The Mosaic Company
Analysis
Mosaic is idling phosphate plants because the sulfur they need costs more than the fertilizer earns. Potash, cost cuts and asset sales are carrying the company while it waits for two years of skipped fertilizer to force a rebound. How much of the third quarter sulfur need is locked in already?
- Mosaic is deliberately making less phosphate.
The limit is not demand, it is sulfur: with spot prices above what fertilizer can pay, management cut output at Bartow and Louisiana and pulled back in Brazil. Revenue falls now, but the company avoids selling tonnes at a loss. How much phosphate capacity could restart within weeks if sulfur eases?
- Potash is now the stable half of the company.
Potash was untouched by the conflict. Canpotex sold out through June and is on pace for a record year, and Esterhazy's HydroFloat tonnes should pull unit costs lower, so potash is what funds the phosphate shutdowns.
- Cash, not earnings, is the pressure point.
Capex guidance has been cut twice and costs are falling, but free cash flow has been negative for four straight quarters and net debt has climbed to $4.5 billion. The wait is funded by the balance sheet, not by cash the business makes. How much of that inventory release has already shown up in cash?
- Phosphate supply stays shortGlobal phosphate supply stays short as China restricts exports and little new capacity is built, so Mosaic's tonnes find buyers even when farmers push back on price.
- Potash carries the earningsPotash supply and demand are balanced, Esterhazy's expansion lowers unit costs and Canpotex is sold out, giving steady cash while phosphate is curtailed.
- Raw material access beats peersMosaic buys most sulfur molten from U.S. Gulf refineries and most ammonia from its own plant or gas-linked contracts, so it runs when competitors cannot.
- Sulfur sets the production levelSulfur availability and price, not phosphate demand, now decide how much Mosaic produces, and management idles plants rather than buy raw material at spot.
- Nutrient under-applicationFarmers in North America and Brazil have cut phosphate application for two seasons, shrinking the demand base Mosaic's idled volumes would return to.
- Free cash flow and leverageWorking capital and heavy capital spending have left free cash flow negative and net debt higher, so buybacks stay deferred until the balance sheet improves.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$15K | May 22 | Jul 1 |
Ro Khanna Democratic · House · CA-17 | Purchase | ≥$1K | Jul 20 | Aug 7 |
Ro Khanna Democratic · House · CA-17 | Purchase | ≥$1K | Jul 7 | Aug 7 |
Alan Armstrong Republican · Senate · OK | Purchase | ≥$1K | Mar 27 | Jul 21 |
Ro Khanna Democratic · House · CA-17 | Sale | ≥$1K | May 27 | Jun 9 |
Congressional trading data provided by QuiverQuant
How The Mosaic Company turned $12.1B of revenue into $821.5M of operating income.
| Revenue | ||
|---|---|---|
| Mosaic Fertilizantes | $4.8B | ▲ 9.61% YoY |
| Phosphates Segment | $4.6B | ▲ 1.28% YoY |
| Potash Segment | $2.7B | ▲ 11.43% YoY |
| Total revenue | $12.1B | |
| Gross profit | $1.9B | 15.8% |
| Operating income | $821.5M | 6.8% |