All Posts from May 3, 2024

Mosaic Earnings Fall; Riverview Back to Full Capacity

The Mosaic Co. posted first-quarter net earnings of $45 million, down sharply from $435 million in first-quarter 2023. Revenues were $2.7 billion for the quarter, off 26% from the first quarter of 2023, while adjusted EBITDA of $576 million fell from the year-ago $777 million.

Net earnings and revenues tracked below analyst estimates (Bloomberg Consensus) of $225 million and $2.8 billion, respectively, though adjusted EBITDA fell in line with expectations. Mosaic shares on May 2 fell to $27.88 in early trading, a 6.8% decline from the $29.93 prior-day close, the lowest share price since February 2021.

“Mosaic delivered a solid first quarter,” said Bruce Bodine, Mosaic President and CEO. “For the remainder of the year, we will focus on execution and the completion of previously announced low-capital-intensity initiatives that build on our strengths.”

Mosaic partially attributed its lower net earnings to an after-tax impact of items totaling $165 million, including a foreign currency transaction loss, an unrealized loss on derivatives, and an adjustment to environmental reserves. It also cited a sharp year-over-year decline in potash prices, as well as lower prices and sales volumes in the Phosphate segment.

In addition to the special after-tax losses, a 43% year-over-year decline in potash prices – to $241/mt from $421/mt in first-quarter 2023 – contributed to the earnings decline. The lower prices were partially offset by a 16% rise in sales volumes, to 2.2 million mt from 1.9 million mt, as well as a decline in Canadian resource taxes.

Due to the week potash market, the company in March announced a production curtailment at the Colonsay potash mine in Saskatchewan, intending to leave the mine idle until market conditions improve. Mosaic previously reported a commitment to flexibly managing its network to assure that lower-cost mines like Belle Plaine and Esterhazy operate at capacity, while Colonsay is utilized only when market conditions dictate (GM Feb. 23, p. 26).

Phosphate sales volumes fell 11% in the first quarter, to 1.6 million mt from last year’s 1.8 million mt. A 9% decline in the average DAP price, to $598/mt from $660/mt, helped drag net sales to $1.2 billion from the $1.4 billion posted one year earlier, a 14% decline. Finished phosphate production fell 14%, to 1.6 million, due to an increase in planned maintenance turnaround activities during the quarter.

Repairs to the Riverview phosphate fertilizer production facility in Florida were completed in late April, the company said, returning the plant to full production. Mosaic on March 27 reported limited damage to ancillary operations from a brush fire that week, predicting production impacts lasting four to six weeks. Riverview has capacity to produce approximately 30,000 mt of phosphate products per week (GM March 29, p. 31). At the time of the fire, the facility was reportedly configured to produce phosphate products primarily for export to Brazil.

“Some reduction” in second- and third-quarter sales volumes are expected as a result of the fire, though the company described the overall impact as minimized. “Our second-quarter guidance reflects the impacts of the fire, the ongoing turnaround activity, and the seasonal softening in the US, partially offset by improvements in Brazil,” said Bodine.

In the Mosaic Fertilizantes segment, the company reported first-quarter sales volumes of 1.7 million mt compared to 2.1 million mt in 2023, while net sales dropped 32% year-over-year, to $886 million from $1.3 billion. In a bright spot, gross margin firmed to $75 million in the quarter, up from a year-ago loss of $1 million, while both operating earnings of $42 million and segment adjusted EBITDA of $83 million firmed from a loss of $32 million and positive $3 million, respectively.

Other project updates included the first-quarter completion of an 800,000 mt MicroEssentials capacity conversion, with production slated to begin in May. In the longer-term, an effort to increase milling capacity by 400,000 mt at Esterhazy is on track for completion in mid-2025, the company said, while a 1 million mt blending facility under construction in Palmeirante, Brazil, is on schedule to be completed in 2025.

Mosaic expects its core fertilizer markets to strengthen during the second half of the year. “Despite the seasonal reset of the market as we transition out of North America planting season, our outlook for the year is positive,” Bodine said.

“Fertilizer market fundamentals remain constructive, and the phosphate supply and demand picture is particularly compelling,” he noted. “As the North America spring planting season winds down and fertilizer prices have moderated, fertilizer demand strength is now emerging in other key agricultural geographies, which will bode well for pricing in the second half of the year.”

For the second quarter, Mosaic expects potash sales volumes in the 2.2-2.4 million mt range with mine-gate prices of $210-$250/mt. Phosphate sales volumes are projected at 1.6-1.8 million mt, with ex-plant DAP prices forecast in the $530-$580/mt range. Conversion and turnaround costs for phosphate production will likely remain elevated in 2Q due to continued efforts to increase production volume, the company said.

Mosaic returned $178 million of capital to shareholders during the first quarter, representing 88% of its free cash flow, which included share repurchases totaling $108 million.