Mosaic reports strong Q4 2024 earnings, optimistic about agriculture markets and strategic progress in 2025.
From Nasdaq: 2025-02-28 17:45:16
Mosaic (NYSE: MOS) reported their Q4 2024 earnings in a conference call on February 28, 2025. The company’s net income was $169 million, with adjusted EBITDA at $594 million. Strong phosphate prices and solid potash performance were highlighted. Mosaic is optimistic about agriculture markets and strategic progress in 2025.
In the call, Bruce Bodine, President and CEO, emphasized operational and strategic progress at Mosaic. Luciano Siani Pires, CFO, discussed financial results and capital allocation strategies. Mosaic is focusing on shedding noncore assets and reallocating capital. The company is investing in increasing production capacity for potash and addressing challenges in phosphate production. Mosaic expects production volumes to improve in 2025 to reach 7.2-7.6 million tonnes. Operating performance in Brazil is strong with an adjusted EBITDA of 82 million in the fourth quarter. Cost discipline is a priority, and strategic progress includes the sale of underperforming assets and capital redeployment for better returns. The company is investing in core businesses and new growth areas like Mosaic Biosciences. Agriculture commodity fundamentals are strong, with high demand expected for phosphate and potash due to rising crop prices and global demand. Tight supply and elevated prices are anticipated for both phosphate and potash. In 2024, there was a flat capex to address reliability challenges, with a focus on reducing capex in future years. Net income was impacted by a $522 million gain on exchange of a stake in a joint venture for shares of Ma’aden. A $390 million foreign exchange loss in the fourth quarter was due to weakening Brazilian real and Canadian dollar. Adjusted EBITDA for Brazil was 82 million in Q4, but after charges, the underlying performance was in the 120 million territory. Cost performance is strong, with a $150 million cost reduction program capturing 35 million recurring savings in Brazil.
SG&A was largely flat in 2024 compared to 2023, including a 30 million loss on receivables from a defaulted Brazilian retailer. Without this loss, SG&A would have been 34 million less. In potash, MOP costs have been flat at $65 to $75 a tonne, with margins expected to improve with increased production. In phosphates, costs increased in Q4 due to plant downtime after hurricanes, but cost reductions are expected to exceed 150 million, with digital acceleration and better mine planning contributing to savings. Mosaic announced plans to discontinue monthly price and volume releases, citing feedback that it was more noise than signal. The company is focused on reallocating capital to benefit shareholders and recently closed a $1.5 billion deal with Ma’aden shares. Mosaic remains optimistic about its outlook for 2025, with improving operational performance and a strong financial foundation. The company is also considering monetizing assets like Carlsbad and continues to evaluate its portfolio for opportunities. Analysts are invited to attend the upcoming analyst day on March 18 for more details. Mosaic is optimistic about the progress in Carlsbad and expects important news in Q2. They are also looking into ways to monetize Ma’aden shares. Analysts question the global phosphate shipments outlook, citing supply constraints and potential for yield improvements with new products. Mosaic projects a 1-1.5% compound annual growth rate in phosphates. When asked about maximum potash production, Mosaic sees limited upside due to running facilities at full capacity. They continue to monitor and analyze production levels. Stay tuned for more updates on their analyst day on March 18th. BHP executives discuss the limitations of the potash supply chain in Canada, with uncertainty around Laos and China’s production cuts. They aim to reduce capex by $200-300 million in the next few years, focusing on maintenance projects like HydroFloat and MicroEssentials. Working capital will increase due to business growth, especially in Brazil. Richard Garchitorena of Wells Fargo queries about Fertilizantes’ cost savings and Brazil market credit issues, with Bruce Bodine stating that cost savings will come from SG&A and fixed cost absorption benefits from increased production volumes. Mosaic is focused on doubling cost reductions in all areas of the business, with $150 million already achieved in phosphates and potash. The company plans to exceed this target with aggressive strategies. In Brazil, credit risk issues are managed by shifting focus to lower-risk customers, such as mega farmers and traders. Tariffs on Canadian potash may affect pricing and demand, but Mosaic believes downstream customers will bear the brunt of the cost. Affordability of potash remains strong, with no immediate impact expected on spring season demand or profitability. Farmers are not concerned about the additional cost, showing confidence in the market. The global potash market is seeing good price appreciation, with prices up over $40 a tonne in the U.S. and Brazil since December. Production shortfalls impacted cash flow for Mosaic in 2024, but they expect to cover dividends and capex in the future. Mosaic is not providing sales guidance for the year, but production volumes for potash and phosphate have been shared. Recent supply side constraints have tightened the market, leading to price increases. In Brazil, Fertilizantes has focused on cost reductions to improve performance. Mosaic expects to recover losses in the third quarter with AgroGalaxy. The company is focused on reducing costs and improving performance in 2025. They anticipate positive results from insurance reclaims and are confident in cash flow recovery this year. The $120 million quarterly run rate for Fertilizantes is considered a floor for performance going forward. The market backdrop is promising, and Mosaic is making strategic progress to benefit from good market conditions. They have a positive outlook for 2025 and are reallocating capital for better returns.
Read more at Nasdaq: Mosaic (MOS) Q4 2024 Earnings Call Transcript