The Mosaic Co. on May 3 announced first-quarter adjusted EBITDA of $777 million, falling below the Bloomberg Consensus, the average estimate by major analysts, which was $805 million. Mosaic posted adjusted earnings per share (EPS) of $1.14, missing analyst estimates by a dime. Mosaic, however, exceeded analyst expectations on revenues at $3.6 billion versus $3.24 billion, and matched their average on net income at $435 million.
Never mind that Mosaic beat the revenue estimate and those for potash and phosphate volumes and matched net income – company shares fell 10% on May 4, its biggest intraday slide since November 2022, according to Bloomberg, which reported that earnings per share missed Barclays analyst Benjamin Theurer’s estimates “despite top line results beating our expectations by a wide margin.” He noted lower prices and “somewhat” higher volumes, and that the bottom line was down “across the board on a consolidated level,” with misses in operating income and adjusted EBITDA.
Year-ago first-quarter net income was $1.18 billion on revenues of $3.9 billion with adjusted EBITDA of $1.45 billion, all far surpassing the 2021 quarter’s $157 million, $2.3 billion, and $560 million, respectively.
“Mosaic delivered another strong first quarter,” said President and CEO Joc O’Rourke. “While fertilizer prices have pulled back from last year’s peak levels, they remain constructive. At the same time, North American fertilizer demand has accelerated as growers are being incented to maximize yields.”
Mosaic said grain and oilseed markets are expected to remain tight through 2023 and likely beyond, citing the disruption in Ukraine’s production as well as sub-optimal weather in major growing regions like the Americas, Europe, and China. It said this suggests that global stocks-to-use ratios, already projected at 25-year lows, will remain under pressure.
Mosaic said North American spring nutrient application rates are trending toward normal levels. Mosaic said its own April shipments to North American customers have recovered significantly from last year and represent the highest April shipments in the last five years, with this trend continuing into May. “Combined, Mosaic shipped over 1 million tons of potash and phosphate to North American customers in April alone,” O’Rourke told analysts.
In Brazil, Mosaic said an attractive fertilizer-to-soybean barter ratio suggests a significant recovery in fertilizer shipments in 2023. It also expects movement soon for the safrinha season, which begins in the third quarter.
Mosaic sees constraints on both potash and phosphate production, with annual shipments from Belarus down 5-6 million mt from pre-sanction export rates. O’Rourke said the company continues to see indications of reduced Russian production. Mosaic expects only a modest recovery in Chinese phosphate exports, citing domestic production, rising industrial demand, and environmental restrictions.
While first-quarter potash sales volumes were up, production was down, with the company saying this reflected the idled Colonsay mine. Mosaic said the mine’s restart has been pushed to the second half from the first half (GM Feb. 24, p. 1), though O’Rourke said much depended on international demand and whether those markets “heat up” or are lackluster. “I don’t want to be stuffing product into a market where there isn’t a buyer or we just actually destroy the market we are in,” he told analysts.
At the Esterhazy mine, he said the last of the 13 mines is expected to come online later this year, with Esterhazy’s production rate going from 5.5 million mt to well over 6 million mt by the end of 2023. The Belle Plaine mine adds another 3 million mt. As a result, the company will have 9 million mt of production without Colonsay.
Mosaic expects second-quarter potash sales volumes of 2.0-2.2 million mt with realized mine-gate prices of $325-$375/mt. It said second-quarter shipments are expected to reflect a higher percentage of lower-priced export sales.
Mosaic said first-quarter phosphate production was the best quarterly production since 2021, as operations recovered from second-half 2022 disruptions that were resolved in the early part of the quarter.
Second-quarter phosphate sales volumes are expected to be 1.8-2.0 million mt, with DAP FOB prices averaging $550-$600/mt. Lower raw material prices are expected to provide a sequential benefit during the quarter.
Mosaic Fertilizantes posted a negative gross margin of $1 million during the first quarter, with the company attributing this primarily to a concerted effort to destock high-cost inventory in the distribution business. It said this is now largely complete, and margins are expected to return to more normalized mid-cycle levels in the second quarter.
During the first quarter, Mosaic returned $608 million to shareholders, with $456 million via share repurchases and $152 million by special and regular dividends. The regular dividend is $0.80 per share, and Mosaic said its business position is to consider further increases over time.
| Potash (millions) | 1Q-23 | 1Q-22 |
| Sales Volume (000 mt) | 1.9 | 1.8 |
| Production Volume (000 mt) | 1.9 | 2.2 |
| Gross Margin (million $) | 413 | 579 |
| Operating Earnings (million $) | 402 | 563 |
| Adjusted EBITDA | 474 | 651 |
| Sales (million $) | 907 | 1,100 |
| MOP Selling Price $/mt | 421 | 582 |
| Phosphates (millions) | 1Q-23 | 1Q-22 |
| Sales Volume (000 mt) | 1.8 | 1.7 |
| Production (Finished) Vol. (000 mt) | 1.8 | 1.7 |
| Gross Margin (million $) | 259 | 528 |
| Operating Earnings (million $) | 266 | 493 |
| Adjusted EBITDA | 382 | 632 |
| Sales (million $) | 1.4 | 1.5 |
| DAP Selling Price $/mt | 660 | 785 |
| Mosaic Fertilizantes (millions) | 1Q-23 | 1Q-22 |
| Sales Volume (000 mt) | 2.1 | 1.8 |
| Gross Margin (million $) | (1) | 219 |
| Operating Earnings (million $) | (32) | 187 |
| Adjusted EBITDA | 3 | 233 |
| Sales (million $) | 1.3 | 1.5 |
| Avg Finished Price (Dest.) | 646 | 817 |