Q1 2025 Mosaic Co Earnings Call
Speaker Change: Good morning, and welcome to the Mosaic Company's first quarter 2025 conference call.
Speaker Change: All participants will be in the listen only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.
Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Jason Tremblay, please go ahead [inaudible]
Jason Tremblay: Thank you, and welcome to our first quarter, 2025 Earning School
Jason Tremblay: Opening comments will be provided by Bruce Bodine, President and Chief Executive Officer. Jenny Wong, Executive Vice President, Commercial, will then cover the market update.
Jason Tremblay: Luciano Ciani Perez, Executive Vice President and Chief Financial Officer, we review financial results and capital allocation progress. We will then open the floor for questions.
Jason Tremblay: We will be making forward-looking statements during this conference call. The statements include, but are not limited to statements about future financial and operating results. They're based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties. The statements include, but are not limited to statements about future financial and operating results.
Jason Tremblay: Actual results made different materially from projected results. Actors that could cause actual results to different materially from those in the forward-looking statements are including our press release published today and in our reports filed with the Securities and Exchange Commission.
We will also be presenting certain non-GAAP financial measures.
Jason Tremblay: Her press release and performance data also contain important information on these non-GAF measures.
Now I'd like to turn the call over to Bruce.
Bruce Bodine: Good morning, and thanks for joining our call. I'll start with our key messages for today.
First, fertilizer fundamentals are compelling, and prices are rising.
Bruce Bodine: Despite the uncertainty around global trade policies, fertilizer demand is very strong in every key growing region of the world.
Bruce Bodine: You can see plenty of evidence of this important strategic advantage .
Bruce Bodine: Our business in Brazil is performing exceptionally well. We've increased our potash production outlook to meet demand around the world, and our mosaic biosciences business continues to grow at a brisk rate.
Bruce Bodine: And finally, our work to shed non-core assets and reallocate capital is continuing to take shape.
Bruce Bodine: To cover our first quarter results, net income was $238 million, and adjusted EBITDA came in at $544 million.
Bruce Bodine: The quarter's results underscore very strong phosphate prices, improving potash prices, and excellent performance in the mosaic for Laissance segment.
Bruce Bodine: And remember, the first quarter is traditionally our seasonally slowest quarter of the year.
Bruce Bodine: We expect earnings soon prove further from our strong start to 2025.
Bruce Bodine: Let's take a few minutes to review market fundamentals at a high level as well as our progress towards our operating goals.
Speaker Change: Jenny will go deeper into the markets, and Luciano will discuss financial results, financial strategy, and our capital reallocation journey.
Speaker Change: Our market outlook remains positive. Ag commodity fundamentals and fertilizer demand are solid around the world.
Speaker Change: with sustained supply constraints in phosphate. Prices in stripping margins remain elevated compared to historical norms.
Speaker Change: and with supply reductions from several major potash producers, as well as robust demand, potash prices are rising.
Speaker Change: In fact, first quarter realized prices of $623 per tonne for phosphate and $223 per tonne for potash exceeded our guidance ranges
Speaker Change: The strong performance of mosaic pro lasanches was also helped by the realization of higher prices.
Speaker Change: is no secret that global trade conflicts and other geopolitical forces have intensified in the past few months.
Speaker Change: As we continue to monitor the latest developments and evaluate the impact, especially in the US agriculture sector, we believe we are well positioned to navigate these dynamics.
Speaker Change: Our expansive market access, especially our strong presence and long history of operating in Brazil and our supply chain agility will prove to be important strategic advantages as we navigate shifting trade flows.
Speaker Change: While Trade continues to grab headlines, I can't emphasize enough that Mosaic is built for the long haul.
The long-term market fundamentals and operating backdrop remain constructive [inaudible]
Speaker Change: For example, biofuel mandates around the world continue to advance and that growth is expected to contribute significantly to global grain and oil seed demand.
Speaker Change: Fossvate demand is also driven by rising lithium iron phosphate production in China, which grew 55% in just the first quarter of this year and continues to limit the amount of phosphate available for export.
Speaker Change: As a result, the phosphate market remains tight. And while tariffs could disrupt trade flows, they cannot create more phosphate supply.
Speaker Change: Now, let's move on to the progress we are making toward normalizing production and cost.
Speaker Change: Improving our asset reliability and being disciplined in our cost management remain our key focus areas.
Speaker Change: Impadash, the SRA's complex continues to generate strong cash flow across the commodity cycle.
Speaker Change: It clearly benefits us to produce every time we can at Esther AZ, and we're investing to do just that.
Speaker Change: We expect to complete the 400,000 ton per year hydrofloat project soon.
Speaker Change: It is expected to increase our production volumes for Mr. Hazy and improve our product mixed flexibility, allowing us to maximize our netbacks while driving our pertun costs lower.
Speaker Change: We're on track to achieve our production cost per ton target this year.
Speaker Change: In phosphate, we produce 1.4 million tons in the first quarter of 2025.
Speaker Change: The Barto and New Wales Plants experience a substantial downtime for planned turnaround and other reliability improving work during the quarter.
Speaker Change: That said, March was the third strongest production month in the past 18 months and we are maintaining our 2025 production volume outlook in the 7.2 to 7.6 million time range.
Speaker Change: As production improves throughout the year, our conversion cash cost per ton is expected to decline.
Speaker Change: Mosaic for lasantes delivered a very strong operating performance in the first quarter, with conversion and production unit costs declining year over year.
Speaker Change: As cost measures yield further benefits, we expect to achieve our full year unit cost targets. In fact, we expect further improvements in segment profitability in the second quarter.
Speaker Change: Now, let's move on to talk about how we're leveraging our market access to redefine growth.
Speaker Change: While operating initiatives will drive significant value creation in the near term, Mosaic also has substantial opportunities beyond the near term to grow in new markets with new products and from new sources.
Speaker Change: Our expansive Brazil footprint positions us well for growth and to navigate the current geopolitical tensions.
Speaker Change: Armosek, for Lizanche's volumes, returned to year-over-year growth in the first quarter. And with our new Palmeranche blend plant, expected to be complete in July , we expect further growth in the remainder of the year.
Speaker Change: In fact, we have already sold over 50% of the additional tons that are expected from the Pomerangie facility this year.
I should also mention that the operating environment is compelling [inaudible]
Speaker Change: With the current good farm economics, we now expect approximately 15% sales volume growth this year.
Speaker Change: Mosaic biosciences had a strong quarter with revenue more than doubling over the prior year and on track to double for the full year driven by surging sales for our existing products and new product launches in our key markets.
Speaker Change: Late last month, Mosaic biosciences brought Neptunian to the market in China. Neptunian is a bio stimulant that helps crops address abiotic pressure such as drought, salinity, and heat by adding stress-resistant properties into water soluble fertilizers.
Speaker Change: Neptuneian is currently in the registration process in India and Brazil .
Speaker Change: We are succeeding at engaging growers around the world and demonstrating through extensive field trials that our biological products deliver meaningful yield and value benefits.
Speaker Change: Moving on to our Portfolio review and cash return focused initiatives.
Speaker Change: You saw the list of assets we shared at our investor day in March.
Clearly, we have significant potential for future monetization. Thank you.
Speaker Change: The conclusion of the modern transaction gave us a transparent value for our investment, which is about $1.5 billion as of today.
We announced the Pathos Domingo Sale earlier this year.
Speaker Change: Our pursuit of strategic alternatives for our potash mine in Carlsbad, New Mexico, is proceeding well, and we continue to assess the performance of assets such as Aresha, Patrocineo, and Takori in Brazil.
Speaker Change: Finally, let me spend a moment addressing Capitol allocation and Capitol return to shareholders.
Speaker Change: Pre-Caselo generation was constrained by typical working capital seasonality in the first quarter.
Speaker Change: We continue to expect CAPEX of $1.2 to $1.3 billion this year, and we anticipate free cash flow conversion will improve in the remainder of the year.
Our commitment to return excess capital to shareholders is unchanged.
Speaker Change: Now, Jenny will provide a more in-depth update of agriculture and fertilizer markets.
David
Speaker Change: Thank you, Bruce. Act fundamentals, continue to be robust, despite significant uncertainties in the market due to global trade policies.
Speaker Change: Price is for the most important add commodities, while Volotel has moved broadly sideways for the past six months and remains supportive to demand as to grow our worldwide, remaining incentivized to push yields higher.
as Global Stocks Reuse Ratio Remains Multi-Decate Low [inaudible]
Speaker Change: It is also important to note that global air commodity demand tends to be less impacted by global macroeconomic fluctuations.
Speaker Change: The North American Spring season is expected to see a typical demand for both PNK, with limited channel inventory mining when plunking wraps up in the next couple of weeks.
Speaker Change: We're watching the potential for demand to face some hate wins in the second half of this year due to more challenging fertilizer affordability.
Speaker Change: Driven by lower-accommodity prices in the US, as green and oil-seeds importers like China have shifted their buying to other exporters.
Speaker Change: For example, China increased in purchases of Brazilian soybeans as opposed to US soybeans.
Speaker Change: In fact, Brazilian-grower economics are quite constructive, despite the general weakness in global soybean prices [inaudible]
Speaker Change: We have learned talked about the natural hatch of market access across key agriculture regions provided by Mosaic's operating model in situations just like this.
Speaker Change: Growers in Brazil are enjoying at commodity prices at the meaningful premiums to prices quoted in Chicago.
Speaker Change: As such, providers shipments into Brazil are expected to set another record with total NPNK shipments likely to exceed 47 million tons
Speaker Change: Purchases of PNK for the upcoming Stafford season are running 10% higher than the year ago.
and Outwear in the Ward. [inaudible]
Grover economics also look compelling. [inaudible]
Speaker Change: Domestic agriculture is saying additional focus and support in many smaller and mid-scale producing countries.
Speaker Change: with their eye towards insulating food security from volatile geopolitical and trade at the moment.
Now, a cup of examples.
Pam, all your producer economics are solid, a low inventory and a low inventory.
Driven by continued robust domestic and export demand.
Speaker Change: Indian farmer returns are also solid given supportive government policies and domestic act product prices [inaudible]
Speaker Change: And after 2024, a year in which Indian farmers were left with low phosphate fertilizer supply availability due to an insufficient subsidy program that kept import volume subdued.
Speaker Change: The Indian government has this year stepped forward with more supportive policy
Speaker Change: We believe, under this more supportive environment, that India will see a far-fetched demand return to a more historically normal input level of 6.4 million times.
Up 40% year over year. [inaudible]
Speaker Change: What demand for P&K appears while supported? Supplies continue to look tight.
for phosphate. [inaudible]
Speaker Change: Chinese export of DAP and MAP remains subdued and are not expected to return with any significance and due to some of the events that are going to happen.
Ash has been the case in recent years.
Speaker Change: Strong domestic fertilizer demand and that the diversion of phosphate molecules into industrial uses like RFP continues to provide a structure change in the availability of Chinese high analysis phosphate fertilizer exports. [inaudible]
Speaker Change: As Bruce mentioned, regarding LFP, production was up 50% year-on-year in Q1
Speaker Change: In part hash, we have seen production expectations take lower in 2025, from some key suppliers like Russia, China and Chile, what questions about sustainability of higher production from
Speaker Change: exports from Belarus were on the higher end of the expectations in Q1. [inaudible]
Speaker Change: So we're watching full the supply impact from non-dimensional there to be realized in Q2.
Speaker Change: From a pricing standpoint, we believe that both P and K will continue to find support at current levels. In fact, we don't anticipate a meaningful summer field reset if any in the U.S. market.
Speaker Change: On the raw materials front, suffered remains firm, with the latest of spot prices, suggesting prices may stay elevated for longer duration. We expect so for prices were normalized by end of the year.
Speaker Change: Conversely, ammonia supply is ramping and prices continue to shift lower. With this backdrop, unsweeted benchmarks, roofing margins are expected to remain elevated.
Speaker Change: In summary, at commodity, phosphate and potash market fundamentals remain compelling and the Mosaic expects manageable impacts from government and trade policies.
Now I'm turning the call to Luciano.
Thank you, Jenny.
First, some housekeeping.
Speaker Change: You will notice that we added cos-per-ton metrics to our release.
with reconciliation tables to U.S. gap metrics at the end.
Speaker Change: We intend to track and discuss closely with you our progress in those metrics going forward.
Speaker Change: Now on to the performers. As you can see by the numbers are phosphated in part of segments out performed in real life sales prices compared to our own guidance given in the last earnings call.
Speaker Change: I guess there's no surprises here as you're certainly following the tight supply and demand situation.
The recent upboard training prices.
Speaker Change: And in Q1, we work conducting the maintenance and reliability improvement projects in our facilities to support increasing volumes for the future and that impacted costs.
for the fast-fit segment.
Speaker Change: Starting by the mines, the United States blended rock costs per time was low, $77 in the first quarter.
Speaker Change: hurricanes well behind us. We have very strong mining output in Q1 and this is continuing. So these lower rock costs
Speaker Change: They will work through inventory and will reflect favorably in our financial results in the next few quarters.
The cash conversion cost per ton was $134.00 [inaudible]
Speaker Change: That increase was caused by lower production volumes and higher operating expenses
to restore asset reliability by design and widely communicated.
Speaker Change: Going forward, we expect to drive costs down towards our range of 95 to $100 run rate.
By your end.
as production output improves throughout the rest of the year.
What a bottom segment, again in the cross-front. Now, let's go on.
Speaker Change: The production cash cost per ton was $78 up from $72 per ton in the prior year quarter.
Speaker Change: During the quarter, we could take a production in response to the cold weather in Saskatchewan.
Speaker Change: Ray Ways could not move the products, finished product where houses were full, we could not keep producing, so we had to stop production.
and we also pull forward repair maintenance work during this downtime. So between...
Speaker Change: This additional work and the lower fixed cost absorption, the production cash cross per ton was higher year over year.
Speaker Change: Looking to the remainder of the year, we expect those unit production costs to the client? [inaudible]
Reaping the benefits of the Hydroflow project.
Speaker Change: We're still very much on track to achieve our target of $64 to $69 for time.
Speaker Change: Homosexual Disanges are Brazilian business. The improvement story is already developing. [inaudible]
Speaker Change: We communicated you will remember in our last earnings call that adjusted EBITDA would have an uplift in Q1 because in Q4 it was impacted by a 35 million negative effect from foreign exchange variations.
Speaker Change: That is exactly what happened, but just a little bit that came in on 122 million [inaudible]
Speaker Change: Despite still having a negative effects effect on payables and currency hedges of 18 million. So, last quarter, 35 million, this quarter, 18.
Still there. [inaudible]
And that allowed us to stop importing expensive rock.
Speaker Change: Conversion costs staged somewhat flat compared to Q4 which was already substantially lower than in prior quarters, so we're good here.
Looking forward to Q2. Thank you.
Speaker Change: Vincent will come in much stronger. Why is that? First seasonality.
Speaker Change: If sales increase by 30% for example, as we saw in 2024,
Speaker Change: Distribution margins returned to the normalized $30 to $40 range. Remember in Q1, it was more into the $20 to $30.
and if the F-Facts hit reduces further...
Speaker Change: presuming the FX remains stable. It's very reasonable to expect that Q2, maybe that for for teenagers will be above 150 million.
Speaker Change: I can walk you through the math in the Q&A if you want. [inaudible]
Speaker Change: Now moving on to SGNA and our progress on the overall 150 million cost savings target.
Speaker Change: Compared to a year ago, SGNA had about a 16 million negative variance in a quarter.
Primarily due to a revaluation of some...
Speaker Change: of standing incentive programs. The share price increase, we had to record this known cash.
Expense,
Speaker Change: Other than that, chorus she innate the crime, albeit at a slower pace. [inaudible]
Speaker Change: As you may, reductions should accelerate in Q3. Once we start automating a lot of activities, following the introduction of our new software platforms that we discussed during our investor day march.
and thus,
We expect SG&A to be down for the full year.
Speaker Change: or 90 million US dollars of the 150 million in annual cost savings target. Remember, this 150 is a run rate cost savings.
When compared, and that is compared to the 2023 baseline, half of these...
Ninety Minus Savings were contributed by Mosaic Fetchy's results. [inaudible]
and within that, [inaudible]
Speaker Change: But 20 million was a result of consuming a higher volume of internally produced rock that we mentioned before. So, 45 from Mosaic Fittis Arches out of which 20 from better rock sourcing versus important. The other half of the 90 million savings was a result of lower S.G.N.A. compared to the 2023 baseline.
Want to catch flows?
Speaker Change: Well, with the improving pricing environment and outlook, our expectations for cash flow generation is increasing.
and Q1.
Speaker Change: Cashflows were subdued, mostly in light of the seasonal increase of approximately 160 million in inventories, that number you can read on the ball and sheet.
Speaker Change: which happened preparing for increased sales in Q2 and Q3. So that's typical for Q1. And other typical Q1 of flow search, for example, as taxes and profit sharing.
Speaker Change: Going forward through year end under our current market outlook, we expect to see a strong improvement in quarterly cash flows due to seasonally stronger demand and the drawdown of inventory. We're going to see a strong improvement in the future.
Speaker Change: But still, we expect a working capital to end the year approximately 150 million above Q4 2024 and driven primarily by the strong increase in the overall level of sales in Brazil.
Speaker Change: And also because of higher prices of raw materials, mainly sulfur, so although cash flow outlook for 2025 is good, it will be impacted by those factors.
Finally, a note on our capital reallocation program.
Speaker Change: The discussions with counterparties on the non-core partage assets, cars, but in Takwari have really accelerated.
Speaker Change: We have communicated very long ago our desire for our strategic solution for cars bad and now we can firmly say that Takwari is in the same bucket,
Speaker Change: These investments are not the best location of our capital and our portfolio so we better let someone come in and take them.
Bruce, back to you
Bruce Bodine: Thank you, Luciano. To summarize, Mosaic delivered a solid quarter and our outlook for 2025 is positive.
Speaker Change: with our improving operational performance, lower cost profiles, and excellent financial foundation, Mosaic is well positioned to benefit from the strong market conditions we see ahead and to navigate effectively in the ever changing geopolitical landscape. Thank you very much.
Bruce Bodine: Now, operator, we would like to take questions from the audience.
Bruce Bodine: Thank you. We will now begin the question and answer session.
Bruce Bodine: To ask a question, you may press star then one on your telephone keypad.
Bruce Bodine: If you were using a speakerphone, please pick up your handset before pressing the keys.
To withdraw your question, please press star, then two.
Speaker Change: At this time we will pause momentarily to assemble our roster.
Chris Parkinson: The first question comes from Chris Parkinson with Wolf Research. Please go ahead.
Chris Parkinson: Great, thank you. Bruce, someone tells me you already know what question I'm going to ask. But if we started to add, you know, in your boardroom during the first quarter...
Chris Parkinson: How do you have, you know, adequate, fully assessed yourself when it came to Barton New Wales and kind of getting into Riverview and Louisiana? What would be the same answer, you know, as you stand here today, mid to Q and, you know, generally, what are the puts and takes for the second half? You know, when you think about kind of. [inaudible]
Chris Parkinson: Finally getting to the end of what has been a multi-year journey. Thank you.
Bear with my voice.
Speaker Change: I think we would have been in a similar position, Chris, today versus what we said now. There have been some puts and takes.
As we went into what we knew, and it...
Speaker Change: You know, talked about a lot going into this turnaround season in quarter one. We knew it was going to be heavy at New Wales and Bartow. Thank you very much.
Speaker Change: that turned out to be the case. And as always, when you get into equipment,
Speaker Change: You have some discoverables and new whales. We had some brickwork and a reactor and phosphoric acid that was unanticipated that took a couple extra days from a turnaround standpoint. We're also doing some reliability enhancement projects.
Speaker Change: as we talked about as well in our analyst day, and those are paying off as well, and part of those are in chip handling particularly at new whales. We did our first train of replacing our chip, some handling system there, [inaudible]
Speaker Change: Had some commissioning issues as it being the first of three that we're going to do. And those were a little more of a struggle than we hoped. But the good news is the benefits there.
Speaker Change: Have paid off, we're seeing at Target Rates at New Wales now, we're seeing at Target Rates at Bartow now, and then we've accelerated...
Speaker Change: Some of the additional Japan-ling work at New Wales more into the first half. So first half may see a little more on the reliability side for improvements that we're going to do a little bit more downtime. But really what we're doing is after the learnings of the first train we did. [inaudible]
Speaker Change: Just going to apply that to the other two trains. [inaudible]
Speaker Change: and really just insulate the back half of the year's performance. And...
Speaker Change: We're very optimistic about what we're seeing. As you said, Chris, a couple of puts and takes. [inaudible]
Speaker Change: But we're seeing the results pay off on all of the hard work and again accelerating some of the work that we have under our control to just get through this cycle even that much faster and that much better going into the back half of the year. [inaudible]
David Simmons: Our next question comes from David Simmons with BNP Pariba. Please go ahead.
Operator: David Simmons, your line has been unmuted, you may proceed with your question [inaudible]
Operator: It seems we are not receiving a response from David at this moment. We will proceed to the next question which will be from Jeff Zekauskas with JP Morgan. Please go ahead.
Thanks very much. In the light of...
Jeff Zukoskas: Are your ammonia costs rising? Or are there ways that you can? [inaudible]
Work to keep them under better control.
Jeff Zukoskas: Yeah, thanks Jeff, and I know there's been some reports on things the last couple days, but...
Jeff Zukoskas: Our purchases, as of now, have not incurred any tariff impacts.
and...
Jeff Zukoskas: To say that that would be the case in going forward in permanency, you know, I don't know, but ammonia is exempt in the United States and that's...
Jeff Zukoskas: where we have most of our supply coming from with our contracts and CF particularly and then we are seeing good production out of our own assets in Louisiana.
Jeff Zukoskas: And we don't expect much over 20% if not less than 20% exposure to any market forces anyways given the product mix of our ammonia so
Jeff Zukoskas: You know, heavy on our supply contracts, strategic supply contracts which to date we're not seeing tariff impacts [inaudible]
Jeff Zukoskas: and, you know, heavy where we can on our own production, Tara Frey, and then exposure is pretty low on the rest of our product needs, Jeff, and, like I said, today we haven't seen Tara Fimpax.
https://www.kenhub.com
Speaker Change: The next question comes from David Symonds with BNP Paribop, please go ahead [inaudible]
Hi guys, can you hear me now?
Thank you.
Hello? Yes, we can hear you.
Helene
David, you are audible, you may proceed with your question [inaudible]
Speaker Change: Okay, brilliant, sorry about that, we're having some tech issues on this side. I had a couple more on phosphates, please, so...
Speaker Change: Maybe you could talk about price realization in April , and if there's any reason that you wouldn't be, you know, rider at the top end of that range that you've given for a realized app prices.
Speaker Change: And then the second question, so I hear you on maintenance costs, but if I look at the absolute cost in phosphate, it was up 20 million year on year, and that's with production lower. Thank you very much.
Speaker Change: and also the the idol and turnaround cost line that you give was also lower year on year so...
Speaker Change: Just a more colour on that, because is there some maintenance costs that sits outside of that idling turnaround line? Thanks a lot.
Speaker Change: David, thank you. Let me start with your last question. So our costs on a per-cost basis, a per-done basis, mostly fixed cost absorption, a big impact of that given the heavy turnaround to activity. But yes, we've had some extraordinary
Speaker Change: Maintenance costs that don't anticipate being reoccurring as we continue to invest in getting reliability back up with, you know, full focus on that.
Speaker Change: With the debt price, let me actually just turn it over to Jenny and talk about that.
Thank you. Bye.
Speaker Change: are realized April , the AP prices are actually higher than the high end of the range.
are we anticipated
Speaker Change: The market is going to keep the strings for the remaining of the quarter and you might be right, we um...
Speaker Change: We probably would see some upside on the prices for the times we haven't realized for the remaining of the quarter. And once again, we do not anticipate any price reset.
Speaker Change: Post-Spring season in North America, and the prices in the rest of the world as you can see it's pretty much at parity at $700 level. We will see this prices going to stay. Thanks.
Speaker Change: Let me add, David, you know, on this cost thing, we do anticipate once we get back, as we said in the analyst day, to our two million ton run rate in the back half of the year. And, and Luciano talked about this in the opening comments as well.
Speaker Change: Conversion costs will be in that $95 to $100 range. So we're confident in that. And as we get through these next few months of extraordinary activities, that's what you should expect. Thank you very much.
Speaker Change: We have Joel Jackson with BMO, with the next question. Please go ahead.
Joel Jackson: Hi, good morning, everyone. Thanks for taking my question. Obviously, the podcast market is nice. It's rising. Things are good. Demand driven. Jenny and the rest of the team, I thought it was interesting. I also, you know, have been following the balleration, shipments and exports.
Joel Jackson: You talked about, let's wait to see if Q2 shipments come down because Q1 was so good but we know overnight Jenny, right? That we saw Belarus exports. [inaudible]
Joel Jackson: I think 1.1 million tons in April , so even higher. [inaudible]
Joel Jackson: He doesn't seem to have any kind of supply issues, so as you think about strategy-wise here, the capotechs, are you wondering if maybe there are no balleration maintenance cuts, so it's coming later. I mean, you're raising your volume, but it seems like this has been not really a supply.
Decreased here. What do you think? [inaudible]
Joel Jackson: Joel, let me just turn it over to Jenny, you're asking her specifically, so I'll let her answer it.
Sure.
Speaker Change: Joe, I think we agree with you on a specificity on ballerarsians, MOP, export.
Speaker Change: Cut that is coming out of China, and we also have seen the announcement from Chile at QM on their repurposed of their podcast production. So to answer your question, have we seen shipment production for the first four months?
especially for the first quarter, yes. [inaudible]
Speaker Change: of Domestic Reduction in China, and also reduced the shipment of...
Speaker Change: Multiple international suppliers into China, China is in a very critical low-human-trace situation for potash, which sets very well for the coming contract negotiation. I will stop here. Thank you.
Speaker Change: Our next question is from Kristen Owen with Oppenheimer, please go ahead [inaudible]
Speaker Change: Hi, thank you for the question. I'm sort of a little bit more closer to home.
Speaker Change: Can you give us an update on the cadence of your production for potash as we go through the year? You know, you know, there's some of the headwinds in Q1, but given the volume update and your maintain target, just wondering how we should think about the cadence of cash costs of production of potash. Thank you
Yeah, thanks, Kristen.
Speaker Change: Really, just to reiterate, Q1 was a little bit of a product mix issue as well as Bellplain was more impacted to these weather constraints that we had that caused them to curtail some of their production, Bellplain being one of our lowest cost producers. Now that Bellplain is back up and running full fluidity of the supply chain is good. .
We continue to make good progress on the ester hazy [inaudible]
Hydroflow Project, Project,
Speaker Change: Adding 400,000 tons in the back half of the year at that run rate. We do expect cost per ton to dramatically improve as we go from quarter two to quarter three to quarter four, as those low cost tons at Esther Hasey come more into the marketplace. So, um,
Speaker Change: Luciano, do you have a little bit more you want to talk about? It's just too much.
Jackson-Tones,
Jackson Toms: Sorry, it was with the mic mute, I'll repeat. I was saying that the achievement of the target range could come as early as Q2 if we deliver what's in the plan. So we're positive on that.
The End
Speaker Change: The next question comes from Andrew Wong with RBC Capital Markets, please go ahead.
Andrew Wong: A good morning. Thanks for taking my question. Can you just provide some thoughts on...
Speaker Change: ESMO's AXROL and how the F&D plays out, until the next, say, like, six or twelve months as production improves.
Speaker Change: How does that impact the market balances and pricing? I know Chinese said that the US summer prices are unlikely to reset, but I'm assuming there's a lot of the production of the music producing would go to the domestic markets. I'm just curious how that plays out. Thank you.
Speaker Change: Yeah, thanks, Andrew. We provided some new graphics in our earnings deck this time to kind of talk about how we see supply.
Speaker Change: and Demand Growth in each of the two major commodities, phosphate and potash. So there is some detail there, but you know, generally when you look at phosphate. [inaudible]
Speaker Change: As we see our production rise in the back half of the year, which we are already anticipating in our kind of supply ads from 2024 to 2025.
Speaker Change: When you look over on the intersection of supply and demand, you still see pretty much supply constraints. So, right now we would say, and I'll let Jenny talk about it in more detail that...
Jenny Wong: Demand is constrained by supply, particularly in phosphates. So adding that little bit of additional production from Mosaic in the back half of the year, as we anticipate that, we see it's still being very constructive to tight.
Jenny Wong: on the supply and demand balance. So Jenny, anything to add? Sure. I think Andrew, your question probably more towards to phosphate.
Speaker Change: I would just simply say the demand in India, the pent up demand in India is going to consume any operational improvement.
Speaker Change: and also the recovery of production from Los Angeles, so meaning the improvement from Mosaic and some of our peers in North America market, plus the recovery in the previous Los Angeles, Los Angeles, Los Angeles, and Lefosa production site will only be able to support the demand issues in India. So to give you some specifics.
Speaker Change: India demand was done last year on DAP and their government has realized that this is an issue and with the latest the policy support they will need to buy
Speaker Change: 2 million towns for the coming grief season, and that season they only got 300,000 towns.
Speaker Change: With their agreement with OCP, that demand cannot be met by only source of of of of Marco.
Speaker Change: So to your questions on the movement of product between North America, which is our whole market and other market .
Speaker Change: Overall, phosphate market is global market. As we know, for over 40% of the demand is actually in the market, which are subsidized by the government. There is no affordability issues.
And when that comes to the non-subsidized market.
especially in the Marcos.
Speaker Change: We might see some demand challenges for the second half of the year for North America.
Which episode? [inaudible]
Speaker Change: Going to be well offset by the demand in Brazil, as we mentioned earlier, the firm economics there are very different.
Speaker Change: then US. So overall, the market are going to be tight. Mosaic, we might make some movement of the product between the US, the whole market and the rest of the world, if it is needed.
In fact,
Speaker Change: We are watching very closely on the affordability issues of phosphate in the US market, and as we are ramping up spring season
And we saw the customers might...
Speaker Change: Might delay their purchases for the same concerns that we have. [inaudible]
and the
Speaker Change: The fact is that over the last week we started to have major customers in the U.S.
Kim Ford
to buy their summer fuel phosphate at today's price. [inaudible]
So, so...
Speaker Change: We're watching the affordability issues. The market is really tight. Eventually, phosphate turns just like any other products.
Speaker Change: That the price is going to really define where it can be used as the best to use. And we believe the stripy margin price will stay animated, given even with the headwinds.
and Yijun Wang.
Speaker Change: The next question comes from Steve Bern with Bank of America. Please go ahead.
Speaker Change: Yes, thank you. You have these 15 year supply and demand charts.
Speaker Change: for phosphate and cod ash that are in your slide deck that are very interesting, particularly the phosphate chart that
Looks a bit unsustainable here with...
You know price rationing demand is is there potential that
Speaker Change: Global demand has really more stabilized versus what you're projecting here or do you think that this deficit could drive a yield drag globally this year?
Speaker Change: Or is this driving demand for your biologicals to release the insoluble phosphate in the soil?
Speaker Change: Steve, really always appreciate the question. I think it's a combination that I think our biologics for sure help in this regard to get more.
Jenny Wong: But I'm going to turn it to Jenny and just let her talk a little bit more about it.
Jenny Wong: I think we share the same view as you are if you look at the overall shipment of phosphate over the last couple of years. That has been an issue. The word would need more phosphate.
Jenny Wong: in order to support yield increases or yield level. And the fact, if you look at the yield increases over the last four or five years
Jenny Wong: Has really slowed down versus the trained level, and that is a reflection, a potentially major contributor was really the lower phosphate application around the globe. [inaudible]
Jenny Wong: So I also appreciate that you pointed out how biology codes can help in this kind of situation, which basically helped farmers to maximize or improve the efficiency for the investment they made on phosphate.
Jenny Wong: And it's even more meaningful today at the price level that we all believe it is a relatively high level for the farmers.
Jenny Wong: By investing in biologicals to maximize their investment in this higher priced phosphate, was really the point that were communicating with the farmers both in North America and also in Brazil. And we will see this biological product well bring the benefit to the farmers not only increase the yield but also help them to improve their ROI return on investment. Thank you very much.
John B.
Vincent Andrews: The next question comes from Vincent Andrews with Morgan Stanley , please go ahead.
Vincent Andrews: Thank you. I appreciate the comments on the working capital in terms of cash flow. Are there any other line items and cash flow from operations that are going to be material deviations, either headwinds or tailwinds this year versus last year? And is it possible to talk about what you think your free cash flow conversion of EBITDA and a percentage terms and a range might be this year? Yeah.
Speaker Change: Hey, Vincent, I'm going to turn this straight over to Luciano.
Vincent, I don't anticipate any...
Speaker Change: I would say, normal components in cash flow for this year. So,
Speaker Change: And because the cash conversion was low last year, pretty much every additional ton of, every additional dollar of ABDAR should flow after taxes towards cash flows, absent the working capital increase that we gave.
We're going to be...
Speaker Change: I'm not going to give you, let's say, a precise number for cash flow conversion, but I think with this directionally you should be able to model it based on that assumption. So every incremental. So.
Speaker Change: Abida, that you forecast for this year, absentee, $150 million working capital increase for Brazil, should flow after taxes towards cash flows.
Speaker Change: I'd like to take this opportunity to correct the information that I gave a little ago.
Speaker Change: I said that polished costs should converge into the range or rating Q2. I was looking at the wrong column. I'm sorry for that. It should be in range for the second half, so Q3 and Q4.
Speaker Change: That's the same thing for faucets as well, just giving that color, Q3 and Q4 should be in range. When you look at the full year, the full year for potters should be in range.
Speaker Change: The full year for phosphates should be a little overranged, the target range just because the Q1 number was so high.
Ben Isaacson: The next question comes from Ben Isaacson with Scotiabank. Please go ahead.
Ben Isaacson: Thank you very much and good morning everyone. I'd just like to go back to the analyst day and just ask a question on Mosaic biosciences. So you're targeting 70 million of revenue this year, profitability and Q4 and then in five years from now 200 million of EBITDA. Can you talk about
Ben Isaacson: The shape of that EBITDA growth. What do the margins look like? And what's the plan with this business? I mean, you don't want a commodity multiple to smother it. So is the intention to spin it off eventually. Thank you.
Speaker Change: Hey, Ben. Thank you. I'm a little Jenny. Take most of this question, but
Jenny Wong: We're seeing good results out of the bioscience and as you said we do in what we said in our opening comments and anticipate good revenues as we laid out.
Jenny Wong: and continuing to grow over the five-year period as we laid out in Analyst Day as well. We actually think they're right be even additional upside to those numbers. But let me get over to Jenny and let her talk about some of the more specifics.
Jenny Wong: and Gross Projection. So the growth in the future, including today, are coming from two different types of products. One is our own products.
Jenny Wong: In this situation, we're also selling the party products. We call licensed in-product. For this product that gross margin are lower, it's somewhere between 30 to 40%. [inaudible]
Jenny Wong: Going forward, we are going to have major new product introduction in all major market as we talked about at NLS today by leveraging our market access.
Jenny Wong: over the next few years after we get the product registration and so that we can more aggressively grow the products that are from our own portfolio.
Jenny Wong: So that's basically the story for our bioscience, as you can expect that we're going to disclose more going forward on our new product introduction, on our new product registration, and Neptune launch last month in China, it's just the starting point.
Thanks. The bandwee.
Jenny Wong: We see this very complimentary to their rest of our business with plant and crop nutrition.
adding soil health to this.
Jenny Wong: We do expect as even continues to grow to meaningful numbers that maybe we do benefit from some of parts evaluation and this is something we're looking forward to and continue to discuss as that business continues to accelerate in grow over the near future.
Jenny Wong: The next question comes from Richard Garchitorena with Wells Fargo, please go ahead.
Richard Garchitorino: Great. Thank you. So maybe you can turn to Brazil, Luciano, if we can dig into the. Yeah.
Richard Garchitorino: EBITDA, upside you were talking about for the second quarter, maybe was driving that potential 150 million, I noticed, you know, production volumes, we're sorry, sales volumes, the first quarter were up 8% so. So.
Richard Garchitorino: I would expect your meaningful increase to that to get to the 15% full year increase and then also just maybe if you had any color on.
Richard Garchitorino: Concerns, and improved, you know, that beneficiary, mainly being Brazil, you know, what were your expectations for volumes at the start of the year versus present today, thank you. Thank you.
Speaker Change: Thanks, Richard, for your question. Let me just turn it over to Luciano to address the first half. And then if Jenny's got commentary on some of the back half question, let her take it. Yeah.
Speaker Change: Well, thanks. So the main concept here is that Q1 in fertility design was mostly driven by our production business. Really the distribution part of it didn't kick in, and it will kick in.
approximately
Speaker Change: 300,000 tons were sold from our own production, and 1.5 million from distribution. If you...
Speaker Change: Multiply $1.5 million by let's say $24 per ton of distribution margin, you get to a $36 million EBDA in distribution, less the foreign exchange impact, you get to 18 million.
Speaker Change: So, out of the 122 million, only 18 was distribution.
Speaker Change: So by the same token, if you, for example, assume that sales and distribution are going to go from 1.5 to 2.1.
Speaker Change: If you multiply it by something in the mid $30 to $40 [inaudible]
and if you remove... [inaudible]
Speaker Change: Still, another effects impact from 5 to 10, you get to about 55 million US dollars. So, if you add this to the...
Speaker Change: of the production business in the first quarter which was 100 million that puts a floor of about 150 million for the performance in Q2. But remember, also the production business will also increase sales in Q2. Thank you.
Speaker Change: So therefore that's why we're very confident that the 150 is might be even a conservative estimate for the performance in Q2.
Jenny, anything to add on? [inaudible]
Yeah.
Yes.
Speaker Change: Probably add a little bit on the market. We are expecting Brazil market to grow this year. It is partially also because of the increase the average from both corn soybean. And as we mentioned earlier, trade flow change has really benefited the Brazilian farmers. [inaudible]
Opportunity to grow and also to capture higher share in the market.
Speaker Change: Lastly, I would say the headwinds in Brazil market are related to the quality issues and also some of the high interest rate environment. It is still a challenge for the market and we've been very diligent and disciplined in managing our credit risk as we operate and grow in the market. [inaudible]
Thank you. Bye.
Lucas Beaumont: We have our next question from Lucas Beaumont with UBS. Please go ahead.
Lucas Beaumont: Well, thank you. It's sort of a clarify on the phosphate volume production outlook, so you kept your target unchanged there. .
Lucas Beaumont: But with where your first half guardances in that set of 3.3 million ton range, you need to kind of hit 2 million tons or higher just to get to the bottom of the annual range in the second half. That's it.
Lucas Beaumont: So I was just wondering, does that mean now you're probably pointing towards the low end of that range or do you think you can even get above?
Lucas Beaumont: Two million times a quarter in the second half to kind of still be either in the middle or at the upper end of the range, thanks. Thanks.
Hey Lucas, thanks [inaudible]
Lucas Beaumont: based on capability at our facilities. So, point for me is that we are feeling very good about the work that's been done, the demonstration of capacity that we're seeing post some of these reliability improvement projects that we know that been hanging on us as we've tried to step on the accelerator into 2025.
Lucas Beaumont: and late 24, and that we do feel good about full capacity output in the back half of the year. So, again, still feel good about the 7.2 to 7.4 millions un-range and not willing to stay that we're coming down to the low end of that by any means.
Speaker Change: The next question comes from Edlain Rodriguez with Mizuho, please go ahead [inaudible]
Speaker Change: Thank you. Good morning, everyone. This is for Bruce and Jenny, I guess.
Speaker Change: I know it's hard to do, but given the near term and medium term dynamics of the respective industries, if you have to choose between P and K, which one would you allocate more capital CapEx to right now? Yeah.
Speaker Change: Edlain, a way to finish the call. Appreciate the question.
Speaker Change: That is a tough one because we do foresee stripping margins being protracted at a high level for phosphate.
Speaker Change: I think as we talked about an analyst day, we still see very constructive on pod ash and you know over the five year period I don't know what long term medium term you know range you're thinking about but let's just use five year kind of outlook. [inaudible]
Speaker Change: A lot of it if I were to have a crystal ball and could think about it would be, you know, how fast and how lumpy the some of the news supply come on and pot-ash.
Speaker Change: But we're feeling pretty good about the stripping margins and phosphates. At the end of the day though, however, the EBITDA cash conversion and pot-ash is better than it is in phosphates just because of the large cap-X demands that that business has.
Speaker Change: with gypsum status, clay settling areas, and just the cost to maintain those facilities.
Speaker Change: So it is a catch-22. I think we're happy with both children right now.
and we're going to continue to invest.
Speaker Change: appropriately in both, and I know that doesn't give you the right answer, but-
Speaker Change: Or a 1-pure-k answer, but it always depends, and it depends on structure, it depends on what's going on in the market.
Speaker Change: But we feel pretty good about both and we're going to continue to do the right things and swing capex and investment a little bit here there depending on how things sharpen up from a clarity standpoint over the next one three, five years so I'll leave it at that.
Thank you.
Speaker Change: Thank you. Just for the purpose of thinking about it, the operating leverage in phosphates is huge, precisely because it consumes more capital, but also in upturns of the cycle, it tends to surprise on the upside in terms of casual journey, so better this in mind.
Operator, I think we're ready to close. Thank you.
Speaker Change: Certainly, thank you. This concludes our question and answer session. I would like to turn the conference back over to Bruce Bodine for any closing remarks.
Speaker Change: Well, thanks everyone. I'd like to close our call by reiterating our key messages. First, ag and fertilizer markets are strong and prices for our products are rising. We expect good business conditions to persist through the remainder of the year.
Speaker Change: Second, we are making strides on our work to improve phosphate asset reliability and production and we are on track to deliver better production numbers this year.
Speaker Change: Third, our market access is a significant strategic advantage, and it is enabling us to benefit from the strong markets and grow in new ways.
Speaker Change: For example, we've built a powerful franchise in Brazil and it is now performing exceptionally well and our bioscience business is growing faster than others because we have distribution access [inaudible]
Speaker Change: And finally, we continue to make progress on our efforts to reclaim underperforming capital so that we can redeploy in pursuit of higher shareholder returns.
Speaker Change: All in all, Mosaic is performing well across our businesses and geographies, and we are in excellent position to continue to benefit from the compelling market conditions we expect over the near and medium term.
Speaker Change: So thank you for joining the call today and have a great safe day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Andrews, Christopher Parkinson, Christopher Parkinson, David Symonds, Edlain Rodriguez