Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Mosaic Co (MOS, Financial) successfully navigated through three hurricanes with no safety incidents or significant environmental damage, quickly restoring operations.
- The company generated $2.8 billion in revenue for the third quarter, with a net income of $122 million and adjusted EBITDA of $448 million.
- Mosaic Biosciences is experiencing accelerated growth, with products now used on 9 million acres globally, and is largely self-funding.
- The company is on track to achieve its $150 million annual run rate cost savings target by the end of 2025 and a $200 million reduction in CapEx this year.
- Mosaic Co is optimistic about the agriculture and fertilizer market outlook for 2025, expecting strong demand and constructive market fundamentals.
Negative Points
- The third quarter was challenging due to hurricanes and electrical issues at potash mines, impacting production levels.
- Lower potash prices and a delayed agriculture recovery in Brazil contributed to reduced adjusted EBITDA.
- The company recorded $32 million in bad debt reserves due to a Brazilian customer's bankruptcy, impacting Mosaic Fertilizantes' EBITDA.
- Phosphate production was affected by Hurricane Milton, resulting in a loss of about 250,000 tonnes, impacting fourth-quarter volumes.
- The potash segment saw a decline in adjusted EBITDA compared to the previous year, driven by lower prices and production disruptions.
Q & A Highlights
Q: What is the current state of agriculture and fertilizer markets, and what is your outlook for next year?
A: Bruce Bodine, CEO, stated that agricultural fundamentals are solid, and fertilizers are affordable, which bodes well for demand. Significant changes to phosphate supply will keep the market tight into next year, and the potash market is balanced. Jenny Wang, EVP Commercial, added that strong fundamentals for crops like palm oil, sugar, and coffee support fertilizer demand. In Brazil, domestic corn and soybean prices are strong due to bioethanol demand, and biofuel policies are expected to drive further demand.
Q: Assuming you achieve your target phosphate production run rate in the fourth quarter, how should we think about production volumes moving forward?
A: Bruce Bodine, CEO, confirmed that they expect to achieve the target run rate by the end of the quarter. The production level will be sustainable but may vary quarterly due to turnaround schedules. They have some turnaround activities planned for the first quarter of next year, which will result in lower production initially but will be made up during the year.
Q: What is your exposure to future credit losses in Brazil, given the $32 million bad debt recorded this quarter?
A: Bruce Bodine, CEO, indicated that Mosaic has limited risk to further credit losses. They have reduced exposure to retailers most impacted by credit issues and employed additional risk mitigation measures, such as requiring prepayments. They also use credit insurance programs to mitigate potential losses.
Q: Can you elaborate on the biosciences segment and its potential for growth?
A: Bruce Bodine, CEO, expressed excitement about the biosciences segment, which is seeing accelerated growth. Jenny Wang, EVP Commercial, explained that the products, such as PowerCoat and BioPath, improve nutrient use efficiency and are used in North and Central America. The pipeline includes nitrogen fixation materials and products to improve phosphorus solubility, indicating potential for long-term growth.
Q: What is your outlook for potash demand and supply in 2025, and how much can Mosaic supply?
A: Bruce Bodine, CEO, noted that they expect market growth of 1.5 to 2 million tonnes next year, with additional capacity from Laos and some from Russia and Belarus. Mosaic's Esterhazy and Belle Plaine mines should produce around 9 million tonnes, with Colonsay as a flexible option to cover any additional demand or unforeseen supply issues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
