The Mosaic Co. announced second-quarter net income of $369 million on revenues of $3.4 billion and adjusted EBITDA of $744 million, below analyst estimates (Bloomberg Consensus) of net income at $385 million and adjusted EBITDA at $746 million, but beating estimated revenues of $3.2 billion.
Net income for the quarter was off 64% from the year-ago $1.0 billion, while revenues fell 37% from the $5.4 billion reported in last year’s second quarter. Adjusted EBITDA dropped 63% year-over-year from $2.0 billion.
The company cited lower selling prices amid the ongoing fertilizer market downturn, noting second-quarter gross margin rates softening to 16.8% from 34.4% in 2Q 2022.
“The investments we’ve made in our business over the last decade are yielding results,” said Mosaic President and CEO Joc O’Rourke. “Our Esterhazy potash complex is now the largest in the world and our Fertilizantes business in Brazil accounts for nearly a quarter of all fertilizer sales in one of the most dynamic ag markets in the world. Mosaic is well-positioned to capitalize on the fertilizer market’s recovery, which is well underway.
“Overall, the fertilizer market recovery is playing out as we expected,” O’Rourke added. “In a tight market, volumes are moving and prices are following. Phosphate prices have risen over the last month, while potash prices have stabilized and are now beginning to move higher.”
Potash 2Q sales volumes of 2.2 million mt were down slightly from the year-ago 2.3 million mt. The average selling price of $326/mt was off 52% from $678/mt in second-quarter 2022, however, leading to a 64% decline in operating earnings for the segment, to $328 million from the last year’s $915 million.
Adjusted 2Q EBITDA for the Potash segment dropped to $408 million from $998 million last year, a 50% decline, while per-tonne gross margin slid 62%, to $155/mt from the year-ago $403/mt. Potash production for 2Q was 1.9 million mt, off 21% from 2.4 million mt in the prior year.
The production decline reflected lost output from Mosaic’s idled Colonsay potash mine, the company said, where production was curtailed in late 2022. Originally penciled to restart in February, Colonsay restarted in July to offset a planned summer maintenance turnaround at its Esterhazy mine, the company announced.
Describing the Colonsay restart as “temporary,” Mosaic was noncommittal regarding future plans for the mine.
“For now, Colonsay needs to run to reestablish our inventory levels to where they would have been previous to the Esterhazy shutdown,” O’Rourke said. “We’ll run Colonsay first to fill that, then to make up the gap of what we had … in Q2, and what we’re seeing for the summer fill in Q3. So I would say for the foreseeable future, we could see Colonsay running. But again, I’m not going to run an operation for the sake of running it.”
Outputs at Colonsay were reported at 1.3 million mt/y prior to the curtailment (GM Dec. 9, 2022). Nameplate production capacity at Esterhazy was confirmed at 7.8 million mt/y in the second quarter by an independent third party, Mosaic said.
Mosaic noted a 15% increase in second-quarter Phosphate segment sales volumes, to 1.9 million mt from the year-ago 1.7 million mt. Net sales declined to $1.3 billion, however, down 28% from the year-ago $1.8 billion.
“In North America, a strong spring application season depleted fertilizer inventories, which customers are now looking to replenish,” O’Rourke said. “Logistical constraints associated with low water levels on the Mississippi River and limited trucking capacity persist, but favorable grower economics are leading retailers to secure supplies early to avoid any backups.”
The average selling price for DAP fell 36% year-over-year, to $585/mt from $920/mt, while gross margin per tonne plummeted 71%, to $112/mt from the year-ago $383/mt. Adjusted EBITDA for the Phosphate segment dropped 49%, to $385 million from $758 million in 2Q 2022. Production volumes of finished phosphates firmed 1% in the quarter, to 1.7 million mt.
Net earnings for the January-June period totaled $803.8 million on net sales of $7.0 billion, down from the year-ago $2.2 billion and $9.3 billion, respectively. Gross margin for the six-month period was $1.2 billion, off 62% from $3.3 billion.
Looking ahead, Mosaic expects third-quarter potash sales volumes of 2.1-2.3 million mt, with mine-gate prices landing in the $250-$300/mt range. Third-quarter phosphate sales were projected at 1.7-1.9 million mt, with average DAP pricing anticipated at $475-$525/mt FOB. Lower raw materials costs were expected to positively influence phosphate margins in the third quarter, the company said.
Citing the ongoing war in Ukraine, Mosaic expects the grain and oilseed markets to remain tight through the end of the year and likely into 2024, suggesting continued pressure in global stocks-to-use ratios. With crop prices driven higher in the prevailing fundamental landscape, the low prices observed in the potash and phosphate markets during the second quarter have led to favorable grower economics.
Supply constraints are expected to remain a force in the market, however. Mosaic noted expectations of a 5-6 million mt reduction in potash exports from Belarus compared to pre-war exports, while in North America, export rates were predicted to decline due to constraints at western ports, including the dockworker strike at Vancouver.
“Canpotex is making use of alternative ports in Canada and in the southern and eastern United States to mitigate some, but likely not all, of the impact on international shipments,” O’Rourke said.
Despite a projected increase compared to 2022, Mosaic expects phosphate exports from China to remain well below 2021 totals. “In both phosphates and potash, the fundamental tightness in global markets is expected to persist through 2023 and likely beyond,” the company said.
“Around the world, weather extremes are having a profound effect on crop production,” O’Rourke noted. “North American yields this year could be negatively impacted by dry conditions, and El Niño is hurting production across Southeast Asia and Australia. This situation is exacerbated by under-application of nutrients, especially potash, which is crucial for drought resistance and crop resilience.
“To maximize yields and meet global consumption needs, growers need to increase cropping intensity, which will mean increasing fertilizer applications,” O’Rourke added. “The world can’t afford multiple years of under-fertilization and crop production shortfalls.”
| Potash (millions) | 2Q-23 | 2Q-22 |
| Sales Volume (000 mt) | 2.2 | 2.3 |
| Production Volume (000 mt) | 1.9 | 2.4 |
| Gross Margin (million $) | 338 | 928 |
| Operating Earnings (million $) | 328 | 915 |
| Adjusted EBITDA | 408 | 998 |
| Net Sales (million $) | 849 | 1,600 |
| MOP Selling Price $/mt | 326 | 678 |
| Phosphates (millions) | 2Q-23 | 2Q-22 |
| Sales Volume (000 mt) | 1.9 | 1.7 |
| Production (Finished) Vol. (000 mt) | 1.7 | 1.7 |
| Gross Margin (million $) | 216 | 642 |
| Operating Earnings (million $) | 146 | 578 |
| Adjusted EBITDA | 385 | 758 |
| Net Sales (million $) | 1,300 | 1,800 |
| DAP Selling Price $/mt | 585 | 920 |
| Mosaic Fertilizantes (millions) | 2Q-23 | 2Q-22 |
| Sales Volume (000 mt) | 2.4 | 2.3 |
| Gross Margin (million $) | 13 | 450 |
| Operating Earnings (Loss) (million $) | (20) | 420 |
| Adjusted EBITDA | 66 | 444 |
| Net Sales (million $) | 1,400 | 2,300 |
| Avg Finished Price (Dest.) | 595 | 974 |