MOSAIC CO Q4 FY2024 earnings call

Key Messages

• Agriculture markets improved, constructive ag and fertilizer fundamentals expected in 2025.
• Mosaic making operational and strategic progress, positioned well for good markets in 2025.
• Shedding non-core assets and reallocating capital taking shape.

Potash Highlights

• Esterhazy complex generates strong cash flow, optimizing it with projects like hydrofluid to increase capacity. Belle Plaine mine had 100% operating rate and record production in 2024, resolved electrical issues.
• Geopolitical factors like Canadian tariffs and supply issues in Laos, China, etc., impact potash markets but affordability remains, no major demand destruction expected.

Phosphate Highlights

• Supply tight, demand strong, prices and stripping margins elevated. Secured long-term ammonia supply. Focus on restoring US phosphate production, accelerating capital spending for asset reliability after hurricane impacts.

Strategic Progress

• Sold Patos de Minas site in Brazil and concluded Ma'aden transaction. Pursuing strategic alternatives for Carlsbad potash mine. Investing in core business with projects like Esterhazy compaction and Brazil blending plant. Mosaic Biosciences doubling revenues and acreage in 2024, expected similar growth in 2025.

Potash

• Absolute terms: The Esterhazy complex, world's largest potash mine, generates strong cash flow. Belle Plaine potash mine had 100% operating rate and record production in 2024, resolved electrical issues and operates at full capacity now. Expect to complete hydrofluid project in 2025 for additional capacity.
• Revenue contribution %: Not explicitly stated but potash is a key segment with significant cash flow generation.

Phosphate

• Absolute terms: Supply tight, demand strong, prices and stripping margins above historic levels. Fourth-quarter production lower than expected due to hurricane recovery challenges. Aim to restore US phosphate production to historical levels.
• Revenue contribution %: Not explicitly stated but important segment with high margins.

Brazil

• Absolute terms: Fourth-quarter adjusted EBITDA for Mosaic Fertilizantes segment was $82 million. New one million ton blending plant in Paranaguá almost finished.
• Revenue contribution %: Not explicitly stated but business performing well with healthy margins.

Forward-Looking Statements

• Expect constructive ag and fertilizer fundamentals in 2025.
• Potash demand to remain strong due to affordability, crop price trends, and supply reductions.
• Phosphate production volumes expected to improve throughout 2025, reaching 7.2 to 7.6 million tons.
• Target to reach $150 million cost savings, with progress on cost control initiatives.
• Capital expenditures under control, with flat capex in 2025 to address reliability challenges but plans to reduce capex in future years.

Risks

• Canadian Tariffs: Uncertainty around Canadian tariffs and its impact on potash markets.
• Geopolitical Supply Issues: Supply reductions from Laos, China, Belarus, Russia, and uncertainty around additional production from Laos due to mine issues.
• Brazil Credit Risk: Past credit issues with Brazilian retailers, although insurance on bad debt exists.
• Weather Impact: Hurricanes affected phosphate production in the fourth quarter, posing risk to future production.

Q: Chris Parkinson asked about the outlook for global phosphate shipments and the impact of biosciences products.

A: Bruce Bodine and Jenny Wang responded, stating phosphate supply-side limitations drive market constructiveness, and biosciences products like Biopass and PowerCode can help release immobilized phosphate in soil to improve yield even with supply constraints.

Q: Andrew Wong inquired about other assets being considered for monetization and monetizing the Ma'aden investment.

A: Bruce Bodine and Luciano Ciani Perez replied, mentioning ongoing process to evaluate all assets, including Carlsbad potash mine, and exploring ways to monetize Ma'aden shares with constraints but plans to update as decisions are made.

Q: Steve Byrne questioned the outlook for global phosphate shipments and the potential of biosciences products.

A: Bruce Bodine and Jenny Wang answered, highlighting supply-side limitations in phosphate driving market constructiveness and biosciences as complementary to address supply constraints and improve yield.

Q: Anthony asked about maximum potash production potential given upside demand surprises.

A: Bruce Bodine and Jenny Wang responded, stating limited upside on maximum production due to supply chain constraints like rail fluidity and port capacity, with major producers having production cuts and uncertain supply from Laos.

Q: Vincent Andrews inquired about CapEx and working capital.

A: Luciano Ciani Perez replied, stating not happy with current CapEx level, targeting to reduce sustaining CapEx in future years, and expecting working capital buildup in 2025 due to business growth, with cash flows expected to improve in 2026.

Q: Richard Garticarena asked about cost savings from Fertilizantes and credit issues in Brazil.

A: Bruce Bodine and Luciano Ciani Perez answered, mentioning remaining cost savings to be achieved from various areas and focusing on lower-risk customers in Brazil to manage credit issues.

Q: Chris Prell asked about potash tariffs, pricing, and demand.

A: Bruce Bodine and Jenny Wang responded, stating tariffs unlikely to have major impact on demand, price momentum reflected in Q1 and more in Q2 due to selling cycle differences.

Q: Jeff Zekauskas inquired about cash flow shortfalls and coverage of CapEx and dividends.

A: Bruce Bodine and Luciano Ciani Perez answered, attributing cash flow shortfalls to production volume shortfalls and expecting improvement in 2025 with better cash flow coverage.

Q: Edlain Rodriguez questioned potash pricing and farmers' willingness to pay.

A: Bruce Bodine answered, stating price appreciation due to supply-demand dynamics, with market fundamentals changing post-December leading to higher prices, and farmers not overly concerned about tariff impacts due to affordability.

Q: Ben Theurer inquired about Fertilizantes SG&A run rate and insurance reclaims.

A: Luciano Ciani Perez replied, stating SG&A run rate with FX effects, and confidence in recovering insurance reclaims on bad debt in Brazil.

Q: Christian Owen asked about Fertilizantes underlying performance and demand recovery.

A: Jenny Wang and Luciano Ciani Perez answered, stating no major volume change expected from Q1 to Q2, with confidence in Fertilizantes performance due to cost control and expected upside from initiatives.