The Mosaic Co. announced third-quarter net earnings of $841.7 million on revenues of $5.3 billion and adjusted EBITDA of $1.7 billion, below Bloomberg Consensus analyst estimates of a $1.19 billion net income, revenues of $5.76 billion, and $1.88 billion adjusted EBITDA.
Despite the miss, the company’s net earnings more than doubled from the year-ago $371.9 million, while outpacing prior-year revenues of $3.4 billion and adjusted EBITDA of $969 million. Gross margin for the quarter was $1.50 billion, up from $864.5 million.
Mosaic cited a demand dip in the third-quarter phosphate market, as well as reduced production volumes stemming in part from damage sustained from Hurricane Ian.
“Mosaic delivered record sales in the first nine months of 2022, and we expect favorable fundamentals as we conclude the year and look forward to 2023,” said Joc O’Rourke, Mosaic President and CEO. “In our Phosphates business, Hurricane Ian forced us to shut down operations late in the third quarter, which delayed shipments at the end of September. Our team performed admirably and was able to get our Florida operations back up and running quickly following the hurricane. We estimate the shortfall in production to be in the range of 200,000 mt.”
Phosphate sales volumes were down 10% in the third quarter at 1.7 million mt, Mosaic said, while turnarounds and impacts to the company’s Florida-based operations due to Hurricane Ian contributed to a 4% year-over-year decline in production.
Strong potash prices, as well as increases in both MOP production numbers and sales volumes, were a primary driver for the company’s year-over-year earnings increase, the company showed. The average MOP price for the quarter was $666/mt, up 129.7% from the year-ago $290/mt. Sales volumes registered a 16.7% increase, at 2.1 million mt compared to 1.8 million mt in 3Q 2021, while production firmed 43.8%, to 2.3 million mt from 1.6 million mt.
O’Rourke attributed the segment’s price strength to ongoing global supply weakness.
“Global potash supply remains impacted by the significant reduction in Belarusian exports, which we think will be down 8 million mt in 2022,” said O’Rourke. “Of the 4 million mt they will export this year, we estimate about 2 million mt were shipped in the first quarter before the sanctions and Lithuania’s decision to prevent Belarus from using its ports.”
Mosaic anticipated similar conditions continuing into 2023. “If I think about 2023 … with the lack of sales coming out of Belarus, we do see that the market is going to have to ration supply,” said O’Rourke, “which does … bring up an opportunity for us to potentially move more product.
“We have, I think, developed real great flexibility there with Esterhazy now reaching what I would call its full capacity, (and) bringing on Colonsay to augment that capacity and give us some flexibility so that we can hit the seasonality as well as the increased demand. So I think we’re well positioned there,” he added.
The phosphate market continued to be impacted by supply constraints of its own, the company said, citing continued expectations of a full-year export reduction totaling 5 million mt from China, which O’Rourke expected could continue through “at least” the first half of 2023, and possibly beyond.
“While global channel inventories of phosphate and potash remain below historic norms, certain regions – especially in the areas where we do most of our business – inventories built in the first half of the year,” O’Rourke said. “But prices have retreated back to levels low enough to entice growers to step back into the market. We expect inventories to continue working lower through the end of the year and into early 2023.”
While US farmers were previously seen mining their soil, falling fertilizer prices were said to entice growers toward more typical application rates.
“US fall application has been trending back towards normal levels. We believe we could end the season with inventories significantly depleted, especially for phosphates,” said O’Rourke. “The strength of crop prices and more affordable fertilizer prices suggest nutrient demand will recover from the summer lull we experienced during the third quarter.”
For the fourth quarter, Mosaic expects MOP sales volumes of 2.0-2.2 million mt, with mine-gate prices landing in the $580-$630/mt range. Phosphate sales volumes are projected at 1.7-2.0 million mt, with DAP prices anticipated in a $700-$750/mt FOB range. A decline in raw materials prices, specifically sulfur, is expected to improve phosphate margins by $40-$45/mt in the fourth quarter.
Net earnings in the nine-month period were $3.06 billion on net sales of $14.64 billion, above the year-ago $965.8 million and $8.52 billion, respectively. Gross margin was $4.79 billion, rising from $2.05 billion.
| Potash (millions) | 3Q-22 | 3Q-21 |
| Sales Volume (000 mt) | 2.1 | 1.8 |
| Production Volume (000 mt) | 2.3 | 1.6 |
| Gross Margin (million $) | 799 | 236 |
| Operating Earnings (million $) | 793 | 220 |
| Adjusted EBITDA | 871 | 272 |
| Sales (million $) | 1,400 | 589 |
| MOP Selling Price $/mt | 666 | 290 |
| Phosphates (millions) | 3Q-22 | 3Q-21 |
| Sales Volume (000 mt) | 1.7 | 1.8 |
| Production (Finished) Vol. (000 mt) | 1.7 | 1.8 |
| Gross Margin (million $) | 358 | 364 |
| Operating Earnings (million $) | 131 | 326 |
| Adjusted EBITDA | 481 | 479 |
| Sales (million $) | 1,600 | 1,300 |
| DAP Selling Price $/mt | 809 | 605 |
| Mosaic Fertilizantes (millions) | 3Q-22 | 3Q-21 |
| Sales Volume (000 mt) | 2.8 | 3.4 |
| Gross Margin (million $) | 348 | 332 |
| Operating Earnings (million $) | 323 | 290 |
| Adjusted EBITDA | 343 | 317 |
| Sales (million $) | 2,600 | 1,800 |
| Avg Finished Price (Dest.) | 931 | 524 |