The Mosaic Company is holding their second quarter 2024 earnings conference call. Bruce Bodine, President and CEO, will provide opening comments, followed by a fireside chat and open Q&A. The company will be making forward-looking statements and presenting non-GAAP financial measures. Bodine acknowledges recent safety incidents and emphasizes the company's commitment to improving safety.

The second quarter was successful for Mosaic, with strong results and progress in various areas. The company is focused on managing costs and has already achieved one-third of its annual cost savings target. They have also executed a contractor reduction plan and are on track to reduce capital expenditure. Production volumes have increased, and efficiency has improved across segments. Growth projects, such as the microessentials expansion, are progressing well.

The company has completed a potash compaction project and is on track to finish the Palmeirante blending facility in Brazil by 2025. Their Mosaic Biosciences business has launched products in various markets and has seen significant growth. The company has also successfully launched a global digital acceleration program and has returned a significant amount of capital to shareholders. The fertilizer and agriculture markets are showing positive signs, and the company's phosphate business in the U.S. is aiming to reach a production rate of 8 million tons per year by 2024.

The company has seen good progress in their second quarter production volumes, with some facilities reaching 90% of their target production levels. Turnaround work has led to improvements in production rates and lower unit costs. The company expects further improvements as remaining projects are completed. The global ag commodity markets have seen diverging trends, but crop nutrient affordability remains strong, leading to high fertilizer demand. The company remains positive about the long-term outlook for phosphate.

The demand for grains and oilseeds is increasing, leading to competition for limited phosphate supply. Chinese exports are low and major new supply is not expected for years. Prices have rebounded due to strong demand and tight supply. The potash market is balanced and the company has restarted production to meet customer commitments. In the phosphate segment, adjusted EBITDA was $308 million on revenue of $1.2 billion, with solid sales volumes and strong prices.

In the second quarter, margins increased due to strong pricing and lower costs. Sales volumes are expected to increase in the third quarter. Potash adjusted EBITDA was $271 million and sales volumes were solid. In Brazil, adjusted EBITDA was $96 million and results were solid due to prioritizing margin and cash flow. Capital allocation strategy remains the same. Mosaic is executing well and outlook is positive. The most common question is related to the markets.

Bruce Bodine and Jenny Wang discuss the demand outlook for fertilizers, stating that while corn and soybean prices have weakened, other crops such as palm oil and rice are favorable. They also mention that only one-third of phosphate and potash consumption is related to corn and soybeans, and demand for these fertilizers remains strong in all key markets. They highlight that demand has significantly increased in Southeast Asia due to favorable weather conditions and attractive prices. In terms of near-term demand, they mention a strong summer fuel program in North America and robust demand in Brazil, with record shipments expected.

The company has sold all of its available tons for Q3 with a strong customer prepayment. In India, there is a high demand for fertilizers due to favorable monsoon and growers needing to maximize their crop production. In China, there has been a 20% growth in domestic phosphate and potash shipment, driven by strong ag fundamentals and food security policies. The company anticipates limited phosphate exports from China, which will benefit global phosphate prices. First half exports were 1 million tons lower than the previous year due to high domestic demand, and it is expected that export restrictions will continue or even tighten to control domestic prices.

The paragraph discusses the impact of high-tech seed technologies on fertilizer demand, as well as the shift from fertilizer production to industrial products like PPA and LFP. The growth of domestic demand, reduction of production, and rising prices have led the Chinese government to tightly control phosphate exports. The production ramp up for phosphates is going well, resulting in increased volumes and lower costs. Certain sites, such as Bartow and New Wales, are performing particularly well and meeting historical production objectives.

The company plans to conduct maintenance turnarounds in Louisiana and Riverview to improve production, but there may be some variations due to normal turnaround schedules and product mix decisions. Annual production is expected to be between 7.8 million to 8.2 million tons. Unit costs are expected to decrease due to increased production efficiency. The company plans to restart Colonsay to meet market demand and fulfill customer commitments. The market in Brazil has been challenging for the industry.

Bruce Bodine discusses the challenging operating environment in Brazil agriculture and how Mosaic has been able to mitigate risks and deliver strong results due to their expertise and assets in the country. He also mentions the progress made in meeting cost savings and CapEx reduction targets, specifically in operating efficiency and reducing costs in all areas of the company.

The company has implemented plans to reduce headcount and cut costs, resulting in run-rate savings of $20-30 million. They have also finished several growth projects and are on track to reduce CapEx by $200 million this year. The Phosphate side of the business is performing well despite high prices and low crop prices, and the company is not worried about demand disruption or trade flow from China. It is unclear what could potentially break the Phosphate cycle, but LFP demand is expected to remain strong in the future.

The speaker discusses the lack of new capacity in the near future that could affect prices, but remains optimistic about the current prices. They also mention that 30-33% of P&K demand is in corn and soybeans, while the remaining 67% is in other crops such as palm oil and sugarcane. The speaker also mentions that LFP is mainly used in China and for Tesla, and that global adoption is projected to be between 35-55%.

The speaker discusses the potential for LFP adoption and its role in energy storage, particularly in China and with the help of companies like Tesla. They also mention that the growth of the EV market in China can serve as a proxy for the rest of the world. The speaker then moves on to answer a question about industry shipments in Potash and Phosphate, projecting a range for both. They note that their Potash projections have gone up slightly due to developments in Southeast Asia, while their Phosphate projections remain largely unchanged.

The speaker provides an update on the status of the industry and the Department of Commerce's rulings and appeals. They also mention that Mosaic Fertilizantes is performing well and they expect margins to remain steady in the $30 to $40 range. Overall, they see good demand for fertilizer in Brazil for the year.

Jenny Wang provides some insight into the current state of the fertilizer market and the demand for sulphur. The sulphur season is in full swing and demand is strong, with farmers selling their crops and improving liquidity in the system. Mosaic is selling ahead of the market trend and prioritizing sales to customers with lower credit risk. There may be a potential shift in sales for the safrina season in Brazil, with some demand potentially shifting from late Q4 to early Q1.

The speaker, Jenny, reports that the company has successfully sold all of their Q3 products and is currently focused on executing their business plans. In response to a question from Joel, Bruce addresses a recent safety incident at one of their facilities and expresses condolences to the affected families. He also discusses the progress of their phosphate production, noting improvements in Q4 and the ongoing ramp-up at several facilities.

Bruce Bodine states that the Potash market is complex and difficult to predict. While there are sanctions in place for certain regions, trade flows have been shifting and there is still an abundance of product available. This has led to increased competition and a rebound in both Russia and Belarus. Overall, the Potash market remains stable, with Canpotex receiving a value proposition from its global shipments.

The speaker discusses how Belarus is using rail to transport potash to China, but it is at a cost to serve for them. This may affect potash prices, but there are still buyers in other geographies. The supply and demand for potash is returning to pre-sanction levels, and there are announced expansions in Greenfield mines. The speaker also talks about the business model for selling biologicals and whether they can reduce P&K application rates.

Bruce Bodine and Jenny Wang discuss the potential for growth in the biologics market and how their company's distribution network and customer relationships will benefit from it. They believe their biologic products, which have shown significant yield results, will complement their current offerings and help farmers get more out of their land. Jenny explains that they will use their current customer base and market access to sell their biologic products, which can be coated on fertilizer granulars or used as a foliar application.

The company has invested in a next-generation nitrogen fixation product that will likely be distributed through seed coating. They are working with major seed companies and hope to provide updates soon. The scheduled turnaround at Esterhazy will last about a month, during which Colonsay will be restarted to offset the lost tonnage. Colonsay will continue to run for the rest of the year to meet market demands and serve as backup during maintenance turnarounds.

The speaker prefers to run the Bell and Esterhazy plants first due to their low cost, while the Colonsay plant has higher costs. However, improvements have been made to reduce the incremental cost at Colonsay. In response to a question about phosphate shipping margins, the speaker mentions that their realized stripping margins are higher than benchmark stripping margins. They also address a specific question about the increase in ammonia costs, stating that they do not have much insight on the matter as they do not report on it.

The speaker discusses the company's advantages in ammonia cost and buying power for raw materials. They also mention that their execution is on track and the market fundamentals are strong, but they believe further execution is needed to gain more investor confidence.

The speaker is pleased with the company's progress and execution of their strategy, but acknowledges that there is still more work to be done in the second half of the year. They mention the need for cost absorption and the impact of China's policies on the phosphate market. A question is asked about the company's thoughts on Fertilizantes for the second half.

The speaker discusses the potential for higher profitability in the second half of the year at Fertilizantes, with expected increases in volume, distribution margin, and EBITDA contribution. They also mention the potential for shifts in volumes and the impact of the safrina season on the market.

The speaker discusses the potential for FX tailwinds and the resiliency of phosphate prices. They mention the disconnect between P&K prices and suggest that it may not necessarily narrow in the future. The supply and demand fundamentals for these commodities are different and there is no clear catalyst for a change in pricing. They are optimistic about P prices and do not see a significant risk for K prices in the near future.

Lucas Beaumont asks about the moving costs in Phosphates, which are down 15% from the end of the year but only 5% year-on-year. He asks for more information on how much the costs will decrease when the company reaches its historical run rate of 8 million tons. Bruce Bodine responds that there will be benefits from volume and fixed cost absorption, as well as other factors like electricity generation. He expects a $20-30 reduction in total cost from the historical high, but does not anticipate getting back to the $65-70 range due to inflation. The next question from Andrew Wong is about the need to keep Colonsay on standby even with the expansion in mid-2025, and the potential cost savings if it were to be permanently shut down.

Bruce Bodine, in response to a question about the Potash strategy, discusses the rationale behind maintaining supply flexibility and the potential impact on buyer behavior. He explains that having Colonsay as a flexible option provides significant upside potential for the company, but they are also responsible in controlling the volume based on commitments to Canpotex and customers. He also mentions the current need to run Colonsay due to the tightness in the market and lack of inventory, but decisions on its future operation will depend on market conditions and shareholder value. Bodine concludes by restating the key themes of the call.

Mosaic had a strong second quarter with positive operational performance and progress on strategic initiatives. Fertilizer demand is high and the overall outlook for the rest of the year is positive. The conference call has ended.

This summary was generated with AI and may contain some inaccuracies.