MOS Q1 2025: Cost cuts to $95/tonne & Q2 $150M Brazil EBITDA lift
- Improving Cost Structure: Management expects conversion costs to decline to a run rate of $95 to $100 per tonne for phosphates and similar target ranges for potash in the second half, which should drive higher EBITDA margins by reducing per‐ton production costs.
- Robust Pricing Environment: Realized DAP prices in April have exceeded guidance, and management anticipates sustained high commodity pricing with little risk of a summer reset, supporting revenue growth across segments.
- Strong Volume Growth & Market Penetration: In Brazil, enhanced operational performance and initiatives—such as the launch of new plants like Palmeirante—are expected to boost sales volumes and improve distribution margins, contributing to a potential $150 million EBITDA uplift in Q2.
- Operational disruptions and unanticipated maintenance challenges: Several Q&A responses highlighted issues such as unexpected equipment problems at key facilities (Bartow and New Wales) and delays in turnaround projects, which could lead to production downtimes and higher operating costs.
- Margin pressure from elevated unit costs: Executives acknowledged that conversion and production costs in phosphate were higher in Q1 due to extraordinary maintenance expenses and heavy turnaround activity, raising concerns if such cost pressures persist.
- Domestic demand vulnerabilities and working capital risks: Comments regarding U.S. market pressures—such as affordability concerns leading to customer purchase delays and significant working capital increases—suggest potential challenges for free cash flow conversion and overall margin performance.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | –2.2% (from $2,679.4M to $2,620.9M) | Slight revenue contraction driven by mixed performance across segments—with modest gains in Phosphates (+7%) and Mosaic Fertilizantes (+5%) partly offset by a 10% decline in Potash revenue—indicating that challenges in some product areas continue to weigh on overall sales. |
Phosphates Revenue | +7% YoY (from $1,023.0M to $1,098.6M) | Revenue growth in Phosphates is attributed to strong demand and improved production/pricing dynamics compared to the previous quarter, reflecting an upward correction from earlier lower performance. |
Mosaic Fertilizantes Revenue | +5% YoY (from $886.4M to $933.8M) | Incremental growth in Mosaic Fertilizantes revenue resulted from higher sales volumes and enhanced market demand, supported by cost improvements that built on prior period results. |
Potash Revenue | –10% YoY (from $634.7M to $570.2M) | A sharp decline in Potash revenue reflects lower finished goods pricing and reduced sales volumes, suggesting that previously emerging challenges in the Potash segment have deepened in Q1 2025 compared to the prior period. |
Brazil Revenue | +6% YoY (from $852.8M to $907.0M) | Improved performance in Brazil is driven by a recovery in the agricultural market and higher inventory turnover, showing a rebound from the relatively weaker performance in Q1 2024. |
U.S. Revenue | –7% YoY (from $1,144.2M to $1,062.8M) | Decline in U.S. revenue points to competitive pressures and possibly a less favorable product mix, reflecting a downturn in market performance compared to the stronger base in the prior period. |
Operating Earnings | +96% YoY (from $172.9M to $338.5M) | Doubling of operating earnings was achieved through improved cost control and margin-focused strategies, driving better performance relative to a relatively low base last period. |
Net Earnings | +343% YoY (from $56.5M to $250.0M) | A dramatic surge in net earnings reflects the combined benefit of improved operating efficiencies, higher gross margins, and favorable noncontrolling interest outcomes, reversing much weaker profitability in Q1 2024. |
Gross Margin | +22% YoY (from $399.2M to $488.4M) | Enhanced gross margins resulted from both improved selling prices and better cost management practices, indicating a significant turnaround in profitability performance from the previous quarter. |
Net Cash Provided by Operating Activities | From –$80.0M to +$42.9M (improvement of $122.9M) | Reversal in operating cash flows is driven by stronger operational performance and effective working capital management, which helped overcome the negative cash flow experienced in Q1 2024. |
Cash and Cash Equivalents | –23% YoY (from $336.7M to $259.2M) | Declining liquidity reflects significant outflows in investing and financing activities—such as capital expenditures and adjusted financing dynamics—even as operating improvements were noted, indicating a strategic reallocation of cash compared to the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Phosphate Production Volume | FY 2025 | 7.2 million to 7.6 million tonnes | 7.2 million to 7.6 million tonnes | no change |
Mosaic Fertilizantes Q2 EBITDA | Q2 2025 | $120 million | Exceed $150 million | raised |
Potash Production Cost per Tonne | FY 2025 | no prior guidance | $64 to $69 per tonne | no prior guidance |
Phosphate Production Cost per Tonne | FY 2025 | no prior guidance | $95 to $100 per tonne | no prior guidance |
Capital Expenditures (CapEx) | FY 2025 | no prior guidance | $1.2 billion to $1.3 billion | no prior guidance |
Free Cash Flow | FY 2025 | no prior guidance | Working capital increase of approximately $150 million | no prior guidance |
Mosaic Fertilizantes Sales Volume Growth | FY 2025 | no prior guidance | 15% | no prior guidance |
Mosaic Biosciences | FY 2025 | no prior guidance | Revenue target $70 million; long-term EBITDA target $200 million | no prior guidance |
Hydroflow Project | FY 2025 | no prior guidance | Completion of the 400,000 tonne per year project | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Cost Reduction Initiatives and Improved Cost Structure | In Q2–Q4 2024 calls, Mosaic consistently discussed aggressive cost savings programs, SG&A reductions, and operational improvements ( ) | Q1 2025 continued the focus on normalizing production costs and improving efficiency amid planned turnarounds ( ) | Consistent emphasis on cost discipline with expectations for further efficiency gains as production ramps up. |
Operational Performance, Production Ramp-Up, and Reliability Challenges | Q2–Q4 2024 detailed production ramp-ups, hurricane recovery efforts, and turnaround activities impacting reliability ( ) | Q1 2025 highlighted planned downtime for maintenance and reliability improvements while maintaining annual production guidance ( ) | Steady improvement efforts with strategic maintenance and ramp-up activities driving production normalization. |
Commodity Pricing Environment and Market Demand Dynamics | Earlier calls (Q2–Q4 2024) noted strong crop prices, tight phosphate supply, balanced potash markets, and regional demand drivers ( ) | Q1 2025 reinforced elevated prices, continued tight supply (notably in phosphate with rising LFP demand) and robust global demand dynamics ( ) | Ongoing supportive market conditions with high prices and constrained supply across regions. |
Margin Pressure from Elevated Production and Conversion Costs | Q2–Q4 2024 discussions emphasized higher conversion costs due to production disruptions and the need for improved fixed-cost absorption ( ) | Q1 2025 reported elevated phosphate and potash costs due to lower production volumes and maintenance actions, with cost targets anticipated by year-end ( ) | Persistent cost pressures expected to ease gradually as production efficiencies improve. |
Cash Flow Generation, Capital Expenditure, and Dividend Coverage | Q2–Q4 2024 highlighted challenges with low cash flows, working capital pressures, and controlled but evolving CapEx, with explicit concerns on dividend coverage ( ) | Q1 2025 indicated subdued cash flows due to seasonal working capital increases and high CapEx plans, while dividend coverage was not specifically addressed ( ) | Increased focus on growth investments and working capital management with expectations for improvement as production stabilizes. |
Foreign Exchange and Currency Volatility Risks | Q4 2024 detailed significant FX losses and their impact on EBITDA in Brazil, while earlier periods (Q2 & Q3) did not mention FX concerns ( ) | Q1 2025 again acknowledged FX impacts on distribution margins in Brazil, though less dramatically than Q4 2024 ( ) | FX volatility remains a recurring risk, albeit with somewhat lower emphasis in the current period. |
Global Shipment Volume Targets and Production Scale-Up | Q2–Q4 2024 calls provided detailed shipment targets and production scale-up initiatives, including new capacity projects and plant turnarounds ( ) | Q1 2025 reaffirmed production targets for phosphate and potash with emphasis on new projects (e.g., hydroflow) and steady sales volume growth, especially in Brazil ( ) | Consistent drive to scale production and improve shipment targets through strategic capacity expansions. |
Innovative Growth Initiatives in Mosaic Biosciences | Q2–Q4 2024 mentioned early product launches, pipeline developments, and initial revenue/acreage growth with modest targets ( ) | Q1 2025 presented aggressive revenue doubling ambitions, new product introductions (e.g., Neptunian), and elevated growth targets for the biosciences segment ( ) | Increasing emphasis on innovation with more ambitious revenue and product portfolio targets to drive future growth. |
Domestic Demand Vulnerabilities and Working Capital Risks | Q3 and Q4 2024 discussed selective sales strategies in Brazil, credit challenges, and anticipated working capital build‐ups linked to growth ( ) | Q1 2025 noted seasonal working capital increases and potential headwinds from U.S. commodity price declines, while strong Brazilian demand remains ( ) | Persistent working capital challenges with moderated domestic demand vulnerabilities in the U.S. coupled with robust Brazilian performance. |
Credit and Customer Default Risks | Q3 and Q4 2024 highlighted credit risk mitigation in Brazil through customer mix shifts, bad debt reserves, and insurance recoveries ( ) | Q1 2025 did not highlight new credit or default concerns, suggesting effective mitigation of prior risks ([–]) | Reduced emphasis in Q1 2025, indicating improved customer credit profiles and effective risk management. |
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Cash Conversion
Q: Any deviations in operating cash flow?
A: Management indicated that aside from a $150 million rise in working capital, nearly every additional dollar of EBITDA flows to cash, underscoring strong conversion (【14】). -
DAP Prices
Q: Are DAP prices below expectations?
A: They noted that April’s DAP prices exceeded the top end of guidance and that extra maintenance costs were extraordinary and non‐recurring, suggesting pricing strength (【9】). -
Potash Costs
Q: When will potash cost improvements occur?
A: Management expects potash production cash cost improvements in Q3 and Q4 as normal operations and the new hydroflow project ramp up (【11】). -
Supply/Demand Balance
Q: Will increased production ease tight markets?
A: Despite higher production, supply constraints continue—especially in phosphate—with robust global demand keeping the market tight (【12】). -
Brazil EBITDA
Q: What EBITDA upside is anticipated in Brazil?
A: They forecast Q2 EBITDA to reach at least a $150 million floor, driven by improved production and favorable distribution margins in Brazil (【16】). -
Phosphate Guidance
Q: Can annual phosphate targets be met?
A: Management maintained a guidance of 7.2–7.6 million tonnes, with quarterly outputs potentially exceeding 2 million tonnes in the second half (【17】). -
Asset Reliability
Q: How is asset reliability improving?
A: Despite some unexpected equipment issues at Bartow and New Wales, reliability enhancement initiatives are yielding target operating rates (【7】). -
CapEx Allocation
Q: Which segment receives more CapEx investment?
A: They are balancing investments between segments, adjusting CapEx appropriately based on each asset’s operational needs (【18】). -
Ammonia Tariffs
Q: Are tariff impacts affecting ammonia costs?
A: Ammonia remains tariff-exempt, with most supply from tariff-free contracts and in-house production keeping costs stable (【8】). -
Phosphate Efficiency
Q: Could rising phosphate prices hurt yields?
A: Although high phosphate prices might suggest pressure, introducing biologicals is expected to enhance yield efficiency and ROI (【13】). -
Bioscience Growth
Q: What margins are targeted for Biosciences?
A: Bioscience products are on track, with own products achieving around 60% gross margins and licensed products between 30–40%, supporting favorable long-term EBITDA growth (【15】).
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