, and how would prolonged low potash prices impact your financial performance and strategic plans?

    4. You've initiated a strategic review of your Carlsbad New Mexico potash mine and are converting your MWSPC joint venture into Ma'aden's shares valued at $1.5 to $1.6 billion. Can you elaborate on your capital allocation priorities, and how do these actions align with your long-term growth strategy, especially in light of recent operational challenges and the need for cost reductions?

    5. Mosaic Biosciences is highlighted as a rapidly growing segment, covering 9 million acres and positioned as a future growth engine. Could you provide more details on its current revenue contribution and profitability, and what level of investment is required to scale this business meaningfully within your overall operations?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateSecond quarter of 2022 July 31, 2022
    End Date/DurationCompleted by July 31, 2022 No set expiration date
    Total additional amount$1.0 billion $2.0 billion
    Remaining authorization$0 (completed) $957,429,576 as of September 30, 2024
    DetailsCompleted Ongoing, various methods

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024
    • Guidance:
      1. Potash Segment:
        • Sales Volumes: 2.2 million to 2.4 million tons
        • Prices: $200 to $220 per ton .
      2. Phosphates Segment:
        • Sales Volumes: 1.6 million to 1.8 million tons
        • Prices: $570 to $590 per ton .
      3. Phosphate Production Run Rate: 7.8 million to 8.2 million tons by year-end .
      4. Cost Management: $150 million annual run rate cost savings target by the end of 2025 .
      5. Capital Expenditures: $200 million reduction in CapEx for the year .
      6. Mosaic Biosciences: Biological products used on 9 million acres .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Phosphate Production: 7.8 million to 8.2 million tons annual production .
      2. Cost Reductions: $150 million expense reduction and $200 million reduction in capital expenditure .
      3. Distribution Margins: $30 to $40 per ton in Brazil .
      4. Fertilizer Shipments: Phosphate 73 million to 76 million tons, Potash 70 million to 73 million tons .
      5. Cost Savings: $20 to $30 per ton conversion cost savings .
      6. Brazil Operations: Strong performance and EBITDA contribution .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024
    • Guidance:
      1. Phosphate Sales Volumes: 1.6 million to 1.8 million tonnes .
      2. Phosphate Average FOB Prices: $530 to $580 per tonne .
      3. Potash Sales Volumes: 2.2 million to 2.4 million tonnes .
      4. Potash Average FOB Prices: $210 to $250 per tonne .
      5. Distribution Margin: $30 to $40 per tonne .
      6. Mosaic Fertilizantes: Improved sales volumes and profitability .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024
    • Guidance:
      1. Potash Sales Volumes: 2 million to 2.2 million tonnes .
      2. Potash Prices: $225 to $250 per tonne .
      3. Phosphate Sales Volumes: 1.6 million to 1.8 million tonnes .
      4. DAP-Realized Prices: $580 to $605 per tonne .
      5. Distribution Business Margins: $30 to $40 per tonne .
      6. Capital Spending: $200 million reduction .
      7. Cost Savings: $150 million annual run rate savings .

    Latest news

    Recent developments and announcements about MOS.

    Corporate Leadership

      Board Change

      ·
      Jan 13, 2025, 10:49 PM

      Key Update: On January 13, 2025, The Mosaic Company (MOS) elected Sonya C. Little and Kathleen M. Shanahan to its Board of Directors. Ms. Little will serve on the Audit Committee, and Ms. Shanahan will serve on the Compensation and Human Resources Committee.

      CFO Change

      ·
      Nov 13, 2024, 12:00 AM

      On November 8, 2024, Mr. Clint C. Freeland, the Executive Vice President and Chief Financial Officer (CFO) of The Mosaic Company, announced his intention to retire in 2025. He will resign as CFO effective December 31, 2024, and will continue as a Senior Advisor until his retirement on July 1, 2025. Mr. Luciano Siani Pires has been appointed as the new CFO, effective January 1, 2025 .