Q3 2024 Earnings Summary
- 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.
- 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. ,
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -21% | Lower average selling prices from softened global markets (buyers delaying purchases) and foreign currency headwinds contributed to the decline, partially offset by some cost-reduction initiatives. Looking ahead, stable-to-rebounding fertilizer demand may support revenue. |
Potash Segment | -27% | Weaker potash prices year-over-year drove most of the decline, although slightly higher sales volumes provided a small offset. The segment also faced geopolitical uncertainties impacting exports. Management expects gradual price normalization as supply-demand balances improve. |
Mosaic Fertilizantes | -19% | Lower finished product prices and foreign currency losses in Brazil eroded net sales, although reduced raw material costs (e.g., sulfur, ammonia) helped mitigate margins. Forward-looking, government policies and better-margin prioritization may stabilize results. |
United States Revenue | -35% | Reduced phosphate volumes due to planned maintenance and lower average selling prices pressured U.S. sales. Despite seasonal demand pickup, margins remained constrained. The company expects some recovery as inventory levels normalize and buyer confidence returns. |
Brazil Revenue | -19% | Delayed grower purchases and foreign currency transaction losses weighed on Brazilian revenue; however, long-term fundamentals like robust agricultural demand remain intact. Management is focusing on margin over volume to navigate a volatile pricing environment. |
China Revenue | +21% | Increased domestic demand for phosphate and a shift in production toward industrial uses (e.g., PPA, LFP) limited export availability, boosting prices and revenues. Continued government export controls are expected to keep Chinese fertilizer exports constrained, supporting domestic margins. |
Net Income | Up to $122.2M (from -$4.2M) | Improved margins in certain segments and lower raw material costs lifted profitability versus the prior-year loss. However, foreign currency volatility and soft selling prices remain ongoing risks. Management anticipates further stabilization in upcoming quarters. |
EPS (Diluted) | $0.38 (from -$0.01) | The swing to positive EPS was driven by better operational performance and cost discipline, despite headwinds from foreign currency losses. Potential price recovery and continued expense management could further bolster earnings in the coming periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Potash sales volumes | Q4 2024 | no prior guidance | 2.2M–2.4M tons | no prior guidance |
Potash prices | Q4 2024 | no prior guidance | $200–$220/ton | no prior guidance |
Phosphate sales volumes | Q4 2024 | no prior guidance | 1.6M–1.8M tons | no prior guidance |
Phosphate prices | Q4 2024 | no prior guidance | $570–$590/ton | no prior guidance |
Phosphate production | FY 2024 | 7.8M–8.2M tons | 7.8M–8.2M tons | no change |
CapEx | FY 2024 | $200M reduction in 2024 | $200M reduction in 2024 | no change |
Cost savings target | FY 2025 | no prior guidance | $150M annual run rate by end of 2025 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Recurring focus on phosphate production ramp-ups and related cost improvements | Consistently emphasized across Q2, Q1, and Q4 regarding ramp-up goals and improved fixed cost absorption. | Target run rate of 7.8–8.2 million tons by end of 2024, with a projected $20–$30/ton reduction in conversion costs. Factoring in turnarounds and weather events. | Continues to be a core priority, with added clarity on turnaround schedules and cost targets. |
Continued emphasis on potash demand growth versus potential oversupply | Addressed in Q2, Q1, and Q4 as strong demand offset by adapted Russian/Belarus supply and possible new expansions. | Near-record potash shipments expected for 2024 and potentially record-breaking in 2025; supply from Russia/Belarus returning but market seen as balanced. | Remains a major focus, with global potash demand recovering and balanced outlook. |
Impact of Chinese phosphate export fluctuations | Repeated mentions in Q2, Q1, and Q4 about reduced Chinese phosphate exports, greater domestic use, and supportive global pricing. | Higher domestic consumption in China, limited exports, and industrial use (e.g., LFP, P4) contributing to tight supply. | Ongoing attention to China’s reduced exports, keeping global phosphate market tight. |
Brazilian market expansion | Q2, Q1, and Q4 highlighted distribution growth strategies (e.g., Palmeirante) and prudent sales to lower-risk customers. | Further optimism on Brazilian demand, planning a 1 million-ton distribution expansion (Pomerance) by mid-2025, with careful credit risk management. | Continues to be a growth area, balancing expansion with credit risk controls. |
Maintenance turnarounds and operational execution risks | Turnarounds viewed as ongoing challenges in Q2, Q1, and Q4, impacting volumes and requiring careful scheduling. | Turnarounds finishing by end of Q4 2024, major Bartow sulfuric maintenance in Q1 2025; hurricanes caused brief outages but production recovered quickly. | Persisting operational factor, regularly noted to affect production goals. |
No further mention of global tariffs and duties after Q1 2024 | Last mentioned in Q1 2024, absent in Q2 and Q4 [N/A]. | Not discussed in Q3 2024 [N/A]. | References to tariffs/duties have stopped post-Q1 2024. |
Discontinued references to potash market weakness and production curtailment post-Q4 2023 | Q4 2023 included talk of Colonsay curtailment and weak conditions, not seen in Q1 or Q2. | Potash commentary now focuses on balanced/optimistic market; no curtailment mention. | Shifted to a more positive potash outlook, dropping weakness/curtailment language. |
Esterhazy HydroFloat project | Mentioned in Q1; no detail in Q2 or Q4. | Confirmed mid-2024 startup with an extra 400,000 tons of potash capacity. | Project remains on track for boosting potash output. |
Introduction of the Palmeirante blend plant in Brazil | Discussed in Q2, Q1, and Q4 as part of broader Brazilian expansion. | Expanding capacity by 1 million tons, operational by mid-2025, located in northern Brazil. | Key strategic addition for Brazilian distribution capacity. |
Changing potash sentiment from weakness concerns to optimism about 2025 demand | Shift noted in Q2, Q1, and Q4 from cautious tone to more positive demand outlook. | Expectation of strong global shipments, near-record volumes, and upward price movements. | Market view has turned positive, anticipating record demand and stable prices. |
Potential major future impact from capacity expansions, cost reductions in phosphate, and growth in Brazil | Ongoing strategic pillar in Q2, Q1, and Q4, combining operational efficiencies, expansions, and strong presence in Brazil. | Maintaining focus on $20–$30/ton phosphate cost improvements, disciplined expansions, and robust Brazilian market development. | Remains central to long-term strategy and profitability. |
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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. -
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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.
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