Q2 2025 Mosaic Co Earnings Call
Good morning and welcome to the Mosaic companies. Second quarter 2025 earnings conference call.
At this time, all participants have been placed in a listen-only mode after the company completes their prepared remarks, the lines will be open to take your questions and now I'll turn the call over to Mr. Jason Trimble, please go ahead.
Thank you, and welcome to our second quarter 2025 earnings call.
Opening comments will be provided by Bruce Bodine president and chief executive officer.
Jenny Wong, Executive Vice President of Commercial, will then cover the market update, and Luciano Pires, Executive Vice President and Chief Financial Officer, will review the financial results and capital application programs.
We will then open the floor for questions.
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 are based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties.
actual results May differ materially from projected results factors that could cause actual results to differ materially from those in the form of looking statements or included in our press release published yesterday and in our reports filed with the Securities and Exchange Commission,
We will also be presenting certain non-gaap Financial measures, our press release and performance data. Also contain important information on these non-gaap measures.
Now, I'd like to turn the call over to Bruce.
Good morning. Thank you for joining our call.
I'll start with an overview of our performance and outlook, then Jenny will provide insight into the markets, and Luciano will discuss details of our earnings.
Our key messages for today are
first, our hard work to improve operating performance is paying off.
Its apparent in our Brazil results and we expect to see improvements in our us, phosphate production business. Now that the vast majority of our work to enhance reliability is complete.
Second.
The market environment remains strong with tight Supply leading to very strong, phosphate margins and Rising potash prices. In fact, we raised our full year potash production to capture strong demand.
Third, the cost reduction efforts, we've been pursuing in Brazil have led to a strong first half of the year and we expect earnings growth to accelerate in the remainder of 2025.
And forth.
Our extensive Market access continues to be a key competitive Advantage for mosaic.
The current market situation demonstrates. This point with some unevenness, in the Americas. There is still more than enough demand around the world for all the tons we can produce
We have the agility to send tons to markets, where demand is strongest.
4 million in the same quarter of 2024.
The factors that drove earnings lower are behind us and across the business, we are poised for a strong second half of 2025.
Potash and phosphate, markets are tight. And we are maximizing production to benefit fully.
We see no signs of a second half price reset that has occurred in the past few years.
The global phosphate Market has been tight for 2 years now and we do not expect that to change in the near to medium-term. Even with the additional Supply, we expect to provide to the market.
All of the supply and demand Dynamics. We've been discussing remain in effect while China recently resumed exports at a low level Chinese exports. Remain restricted as producers there, meet domestic demand for agriculture and growing demand for industrial uses.
Global farmer demand for phosphate and fertilizers remains robust. As an example, Indian importers have come back to the market with increased government support and are now working to meet two years' worth of pent-up demand.
Also remember, there is not much additional capacity expected to come to the market over the next few years, and announced projects take quite some time to come online.
Put simply there is not enough. Phosphate fertilizer available to meet demand and we expect this Dynamic to continue well into 20126. Even if there is some demand deferral in the Americas,
in our business, our work to fortify our us, phosphate assets to maximize future production took longer than we expected, but there is no more planned maintenance. That would impede us from reaching our Target run rate of 8 million tons per year.
To provide more details, our extraordinary level of work is complete at Riverview in Louisiana.
Our Bartow plant has been operating at Target rates for a couple months and a new whales were installation of our final new gypsum pumping station was delayed. All 3 new stations are complete.
We are now returning to our normal cycle for turnarounds.
Our third quarter sales volume guidance of 1.8 to 2 million tons reflects our confidence in our strengthened assets.
Our annual guidance for phosphate production is now 6.9 to 7.2 million tons reflecting the more extensive maintenance downtime we experienced in June and July.
It's also important to note that as our volumes improve. So do our unit costs. We expect to reach our analyst day per ton cost Targets later this year.
In pot ash, the market has evolved from balance to tight.
Maintenance activities at multiple, producers around the world have reduced near-term supply and demand remains strong underpinned in part by continuing High palm oil prices in Southeast Asia.
We're running hard to meet demand and benefit from the market conditions.
A second quarter turnaround at esterhazy is complete and we plan to run our colon mine at least through the end of this year.
as a result and to meet very strong, Global demand, we have increased our annual potash production guidance to 9.3 to 9.5 million tons
We're feeling very good about our business in Brazil, too.
While credit issues are persisting. We expect fertilizer demand to remain strong and Supply Limited.
As a result, we anticipate ibida from the Mosaic for loan to push higher from the strong levels. We've seen the past 2 quarters
Before Jenny provides more details on the markets. I'd like to highlight the important competitive Advantage, our Market access brings to Mosaic
The new Pomeranian facility which was inaugurated last month. Adds a million tons of distribution capacity in the fast, growing Northern Region and reinforces our market-leading presence in the country.
We also continue to leverage our market access to grow the Mosaic biosciences business.
First, half revenue for bioscience is more than doubled, compared with a year ago.
We expect Mosaic Biosciences to contribute positively to adjusted EBITDA beginning in the fourth quarter.
Finally, a note on capital allocation.
We're continuing to make progress on our work to reclaim capital so that we can deploy it in pursuit of better returns.
The hydroflow project and the new Pomeranian facility are good examples of this.
We hope to have news on the processes. We've announced including Carl's Bad into Corey in the near future.
Folders.
All In All, We Have Made important and substantial progress this year and we are in excellent position for a very strong second half of 2025.
Now, I'll pass the call to Jenny.
Bruce highlighted strong. Fertilizer Market fundamentals.
Before I dive deeper into the phosphate and part of Market, I'd like to address the recent pressure on our Commodities and why we are still up at Global agriculture.
Commodity Market has been pressured by both trade and micro uncertainties.
As well as a record Sophia harvest in Brazil, ended the potential for a record us crop this fall.
However, as we mentioned before,
Egg fundamentals. Remain positive cross much of the world including in many of the key geographies where we operate.
Global a market continuously to be supported by strong demand.
Including supporters of new B field policies in India, Brazil, Indonesia, and the US which supports act Market in Long Run.
The headwinds will see in certain geographies related to fertilizer, affordability will necessarily tra some demand, for example, in the Americas.
But this provides a Tailwind to demand in the future as Growers will need to replenish their soil nutrients.
Specifically on phosphate.
Prices have steadily climbed this year with a strong demand that is constrained by Supply.
And despite higher prices and the lack of available Supply that may result in some demand deferral.
Global shipments are expected to approach a new record.
The most notable Factor on supply side remains China.
Which have returned seasonally to the export Market.
Though, we anticipate a further reduction in high analysis, phosphate export this year.
As the country limits export quotas in support of the domestic market and industrial phosphate production.
On the demand side.
Government financial support has energized the Indian buying at higher prices.
While we expect growth in India, shipments this year.
Supply constraints were likely leave India faced another year of pent up demand that goes well as we move towards 2026.
In North America.
Some of you was earlier than expected, given the empty Pipeline and fewer Imports.
Were largely sold out for the quarter and at higher values than spring season.
Import Supply is down around 20% year-over-year, given tariffs on most of the oranges.
And this volumes are expected to stay subdued.
This means that even there is Meaningful demand deferral at grower level this fall.
There should be ample demand for mosaics products.
While in Brazil, we are expecting another fertilizer shipment record this year.
With inputs up, sharply in the first half to meet the demand.
With no significant price reset expected in the near term.
We expect stripping margins to remain elevated as software prices appears to have stabilized and ammonia looks like it could soften through the balance of the year.
Longer term, we anticipate that elevated stripping margins will continue as solid fundamentals carry into next year.
As I mentioned, we like to again see pent up demand as we enter 2026.
Driven by demand deferral this year and limited Channel inventories.
On the supply side, new capacity takes time to build and won't feature meaningfully until at least 2027.
On top of this, we expect China to continue to reduce export availability.
This independent projection for lfp demand through 2030 exceed, even our own projection.
In the case of potash the market shifted from balanced to tight in the first half of this year.
And we anticipate prices to hold around, current levels, driven by what could again be a record Global shipment.
Global Supply is now filling the effects of the non- maintenance in Russia and Belarus.
Action from China and Chile.
Regarding demand us customers indicate, it will be about normal for 4 Seasons, despite prices that are higher than last year. Given they still find good value at this levels.
Like, phosphate offshore pot hash Imports are also trading last year.
Further, tightening the domestic Market.
Brazilian demand has also proved resilient in these higher priced environment.
With inventories near normal despite higher input. So far this year,
Finally.
Annual contract in China and India was signed about 65 per ton higher than last year.
With this expected healthy base load of contract Market, uptake.
Plus a continued strong pool from Southeast Asia, where solid grower economics are supported by elevated palm oil prices.
We believed supply and demand will remain tight in the near term and limiting any late year, seasonal price resets. But usually we experience
let me pass things over to Luciano where he will dive deeper into a financial result or strategies and capital allocation
Good morning.
This was a very unusual quarter in terms of results, with a lot of noise.
We encourage you to see the underlying performance of the business through the numbers.
And also see why we believe Q3 performance will be amongst the strongest in many, many quarters.
First on net income.
The notables were actually on the positive side. The US dollar loss value compared to most currencies, including the Brazilian real, the Canadian dollar.
So there was a reversal of the foreign exchange effects experienced in previous quarters, a total of 220 million.
In addition to that, we had a gain of 216 million, in the market, value of our modern shares. And um with these 2 main effects, that income was 411 million compared to a net loss of 162 million a year before
second on on NBA.
Well, you saw we had these larger than usual, Provisions. That amounted to more than 60%.
Most of these.
Did not have any cash effect in the quarter.
And some also will not have cash effects going forward. Such as for example, the bad debt expense the inventory adjustments,
1 asset right off?
But some will, some will have a cash component. For example, we recorded $8 million in environmental reserves for future remediation, and our Taqua part is mine.
We recorded 4 million for legal reserves.
So, we had a number of net and favorable items that all came together this quarter.
And while we always have some level of this kind of activity, it was quite large.
We don't expect to repeat this level in Q3 and Q4.
Just a note on that the 30 million dollars. Bad debt expense in Mosaic future design, just we had it with a single customer. It is 90% backed by insurance. So we expect recovery is going forward.
Indeed, for example, uh, this quarter, we collected 50 million.
Related to a bad debt expense booked in Q3 last year.
Also.
You can see that all the work of turnarounds as we talked extensively.
Cost us money. A lot of money.
We have been speaking about a hundred million dollars overall aggregating investment to increase reliability.
But part of that, you can see in these elevated idle and turnaround expenditures, some of the work just can't be capitalized.
Has to be expensed.
Not a surprise significant part of the increase in idle and turnaround expenses. Came from phosphates.
And why is that? We we not only extended the duration of our turnarounds.
Which impacted our production volumes, which impacted our fixed costs absorption.
But we also spent more actual dollars in repairs and maintenance.
These works.
Another reminder are all with the goal to the risk. North just our second half performance but well into the future as we return to a sustained and more normal production output level
And turnaround expenses to the client from Q2 to get to a more normalized level.
Because the work has been completed to improve asset reliability.
so now the bright part,
Process. For example, you know that everything hinges upon the volumes, as we said.
85% of our cash costs of conversion is fixed. So given the low production volumes.
The unit cost metric of 126 dollars per turning Q2 Behavior exactly as it should.
It is above our investor day, Target of 95, to $100 per ton, but only because of low production volumes.
On a positive note cash. Mine Rock costs in Florida. Are the lowest in 10 quarters.
$51 per ton against an average of 55 per turn in 2024.
You're not seeing it yet because of the low volumes of finished product.
But these results will flow.
Into the Blended Rock costs.
Once finished product volumes come back.
In Paris.
The cash production cost per ton was 75.
Up from the same quarter last year.
Again due to last fixed cost absorption and lower.
But it was down from 78 in the first quarter.
And we conducted a turnaround at Esther Hazy in Q2 this year.
Versus Q3 last year.
And the shifting timing impacted a lot of metrics year-over-year. When you compare
Q25 to Q2 24.
It impacted production of volumes unit costs and turnaround, and idle expenses.
So again, as in phosphates, you should expect Parish Q3 turnaround and idle expenses to decline from Q2.
So far, the nicest story.
We have achieved $106 million of our $150 million cost reduction target.
These cost reductions.
And the higher realized prices are behind the 150 million dollars in Aida.
despite the bad debt expense of 18 million, net of recoveries
in Q3 with increased volumes.
No further bad debt expenses and a recovery in distribution. Margins, were bound to have an excellent quarter.
The question is, if we're going to be above 200 million Mark or well above the 200 million dollar mark,
This will depend on our management of sales volumes given the credit environment.
And finally, for you to better model.
Mosaic question.
This quarter, we added disclosure on production sales volumes in the result and Outlook tables in the press release.
We provide margins that are earned by these tons and we provide further breakdown of these tons, in the performance data sheet.
All these new disclosure, hopefully will add some transparency to the segment.
Back to cost, reductions.
We have achieved the 150 million cost, reduction targets established last year.
Pop on the back of Mosaic designs as we discussed and sgla alone.
However, in SG&A, the bottom line is clouded because of the bad expenses and because of the known cash amortization of the large technology investment we made that I'm authorized to start in Q3 2024.
And so we also included in the appendix of the presentation or demonstration of the sgna savings.
And with this achievement, we are now extending our goal from 150 to 250 million.
Going forward, this additional 100 million dollars. In value capture is expected to be achieved by the end of 2026.
And will come from further cost, reductions.
By automating administrative functions.
Optimizing supply chain.
Another cost reductions in operations.
Gross, margin optimization.
And fixed cost absorption as we revamp up our production levels.
So the prospects here are very, very exciting.
To conclude Q3, AA in all segments is expected to be significantly higher than last quarter.
With an extraordinary level of turnaround to improve asset, health and reliability behind us.
In phosphates, we expect volumes to increase.
Cash conversion cost per ton to the client significantly in the third quarter.
Turn around and idle expenses to come down as well.
Growth from Q2 to Q3.
In Paris, where paddle to the metal increasing production sales, Outlook to take advantage of favorable market conditions will be Peak sales.
Peak margin season in Q3.
We definitely have the win at Arbok.
With that operator, please open the line for questions.
Thank you. We will now begin the question and answer session.
to ask a question, you may press star then 1 on your touchtone phone,
If you're using a speaker-phone, please pick up your handset before pressing the keys.
And to withdraw your question, please press star, then 2.
We also ask that you please limit yourself to 1 question. And at this time, we'll pause momentarily to assemble our roster.
In the first question, we will hear from Ben Isaacson with Scotia Bank. Please go ahead.
Thank you very much. And good morning everyone. Um, you know, just looking at the share price performance today. I was hoping you could parse out the noise from what has actually changed from your investor day, um, For Better or Worse. Thank you.
Been uh, thanks for your question.
I, I assume you want to go through everything and investor day. Uh, that is changed it. I just want to understand why the market or why do you think the market is reacting? So negatively to what seems like a couple bumpy quarters but nothing has really changed in terms of the main Outlook since your investor day. That's what I'm trying to understand. Yeah, yeah. No. Appreciate the question and uh, appreciate your report, uh, this morning, as well. I thought it was well done. Um, I I think there's a question and the even I know you've asked this, uh, in your report on, you know, how much of this extraordinary expense that we've all been talking about and that we documented in Q2 is, is reoccurring, or is, um, transitory or extraordinary?
Um, and I think that's one thing because, you know, how do you kind of bake into what the underlying performance was? When you normalize things? Um, no doubt, our production volume in phosphates was down from what we had in Analyst Day, and we've talked about that in a number of conferences. Uh, there was discoverable, particularly at New Wales on kind of our Fos acid. Um, uh.
Waste disposal Handling Systems, on all 3 trains that needed to be upgraded.
Um, the final upgrade, as we communicated, we tried to pull that into June, but we just couldn't get the parts in time. We're targeting to have that done in mid-July. It ended up going all the way to the end of July due to parts availability. Um, so that was the biggest change from a production standpoint, although we did guide in early June on what we anticipated there, and actually we're right at the midpoint of guidance. But that is a definite difference. And um,
What we had in our analyst day numbers?
Um, as far as the extraordinary expenses that, you know, we've talked a lot about this, and Doug, and kind of what it's kind of average on turnaround in idle expense for our active facilities.
And although it's not a perfect closure because idle and turn around, always has some variability to it. We feel that about $50 million of that expense and phosphates particularly was kind of non-normal, and
Was truly due to the extraordinary efforts, uh, which were happy to have a behind us to get reliability and asset Health back to where we needed to be, to do exactly what we said in analyst day, which is to get to that 8 million ton run rate. So um, you know, everything else is actually trending quite good paudash. Uh, costs are a little bit higher with FX and uh, the product production mix with more uh,
Runtime from colon particularly in quarter 2 with Esther hazy being down. You know the horse uh rather in Q2 versus Q3 which is maybe more normal for turnaround uh that you know cost difference um probably was more highlighted and elevated.
Side of maybe a little bit of, uh, impact of FX. That's a little bit more, um, than what we would have thought at that moment in March, uh, earlier this year. So.
I I you know, Ben it's a great question, but I I think it's the phosphate volumes. And hey when is execution going to come to bear, um, and how much of this large extraordinary expense was reoccurring? And how much of that was uh kind of 1 time?
The next question will come from Chris Parkinson. With wolf research. Please. Go ahead.
Great. Thanks so much for taking my question. Um a simple yet complex question. Um what was your run rate roughly in July? And how are we, you know, where are we trending in August and September just, you know essentially what's underscoring your confidence into the balance of the year and when I take a look at slide 8, as kind of the, the foundation for this comments, perhaps it looks like Bartow is pretty much has been there where it needs to be, uh, New Wales. And Riverview are in the process of just, you know, kind of getting there and Louisiana, looks a little uncertain. So if you could just hit on those remarks and piece that together for us, it would be greatly appreciated. Thank you.
Yeah, Chris appreciate the question thanks as always. Um,
So in July, the run rate was not what we were hoping for, and primarily what I said earlier is because of the large.
Um, there's a delay of about two weeks on the third JIP, um, pumping system at New Wales. And listen, New Wales is our horse.
Um, now that that is complete, we're seeing exactly like we saw in the other two, uh, trains of, uh, that that not being an issue and getting the, um, elevated rates. Um, it's still early in August, and listen, this went all the way to the end of the month. Uh, so we don't have a lot of, uh, free and clear run rate into August. But what we're seeing in the numbers is very encouraging. Um, Louisiana actually is more encouraging than you may realize. I, I, I know our graphic, uh, how we're trying to represent asset health, uh, is an interesting way to do that, but, uh, actually really encouraged by the numbers that we're seeing in Louisiana. Um, and as you said, Bartow is kind of humming along right at its 2 million ton annualized capacity, uh, without much of a hiccup. Uh, Riverview, all the major work is done and, you know, we're excited.
uh, and what the opportunity is that we're seeing, uh,
Uh there. Um and we just need to now the maintenance activities. There's nothing scheduled more in extraordinary. Work is to really just now that that is out of the way as Luciano said in paudash putting the pedal down in phosphate and stringing together days weeks months and we're very encouraged by what we're seeing. Um hence our guidance at 1.8 to 2 million ton range uh that's the confidence we have and what we're seeing and the confidence we have in what we've executed and got behind us going forward.
The next question will come from Joel Jackson with BMO Capital Markets. Please go ahead.
Hi. Thanks for taking my question. Uh, Luciano Pires, Bruce Bodine team. Okay, so we have $50 million in title and turnaround one-off costs in Q2. You've been very clear about that in lots of different ways. You say that those costs are going down in Q3. I think what investors and shareholders really want to understand is, you know, these $50 million of extraordinary costs, how do these exactly ramp down? If you can give us as much granularity as possible, is that $30 million in Q3, $10 million in Q4, and $0 in Q1? Is it $0 in Q4? Please tell us.
Yeah, Joel, I'm not going to answer it the way you're asking because we don't guide on this, on a quarter basis, but let me try this. As we've looked back historically at turnaround costs and phosphates as an example. They're in the zip code on an annualized basis of 100 to 110 million,
um,
110 million, um, in Paudash that number, you know, is going to be a different number. I know you asked about phosphates particularly, uh, and then, you know, you can look at the history there. I don't think the history is different in Paudash, but again, you look at what we had at Esterhazy. Q2, we executed a turnaround this year, uh, in Q2, rather than what is more traditionally Q3. And that was to try to do the hydroflow tie-in so that we had the 400,000 tons of additional capacity going into the back half of the year, uh, due to that high return capital project. So, I know you'd like a perfect answer. Uh, there's no way to give you one, uh, but hopefully giving you a little more color on an annualized basis allows you to better appreciate, uh, what to expect on a more normalized ongoing basis.
Joe, uh I I listen I I don't know if you
had the time to go through it, but the presentation on our website has 1 slide, which is slide 9, which gives the actual numbers for Q2 24 q125.
2225, then you can do some comparisons and you're going to reach. That's the question. That's the question I'm asking.
question, I'm asking, we're gonna be getting
The next question will come from Andrew Wong with RBC. Please go ahead.
Hey, thank you for taking my questions. Good morning. Um so maybe a couple things here on the phosphate side again. Um first is I think we're about to enter the typical hurricane season in Florida. So um just curious like what has Mosaic done to harden the assets against any potential, leather disruptions? How much does that factor into the Q3 guide?
Um and then just a general question and I guess Bruce has kind of answered it already. But like you know, when we think back to the earlier parts of this year, um it sounded like a lot of the work was thought to be completed by q1. Um but then there were other things that seemed like they needed more work. Like, for example, the new gypsum Handling Systems. I don't think was something that was previously mentioned or that we really, um, had discussed. So I'm just kind of curious like, as you're thinking about production going forward, like are there any
Items on all that, still need any major maintenance, um, that that that should support that run rate? Or are, you know, all those things complete? Thank you.
Yeah. Andrew, appreciate that. Uh, take a, you got a two-part question there.
Hurricane season. Yeah. Is approaching and you know, we do preparation and and do crisis planning and uh, practice on on that front every single year leading into hurricane season. And and that is been complete. As far as hardening the assets, uh, We've looked at our motor control centers, particularly those on the coastal areas, uh, given storm surge potential, uh, and made sure that, um, those sit above, um, you know, kind of that flood stage probability given, uh, categories of storms. Um, we've also gone through with our insurance, uh, carriers and Ma and made modifications due to their recommendations for wind improvements. And a lot of our, uh, stationary buildings, particularly our warehouses, uh, with better venting and things like that to allow, um, when to pass through more easily, rather than um, having a higher potential,
Ripping off a roof or damaging a roof. Um, so there's a number and host of things that we've done. Uh again looking at
Storm surge looking at wind um the difficult thing that is hard to harden for and what we do in preparation going into hurricane season is making sure we have free B board in our gypsum stacks and Clay settling areas is just accounting for how much rain you could get in any given storm and if you went back to some of the storms, we had late last year, 1 of the Thousand-Year storm event is awfully hard to prepare for. Uh, so there's billions of gallons of water that can end up, you know, falling on our areas that we have to manage, uh, and then we have to deal with that water. But we go to Great Lengths, to make sure our free board and there's regulatory requirements around those as well with our state agencies, uh, that we have to comply with going into hurricane season. And and then putting in power back up, pumping back up, uh, for all sorts of contingencies, uh, is part of our game, plan, every single year,
and then, um,
Second part of your question was.
uh,
Phosphate any major.
Oh, any? Yeah, Andrew great question. We talked about that. Always. And we do with our reliability maintenance, folks, you know, assessments of each of our unit operations, we don't see any obvious issues uh, in the remainder of the asset base. So for us, any planned maintenance, uh, for asset health and reliability, is truly now behind us from an execution standpoint.
Those gypsum stack pumping systems. Uh, may we didn't talk about in an earnings call but uh, in q1, but we did. We've talked about it in a number of different, investor conferences. As we de bottle neck, uh, sulfuric acid, and put the pedal down particularly at new wells. Uh, we ran into because we haven't run in 4 years at these rates issues in phosphoric acid, particularly on our gypsum, handling as The Rock quality has changed over the last 4. Or 5 years, we're actually making more gypsum, uh, per ton of rock feed, uh, than we had historically. So those systems just simply were a bottleneck that they didn't used to be, uh, and it was not something that we knew until we got to actually trying to push to full rates. Uh, so that ended up being a throttle limiter, uh, at New Wales. And we had to actually replace all 3 phosphor acid drain gypsum pumping pumping systems.
Uh, between April, May, June, and July.
We don't see anything else like that at any of our other facilities as we've ramped up throughout the last several weeks.
The next question will come from Jeff, the call the costus with JP Morgan. Please go ahead.
Uh, thanks very much.
Can you talk about how tariffs have raised the costs of imports of phosphates?
into the United States, uh, on some kind of percentage or, or
Per per ton basis.
Yeah, Jeff thanks. And listen. Talk about a dynamic subject is that uh, seems to be changing on a
Almost weekly, these days again. Um, but in general, imports of phosphate have a 10% tariff on top of those, depending on the location. Most locations have that; there's nothing on Russia as of today. But, you know, the threat that um,
Outside of the cvd, there's cvd duties. But as far as tariffs go, uh, you've seen in the press. As we all have that there is a threat of, you know, the Russia Ukraine, uh, ceasefire doesn't happen that maybe we would put more tariffs on Russia. Uh, but as of today there's none but Jenny's got a little more detail that I'll let her go into Jenny, sure. Um, Jeff I I think, um, Bruce talked about the, um, the Tariff impact to the market, which actually indirectly supported the market in the US as, uh, this, uh, reduced input. Uh, yesterday. It will see around 20% of the import reduction for both p and K. It looks like it is going to continue in turn of the direct impact to our own business. Um, we our raw materials on software and pneumonia software maturity of the software. For our own production in North America is coming from the golf. Meaning there's no impact.
On the, um, on the uh, uh, uh, uh, the uh, from from the Tariff. We do buy, uh, some uh, uh, solid, uh, dry software from Canada, which is exempt from the usmca agreement, in term of ammonia. Um, majority of the ammonia that we use are consumed in the US are coming from 2 sources. 1 is contracted with, uh, the suppliers in in the US. The second part is our own self uh produced uh in Fina.
We do buy a small percentage of the money from the market. In this bucket. We have a very small volume coming from Trinidad, which we will need to pay 10. 15% of the import tariff, that volume is very small. So, I would say the direct impact, as of today, to our cost from raw material side are, uh, probably minimum.
Yeah. So Jeff that that's probably more of an answer than you asked uh on your question. But that that gives uh
Um, impacts on our own business. Um, due to tariffs
The next question will come from Vincent Andrews. With Morgan Stanley. Please go ahead.
Uh thank you. Um I've got a follow-up on on question 8 sorry on on slide 8 you know that that asset Health Target that you have of 85 to 95% it says based on turnaround timing so can you just help help us better understand?
5 to 95% means it could be 1 or the other depending on how heavy your plan turnarounds are in a particular year. Is that, is that correct? And then is it also not assuming that there are any unplanned outages in in the year. And is it your expectation that with all of the work that you've done over the past few years on a go forward basis? That the, the amount of unplanned outages? Let's leave hurricanes aside for argument's sake, but the, the, the, the, the amount of, you know, to kind of run the mill unplanned. Outages would be would be diminished. Is that? Is that correct?
Vincent great question and just
I know this is an unusual metric. Um, it's not operating rate, um, and that was on purpose. But yes, you kind of nailed it. So that pie chart will start to open up the piece of the pie.
From 95 to 85 as duration, as I use an example. So, if your acid plant turnaround is on a 3-year cycle, in year 2,
From the turnaround that you previously did you know the asset health is starting to tick down a little bit, uh, until you hit your third year turnaround which then it goes back to full asset Health again. So it's just a timing issue of um asset Health just by nature of erosion and corrosion. Uh, on piping and mechanical equipment. Uh, incrementally changes in any moment in time, from its last turnaround, uh, the reason it's not 100% is that it does allow for normal unplanned downtime, uh, which is just run-of-the-mill stuff that, you know, happens all the time. Not these extraordinary unplanned down times that we've kind of seen more prevalent uh, in the past. So,
The answer is, yes, you should think about it, that there's no extraordinary unplanned downtime, uh, in those numbers. And we don't anticipate that being normal on a go forward basis. Now that the asset health is, uh, where we're showing on slide 8, uh, which is where we're targeting, given all the extraordinary, efforts, and spending, and work that we've done over the last few years.
The next question will come from Aaron ciccarelli with Baron Berg. Please go ahead.
Hello, uh, good afternoon. Thanks for taking my question. I have a question on, uh, fertilizantes. In fact, um, I see that you talked about, um, shrinking perhaps your customer base because you're focusing more on, uh, better credit, uh, profile. At the same time, you are adding capacity in Pallante, and now you're talking about a $200 million, or even more than $200 million, EBITDA for next quarter. I'd like to understand, you know, we also have bioscience becoming EBITDA positive later in the year. How should we think about the earnings power of this business in a mid-cycle scenario?
Thank you.
Yeah, Aaron, thanks for the question. Um, I know that.
The 2 may seem to conflict with each other, but it is just part of our credit management, or our risk management process with customers, given the credit situation in Brazil. Knowing that if credit continues to be a pervasive issue with some customers, we may choose not to do business. That's why we have a guidance range that is probably as wide as it is, and that we're saying that.
Tend to be in in fertilizantes maybe on the lower end with with that risk included. Um, now that may or may not happen but you know we are not going to take undue risk and I'm going to let Jenny kind of talk a little bit more about that and then maybe turn it over to Luciano to talk a little bit about um his view on forward look um financial performance in that fertilizante segment given everything that's changed fundamentally from a cost structure standpoint as well as our growth and distribution capability with pomarancza planned. Over the next several years to continue to grow organically with latent capacity as the market continues to grow. So Jenny sure. Uh thanks um, um, in terms of Brazil um I would think the credit risk are actually uh related to
A high interest rate, but also the overall commodity prices.
So as we are in the market, it is uh, uh, sickling code. So you, you will see the price, the market will come back. The extension extension in northern part of the country. In Brazil, where not only looking into the current season on next season. We're looking at the, the growth of the overall agriculture expansion in that part of the market. And also, we see a very um, uh, the the growth itself it is going to, uh, come along, um, in the next few years. So is that contradictory to our smaller? Um, customer base, I would say, I would argue as the, the market growth in northern part of the country. Our customer are growing in that part of the country as well, especially those customers, the end users like Mega farmers and some of the major trading companies, they're expanding their presence in that in the market. So, we are growing as our customer, uh, growing and the grow. The customers, they have much more solid credit, um, uh, situation, uh, growth.
In that market as well. So I would say it is not really uh uh contradictory. It is actually complimentary as we uh, go through that. Uh, the growth journey in, in in Brazil. Um, I would, um, in term of the bio science, uh we are uh, getting into the uh stage by end of the call uh year that we're going to be EB that positive. And from next year, the growth are going to to be from
Um, uh, the new product launches this year, we have launched 2, new products already and we have 3 new in the pipeline to be launched in the, uh, rest of the year. And next year, we have new product to be launched. Um, as as we're going through regulatory, uh, uh, process. Um, the growth is also coming from the customers, uh, the new customers and also new crops, and I can, uh, I, I can, uh, I can, uh, prove you that, uh, the first half of bioscience growth. Uh, not only coming from new customer, new new crop, and also existing customers those who have used our bioscience product and this year, they can see the benefit of using power code and the bio pass. Uh, specially in the environment when fertilizers are more expensive, which helps them to uh, improve the efficiency of this expensive uh, fertilizers. So, in term of the, uh, Financial projection, I would ask, um, Louisiana to provide you, uh, some insight. Lastly, I would also say, uh, Luciano probably. Also
Can help um some of the uh ideas on finding Financial Solutions in helping us navigating uh this credit challenged uh Market uh uh environment in Brazil this year as well. Over to you.
So, Iran, if you look, uh,
Five years from now, we have targets on the investor day deck to reach around 13 million tons of sales in Brazil.
If we use, for example, the upper end of our 30% to 40% distribution margin,
And so you get around the ballpark of 500 million just for uh, distribution. If you get to the, if you want a low end for that.
For example, just picking a number like $10 million, uh, dollars times the lower bound for the distribution, marginal times 30, you would get to 300. So, 300 to 500 would be.
Kind of a range and an aspiration to grow into that range for, uh, just a distribution portion.
Uh, we now speak also about 75 to 80 dollars per ton on on current market uh, for the tons that we produce which is around 4 million. So get that gets you another 3 to
3 to $350 million for, uh, our own tons.
So you add, so you, you see that the earnings potential for uh, Mosaic future design is. And when you add also the the the core products which are around 40 million per quarter,
We could actually reach a billion dollars over the long term, and that's definitely what we are going to pursue.
Uh, would like to call attention as well. Uh, we we don't, uh, disclosed, but
Maybe in the future, we will find that our China business is becoming more material. So, we had around $30 million in the first half of this year. We may have around $60 million, and there's a potential to double or triple this number very quickly.
And in biosciences, we continue to pursue our target of $250 million over the longer term. The speed at which we will attain this goal is more dependent on regulatory approvals for some of our products than anything else.
The next question will come from.
David Simon's with BMP paribus. Please go ahead.
If I back out the implied Specialties price from the phosphate division, then it looks like the price realization was quite low for phosphate Specialties. Is there any reason for that? Perhaps you could talk through what happened with Micro Essentials pricing in the quarter?
Uh, could you give an idea of what's happening on the ground in Brazil? So, you mentioned the change to government financing support for farmers, and we've seen price processes still a little bit in Brazil over the past few weeks. So.
I don't know. It's interesting to hear your very positive outlook for first presenters. At the same time, as you're talking about potentially some headwinds in the Brazilian market, maybe you could elaborate on that.
And then I think you you mentioned in the prepared remarks that you expect the third quarter to be the best quarter for some time.
Given the share price reaction today, and given the consensus, I think it was around $850 million EBITDA for Q3. Could you maybe give a bit more color on those remarks too?
Thank you.
And David, can you clarify your question on specialty?
Phosphates? I think, yeah, none of us kind of followed that. Is that a micro essential?
Margins? What particularly are you asking? So we answered. Yes, yes, yes.
Yeah, sure, thank you. So, if I take the ASP in the Phosphates Division, and then I back out the realized DAP price using DAP volumes, um, and the price you give for DAP.
And then the remainder I'm taking as a kind of Benchmark for the Specialties pricing and that seemed to fall quarter on quarter. Uh with with worse, realization in the sort of in the rest of the business if I take out the DAP part. So just curious whether that's a, a quirk of the calculation, or whether there's anything happening in the specialist, pricing in Q2. Yeah, I think David that's 1 that's probably better handled offline to get into more detail because there's feed products in there that there's a lot of stuff that go into that calculation and the uh, we're already running up on time, so not trying to avoid that question. The second part was more Brazil. What what's going on on the ground? I think is what you said.
Yeah, exactly. And maybe some comments specifically around the government's reduction in support for farmer financing of input costs.
Yeah, I'm going to turn that over to Jenny, and if Luciano's got anything to add as well. Um, but Jenny, go ahead. Yeah.
so,
yes, so David, um, Let me let me start from Brazil. We have a very strong first half of the market, uh, where, um, was supported by the last senior corn crop. And, uh, the, uh, the, the first half of the market was very strong, what we're saying is really a slower. Much slower soybean summer season, um, the farm economics are, uh, challenged, um, given the higher, um, uh, input prices in the lower. Um, uh, crop prices and also, the credit challenge has made the market. Um, moved much slower, um, what we are saying on the ground at this point of time, uh, normally only fit 5% of the summer season fertilizers to be purchased but this year around 20% to be purchased which shows how slow, um, this Market it is. Um, we are, we are we are telling the customers to say the window is closing, um, in order to get their fertilizers on,
The ground, uh, they won't need to get up to the, uh, purchases. Otherwise, we will see some significant logistic challenges.
The bright side is really on the Nexus of Fina or second corn crop where the farmers are really on Pace of selling their crops and also buying fertilizers, in fact, the farmers buy buying their future corn, um, fertilizers already. They they've bought 35% for the, um, for the next, uh, second corn, crop versus 25% as average. So, the real challenge is really in the current, um, summer season for soybean and, and the, uh, uh, credit issue is mainly Challenge. And, uh, we can, we can tell you the customers on the ground are really trying to find any possible solutions. Um, probably government support is 1 of them which I can. Um, I need to ask Luciano to, uh, to comment,
Oh, very quickly. So, high interest rates—yes, less government support. What's happening is that the big farmers, they continue to do well?
But the small ones are being squeezed; you're seeing consolidation. So when we talk about credit issues, it's just on that fringe of small farmers and the retailers that buy and sell and have a lot of working capital needs.
So, the planted area is actually growing because the big ones are making up for the difficulties of the small farmers. So that's the situation. It's a consolidation of the market driven by.
Uh, tightness and financial conditions.
The next question will come from Richard Garcia Reno with Wells Fargo. Please go ahead.
Great. Thanks for squeezing me in. Um, so maybe just shifting the pot. Ash, uh, you took, uh, the full year production guidance up. Um, just curious maybe on the third quarter, uh, you know, you had basically in the second quarter title, cost of 26 million, do you or sorry, 34 million in paudash. Uh, do you expect to get any of that back in the third quarter? And then maybe just bigger picture? Uh, you know, with the yesterday, the Hydra float
Uh, ramping up.
How should we think about 2026 production levels? Um, if the market continues to stay strong, thank you.
Yeah, Richard, um, third quarter, um, turnaround costs because Esther Hazy would usually be at...
And it's usually in the $25 million to $30 million range. The turnaround in Esther Hazy was pulled into the second quarter. We don't have that in the third quarter. Belle Plaine still has a turnaround that straddles the third and fourth quarters. But you should expect, as we've said, to see a significant decrease in third quarter turnaround costs and potash.
Um as as far as uh running our facilities. Um you we're going to continue to run colon um to meet the strong demand that we're seeing, hence, why we raise guidance and that that's really coming from, you know, southeast Asia. Um, we got, you know, good solid demand and in the Americas, uh, but really where we're seeing good growth is on the international side. In fact campaigns, uh, had a record shipment in the first half of the year, uh, and is anticipating something similar in the second half of the year, uh, given strong demand. Uh, so there's good demand at the right value proposition for us to run all of our assets right now. Um, how does that look going into 2026? Given that Hydro flow is now ramping back up. Uh, we're going to have to continue to evaluate that. I if campex and Mosaic domestically have uh enough share and enough volume. Uh
We're in demand exists for our products and the value creation is there. Um, we'll continue to run those facilities. Uh, but it's too early to say outside of running belleplain full and Esther hazy, full. What we're going to do with the colon, uh, at this moment in time until we get a little bit closer to that. Um,
To to quarter 1 in quarter 2 of next year.
The next question will come from. Kristen Owen with Oppenheimer. Please go ahead.
Hi, thank you very much for fitting me in. Um, I I actually want to finish here on on the beginning question and forgive the Simplicity of it. But asking on behalf of myself as the newcomer and um, on behalf of some of the, the shareholders, the more broad shareholder base that you could track a post investor day. Um, given what you know today about your operating rates, you've you've given guidance from pricing, you've given guidance on volume, uh, you've suggested your sold out in class for 32, um, how much better 10 to 32 Ava? Do be versus 2q, any sort of quantification of that sequential Step Up would be extremely helpful. Thank you.
Well, Kristen, it's kind of like the earlier question on guiding to turnaround cost. We just don't guide on EBITDA, but, you know, it may be Luciano who can help.
Uh, give you some things to think about as maybe you're modeling. Um,
Because the, the growth should be pretty significant based on those numbers uh, from Q2 to Q3 so Luciano.
So Christine, for example, starting with phosphates, shipping margins are going to go up, right? So we're guiding $700 to $720 per ton prices compared to $668 realized this quarter. And sulfur and ammonia prices might be stable.
So if you have that change in margin times, and the tons of the queue is an increase, then you have phosphate volumes increasing. You can, for example, use the changing tons that we're guiding times even the Q2 margins.
We have turnaround and idle costs that are coming down. We discussed this extensively, so that’s another plus.
Conversion costs are going to come down, another plus, so commercial costs per ton could come down, you can make an estimate and and multiply it by uh the tons Blended Rock costs.
When you go to Paris, um, same thing, um, prices were guiding us to $70 to $290 compared to $261, so that increased flow directly into the bottom line. You can multiply the changes by the difference in volumes. The volumes, uh, it's a kind of a kind of stable production. Costs are going to certainly increase or decrease with hydro flow coming in.
um,
turn around and auto expenses. We also discussed, they're going to come down on other estimate you, you could do Mosaic for, we kind of guided it uh over 200 million and maybe would be well above the painting on how how much we sell.
so,
A lot of, uh, levers, uh, that a good estimate should consider to see what's going on in Q3. And certainly, it's going to be a much better number.
Well, listen, that's all the time we have for this call. I apologize to the 5 or 6 folks that we didn't get a chance to get to. I really appreciate the interest in our call today. I had a good lineup. I think we talked about a very robust set of topics, so I appreciate that. But I encourage you to follow up with the IR team and ask your questions there, as they're well prepared to talk about that. So I'd like to close our call by reminding you of our key messages. First, our work to improve asset reliability is paying off, and we expect strong production performance, as we talked about, for the remainder of the year.
Second, fertilizer market fundamentals are compelling, with tight supply and good global demand driving prices higher for both potash and phosphate.
Third, our Brazil business is performing very well, and we expect significant earnings growth in the second half of this year.
And finally, we're continuing to derive value from our extensive market access. We have the ability to move tons to the markets where demand is highest, and we have the pipelines to introduce new products, like our Mosaic Biosciences, innovation at scale.
All in all, we've done the work necessary to set Mosaic up for a very strong second half.
So again, thanks for joining our call, and have a great, safe day.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.