MOS Q2 2025: Q3 EBITDA seen rising on prices, volumes & lower costs
- Sequential EBITDA Improvement: Guidance indicates that Q3 margins will benefit from tailwinds such as higher realized prices for phosphates and potash, increased production volumes, and lower turnaround and idle expenses, suggesting a strong sequential recovery from Q2.
- Enhanced Asset Reliability & Production Ramp: Recent upgrades (e.g., completion of New Wales systems) and improved run rates across plants like Bartow and Riverview are expected to support rising production volumes and lower unit costs, positioning the company for robust operating performance.
- Strong Global Fertilizer Market Fundamentals: The Q&A highlighted tight supply, robust global demand, and resilient performance in key markets like Brazil, underscoring the long‐term structural support for margins and earnings growth.
- Production delays and execution risks: The delayed installation of the third jet pumping system at New Wales led to a lower-than-expected run rate in July, raising concerns that further delays or execution issues might impact the expected production volumes and margins in Q3.
- Lumpy turnaround costs and margin uncertainty: The discussion highlighted that turnaround and idle costs remain highly variable and “lumpy” on a quarterly basis, which could continue to weigh on profitability if these extraordinary expenses do not normalize as anticipated.
- Brazil market credit challenges and pricing pressures: Comments pointed to concerns over reduced government support and tighter credit conditions impacting small farmers, which may result in a contracting customer base and potential downward pressure on phosphate specialties pricing and margins in Brazil.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Phosphate Production | FY 2025 | 7.2 million to 7.6 million tonnes | 6,900,000 to 7,200,000 tons | lowered |
Potash Production | FY 2025 | no prior guidance | Full-year production guidance raised to capture strong demand | no prior guidance |
Phosphate Sales Volume | Q3 2025 | no prior guidance | 1,800,000 to 2,000,000 tons | no prior guidance |
Phosphate Prices | Q3 2025 | no prior guidance | $700 to $720 per ton | no prior guidance |
Potash Prices | Q3 2025 | no prior guidance | $270 to $290 per ton | no prior guidance |
Mosaic Fertilizantes EBITDA | Q3 2025 | no prior guidance | Over $200,000,000 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Production and Operational Reliability | Q1 2025 discussed planned turnarounds and extended maintenance work. Q4 2024 highlighted hurricane‐related downtime and recovery challenges. Q3 2024 noted hurricane impacts and early turnaround efforts. | Q2 2025 detailed significant maintenance challenges (e.g., delays at New Wales) that have now mostly been resolved; production rates and target run rate guidance are improving. | Operational reliability remains a recurring focus. Earlier periods highlighted weather and maintenance issues, while Q2 2025 shows that turnaround investments are paying off with improved run rates. |
Cost Structure Improvement and Margin Management | Q1 2025 described mixed results with higher conversion costs and planned cost savings. Q4 2024 emphasized cost reduction targets, SG&A savings, and FX challenges. Q3 2024 mentioned run-rate cost savings and production cost reductions. | Q2 2025 reported significant cost savings in Brazil and margins expected to improve in H2 despite elevated non‐recurring turnaround expenses. | Mixed sentiment persists. Though non‐recurring costs from turnaround work were noted, overall margins are expected to improve as operational efficiencies and production volumes ramp up. |
Fertilizer Market Dynamics and Pricing Environment | Q1 2025 focused on strong global demand with tight phosphate supply and rising prices. Q4 2024 stressed sustained supply constraints and strong stripping margins. Q3 2024 emphasized restricted phosphate exports and robust demand in both phosphate and potash. | Q2 2025 highlighted extremely robust global demand (e.g., Indian importers returning) and tight supply conditions that are pushing record shipments and higher stripping margins. | Consistently bullish. Supply constraints and strong global demand are repeatedly highlighted. Pricing remains elevated, and current period reinforces a bullish outlook despite minor regional deferrals. |
Brazil Market Dynamics | Q1 2025 mentioned credit challenges and subtle FX impacts. Q4 2024 noted significant FX losses and strategic customer shifts. Q3 2024 discussed credit risk mitigation, selective sales, and evolving local demand amid FX effects. | Q2 2025 continues to stress credit challenges and evolving FX risks while highlighting market penetration via new distribution capacity (e.g., the Pomeranci facility). | Persistent challenges with strategic adjustments. Credit risks and FX volatility remain concerns, but investments in market penetration and customer quality are mitigating risks and positioning Mosaic for long‐term growth in Brazil. |
Capital Expenditure and Asset Upgrade Initiatives | Q1 2025 discussed significant turnaround investments and capacity enhancements. Q4 2024 emphasized controlled CapEx, accelerated upgrade projects, and planned capacity expansions (e.g., Palmeirante plant). Q3 2024 highlighted completed projects and near-term turnaround schedules. | Q2 2025 reiterated heavy investments in reliability enhancements (maintenance at New Wales), capacity expansions in potash (Hydrofloat project) and new Brazil facilities; these initiatives aim to drive future production and cost reductions. | Consistent and strategic investment. Each period underlines ongoing asset upgrades and capacity expansions, with Q2 2025 confirming that past turnaround and upgrade investments are key components of the company’s long‐term growth strategy. |
Foreign Exchange Volatility and Currency Risk Impacts | Q4 2024 focused heavily on FX losses (e.g., $390 million loss and a $35 million EBITDA reduction) due to weakening real and Canadian dollar. Q1 2025 mentioned FX impacts on distribution margins but in less detail. Q3 2024 did not provide specific FX commentary. | Q2 2025 reported a reversal in FX effects contributing about $220 million positively to net income, though with some cost pressures in potash production. | Notable shift from adverse to favorable. While Q4 2024 reflected significant FX-related losses, by Q2 2025 currency movements have turned beneficial, illustrating emerging opportunities from FX volatility. |
Working Capital and Cash Flow Management | Q1 2025 detailed seasonal inventory increases and free cash flow challenges. Q4 2024 outlined working capital buildup and cash flow shortfalls impacting dividends and CapEx. Q3 2024 offered limited detail on these topics. | Q2 2025 outlined expected stronger free cash flow in the second half and emphasized capital allocation improvements to support dividends and CapEx. | Ongoing focus with a positive outlook. Previously, working capital increases had constrained cash flow, but improvements in operating cash flow are anticipated later in the year, supporting funding needs. |
Emerging Biotechnology Opportunities | Q3 2024 highlighted initial growth in Mosaic Biosciences and a 9-million-acre reach with promising product pipelines. Q4 2024 mentioned doubled revenues and acreage growth, setting the stage for future Analyst Day details. Q1 2025 emphasized strong revenue growth and planned product launches with an EBITDA target over five years. | Q2 2025 reported that Mosaic Biosciences revenue more than doubled compared to 2024, with multiple new product launches and an accelerated path toward significant adjusted EBITDA. | Accelerating and increasingly central. The segment consistently shows strong growth and expanding product innovation; Q2 2025 reinforces its role as a key growth engine with a robust product pipeline and revenue expansion. |
Competitive Pressures in Fertilizer and Potash Markets | Q1 2025 discussed rising prices driven by supply constraints and global trade issues. Q4 2024 detailed tight supply and upward pricing trends amid production cuts and tariff challenges. Q3 2024 highlighted tight phosphate markets and balanced potash conditions, with emerging supply from new projects. | Q2 2025 emphasized stable competitive pressures with record-level demand and continued supply constraints, while Mosaic leverages market access and strategic distribution to navigate competition. | Steady but well-managed. Competitive pressures persist due to constrained supplies and rising costs; however, Mosaic’s strategic market positioning and flexibility continue to buffer against these challenges without significant shifts in sentiment. |
Domestic Demand Vulnerabilities | Q1 2025 noted potential U.S. demand headwinds due to fertilizer affordability and shifting trade flows harming U.S. grower profitability. Q4 2024 did not emphasize domestic vulnerabilities, focusing more on global and Brazil segments. Q3 2024 alluded indirectly to economic pressures and credit issues. | Q2 2025 briefly mentioned some demand deferral in The Americas, but overall global demand (e.g., strong Indian uptake) offsets domestic vulnerabilities. | Diminishing emphasis. While earlier discussions highlighted domestic vulnerabilities—especially in the U.S.—the strong global demand environment in Q2 2025 has reduced the relative focus on domestic market weaknesses. |
-
EBITDA Outlook
Q: How will Q3 EBITDA improve over Q2?
A: Management highlighted multiple tailwinds—higher margins, increased volumes, and lower turnaround costs—that they expect will drive a substantial step‐up in Q3 EBITDA, though they did not provide specific numbers. -
Potash Production
Q: Will potash costs normalize in Q3?
A: Management expects a decline in turnaround expenses in potash for Q3, with robust demand keeping facilities well-run, while full-year production plans remain under active review. -
Turnaround Costs
Q: How will extraordinary costs taper off?
A: The team explained that the extraordinary turnaround costs noted in Q2 are lumpy by nature and should normalize as asset reliability improves, without providing precise quarterly figures. -
Brazil Credit Impact
Q: How does customer credit affect EBITDA?
A: Management noted that narrowing the customer base to focus on creditworthy farmers in Brazil is expected to foster sustainable growth and support EBITDA improvement, despite near-term credit challenges for smaller clients. -
Tariff Effects
Q: What tariffs impact phosphate import costs?
A: Management described that a standard 10% tariff applies to phosphate imports (with exemptions in cases like Canadian sulfur), resulting in minimal direct impact on their raw material costs. -
Asset Health
Q: Does the asset health metric assume no outages?
A: They clarified that the 85%–95% asset health metric incorporates normal, non‐extraordinary unplanned outages as part of the planned turnaround cycle. -
Hurricane Preparedness
Q: How are assets protected against hurricanes?
A: Management detailed comprehensive measures—such as reinforcing motor control centers and ensuring proper freeboard in gypsum stacks—to mitigate hurricane risks and maintain operational stability. -
Phosphate Specialties
Q: Why did phosphate specialties pricing come lower?
A: Management indicated that the lower pricing was due to complex product mix calculations and market adjustments, while noting that credit pressures are prompting consolidation among larger, more creditworthy customers. -
Production Run Rate
Q: What was the July run rate and outlook?
A: Management reported that the July run rate was below expectations due to a short delay at New Wales, but expressed confidence that rates in August and September will improve, with steady output at Bartow and encouraging signs from Louisiana and Riverview. -
Investor Day Concerns
Q: Why did the market react negatively post-Investor Day?
A: Management reassured that while share price sentiment has been affected by extraordinary, non-recurring costs seen in Q2, the core outlook remains unchanged and asset reliability improvements are on track.
Research analysts covering MOSAIC.