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    MOSAIC (MOS)

    Q1 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$28.41Last close (May 2, 2024)
    Post-Earnings Price$28.70Open (May 3, 2024)
    Price Change
    $0.29(+1.02%)
    • Strong fertilizer demand and higher prices anticipated in the second half of the year, supported by positive market fundamentals.
    • Cost improvements in phosphate operations, with significant reductions in rock costs expected in the second half, enhancing profitability.
    • Expansion of Brazil operations, including the new 1 million-tonne blending plant at Palmeirante, aiming to grow EBITDA and capitalize on market opportunities.
    • Mosaic's optimistic outlook relies on fertilizer prices increasing in the second half of the year; if prices do not rise as expected, it could negatively impact their profitability.
    • There is uncertainty regarding the valuation and liquidity of Mosaic's investment in Ma'aden; difficulties in realizing the value of this investment could adversely affect Mosaic's financial position.
    • Increased production from Mosaic may add supply to the market, potentially putting downward pressure on fertilizer prices and impacting revenues and margins.
    1. Ma'aden Investment Valuation
      Q: How do you view the $1.5 billion valuation of Ma'aden?
      A: Management believes the $1.5 billion valuation for their Ma'aden investment is fair and attractive, representing twice their initial investment. They expect valuation multiples to be consistent with historical levels during their ownership period.

    2. Ma'aden Hedging Strategy
      Q: Can you hedge or lock in Ma'aden's value now?
      A: Management acknowledges the importance of protecting the Ma'aden investment and is evaluating options, considering factors like market liquidity, but is not ready to provide specifics.

    3. Ma'aden Transaction Rationale
      Q: Why was this Ma'aden deal the best option?
      A: The transaction brings transparency to the investment's value and provides capital flexibility. It satisfies objectives for both parties, including Ma'aden's desire to consolidate JV ownership.

    4. Financial Impact of Ma'aden Deal
      Q: What's the impact on free cash flow and EBITDA?
      A: The transaction will have minimal impact on Mosaic's EBITDA and free cash flow. Historically, cash distributions from the JV are included, and future equity earnings will continue to be recognized similarly.

    5. Phosphate Market Tightness
      Q: Why is phosphate supply-demand compelling?
      A: Phosphate markets are tight due to reduced Chinese exports, down 70% in Q1, reducing supply by 1 million tonnes. Demand has recovered, and structural changes in China are further tightening agricultural phosphate supply.

    6. Potash Market Balance
      Q: Why isn't potash supply-demand as tight?
      A: Potash markets are balanced as Russian and Belarusian production returns to pre-war levels, and new supply from Laos emerges. Demand growth is expected at 1–2% annually, keeping supply and demand in equilibrium.

    7. Phosphate Cost Improvements
      Q: Are cost trends improving profitability?
      A: Yes, lower raw material costs, including ammonia and sulfur, will enhance stripping margins throughout the year. Despite seasonal price pressures, margins are expected to remain strong at decade-high levels.

    8. Phosphate Production and Reserves
      Q: How sustainable are cost improvements and reserves?
      A: Achieving a 2 million-tonne run rate will reduce costs by $20 to $30 per tonne. Rock costs will improve, and Mosaic has 30–40 years of phosphate rock reserves in Florida, supporting long-term cost benefits.

    9. Impact of Turnarounds on Supply
      Q: Do turnarounds affect supply and prices?
      A: Turnarounds are necessary maintenance but do not significantly influence market prices. Increased production will meet demand without materially impacting market tightness.

    10. Phosphate Import Duties
      Q: How do duty changes affect Mosaic and consumers?
      A: Duties level the playing field and eliminate unfair subsidies, leading to a healthier industry and more competition for U.S. farmers.

    11. Potash Sales and Contracts
      Q: Breakdown of potash sales and contract assumptions?
      A: Potash sales are 45% domestic and 55% offshore. The India contract is expected to settle soon due to strong demand and low inventories; China is likely to settle later in Q2.

    12. Fertilizer Price Expectations
      Q: Will you be disappointed if prices don't rise in H2?
      A: Management includes expected contract prices in forecasts and believes fundamentals support higher prices in the second half. They would be surprised if prices do not reflect these market fundamentals.

    13. Fertilizantes EBITDA Outlook
      Q: Where can Fertilizantes EBITDA get to in coming years?
      A: Management sees EBITDA improving through increased distribution volumes at $30 to $40 margins, cost reductions of $20 to $30 million, and growth from biosciences starting in 2025.

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