The Mosaic Company's First Quarter 2025 Conference Call begins with an introduction from the operator, followed by Jason Tremblay welcoming attendees. Bruce Bodine, CEO, will open with comments, followed by Jenny Wang's market update and Luciano Siani Pires' financial review. The call will feature forward-looking statements subject to risks and uncertainties, and actual results may differ from projections. Non-GAAP financial measures will also be presented, as detailed in the press release. Bruce Bodine notes that fertilizer fundamentals are strong and prices are rising, with robust demand in all key global regions despite trade policy uncertainties.

The paragraph discusses Mosaic's progress in normalizing phosphate production and operating costs, benefiting from strong market access, and divesting non-core assets. The company's Brazilian operations and Mosaic Biosciences business are performing well, and they have increased potash production outlook due to global demand. In the first quarter, Mosaic posted a net income of $238 million and an adjusted EBITDA of $544 million, driven by strong phosphate and potash prices and the performance of their Mosaic Fertilizantes segment. Despite being the slowest quarter traditionally, they anticipate further earnings improvement by 2025. Market fundamentals for agricultural commodities and fertilizers are solid worldwide, with supply constraints keeping phosphate and potash prices high in the first quarter, exceeding expectations.

The paragraph discusses the current global trade conflicts and geopolitical factors impacting the agriculture sector, with a specific focus on the U.S. The company highlights its strategic advantages in navigating these changes, such as its strong presence in Brazil and supply chain agility. Long-term market fundamentals remain favorable, particularly with increasing demand due to biofuel mandates and growing ethanol usage in Brazil. Phosphate demand is driven by rising lithium iron phosphate production in China, keeping the market tight despite potential trade disruptions. The company emphasizes efforts to normalize production and manage costs, highlighting investments in the Esterhazy complex to enhance potash production.

The paragraph outlines the expected increase in production volumes and flexibility at Esterhazy, which will help reduce per ton costs and improve netbacks. Despite planned downtime at the Bartow and New Wales plants, phosphate production was strong, with a 2025 goal of 7.2 to 7.6 million tons still in sight. Mosaic Fertilizantes showed robust performance in the first quarter, with declining conversion and production costs and expected profitability improvements. Looking beyond immediate operations, Mosaic plans to expand into new markets and products, leveraging its presence in Brazil and geopolitical positioning. With the completion of the Palmeirante blend plant expected in July, further growth is anticipated, with over half of the additional capacity already sold. The operating environment remains favorable.

The paragraph highlights Mosaic Biosciences' anticipated 15% sales volume growth due to strong farm economics. The company's revenue more than doubled from the previous year, driven by increased sales of existing products and new launches like Neptunion, a biostimulant introduced in China that helps crops handle stress from drought, salinity, and heat. Neptunion is awaiting registration in India and Brazil. Mosaic Biosciences is successfully engaging global growers with its biological products. The company is also reviewing its asset portfolio and exploring strategic alternatives, including the sale of certain assets and evaluating others in Brazil. Despite working capital seasonality affecting free cash flow in Q1, Mosaic expects improvement later in the year, while maintaining its commitment to returning excess capital to shareholders. The passage concludes with a mention of upcoming updates on agriculture and fertilizer markets.

The paragraph discusses the current state of the agricultural market, highlighting strong fundamentals despite uncertainties caused by global trade policies. While ag commodity prices have been volatile, they have remained stable overall, with demand supported by low global stock-to-use ratios. Global ag commodity demand is less affected by macroeconomic fluctuations. In North America, typical spring demand for fertilizers is expected. However, in the U.S., growers may face challenges in the second half due to lower commodity prices and shifting trade flows, benefiting Brazilian growers instead. Brazilian farmers are experiencing strong economics, with commodity prices higher than those in Chicago. Fertilizer shipments to Brazil are expected to reach a record high, and P&K purchases are up 10% from the previous year. Elsewhere, grower economics remain favorable.

The paragraph discusses the state of domestic agriculture in smaller and mid-scale countries aiming to enhance food security amid global uncertainties. It highlights strong economic performance in palm oil and Indian pharmaceutical sectors, supported by favorable government policies. Following a phosphate fertilizer shortage in 2024, India is expected to see demand rise by 40% in 2025 due to improved government support. However, phosphate and potash prices remain tight, with Chinese high-analysis phosphate exports limited by domestic demand and industrial use, and reduced potash production expected in 2025 from major suppliers like Russia, China, and Chile. Belarusian exports exceeded expectations in Q1, and upcoming maintenance may impact supply in Q2. Both phosphate and potash prices are expected to maintain current levels.

The paragraph discusses the current state of the U.S. market for raw materials, highlighting firm software prices and sulfur prices expected to normalize by year-end. Ammonia supply is increasing, leading to lower prices. Despite this, phosphate margins are expected to stay high due to elevated benchmarks. The Mosaic company anticipates limited impact from government and trade policies. Luciano Siani Pires addresses performance and reveals cost per ton metrics in their release, highlighting phosphate and potash segments' outperforming sales prices in Q1 despite maintenance impacting costs. Strong mining output and lower rock costs are expected to improve financial results in upcoming quarters, though cash conversion costs rose due to lower production and higher operating expenses.

The paragraph discusses the financial and operational performance of a company in the potash and Brazilian fertilizer segments. In the potash segment, production costs increased due to production curtailment caused by cold weather in Saskatchewan and maintenance work during downtime. However, the company expects production costs to decrease and meet target levels by benefiting from the hydrofloat project. In its Brazilian operations, the company saw an improvement in adjusted EBITDA, which increased to $122 million despite negative foreign exchange impacts, as mining costs declined due to improved mine plans and operational performance. The company anticipates stronger results in Q2, partly due to seasonal effects.

In the paragraph, the discussion revolves around sales, distribution margins, and financial performance. It highlights the expected increase in Q2 EBITDA for Fertilizantes to above $150 million due to a 30% sales increase and stabilized FX impacts. The text also covers cost-saving progress, with a $150 million target, of which 60% has been achieved so far. This includes $90 million in savings, split between improved rock sourcing by Mosaic Fertilizantes and lower SG&A costs. The company anticipates accelerated SG&A reduction in Q3 due to new software implementations. Finally, with an improving pricing environment, the outlook for cash flow generation is positive.

In Q1, cash flows were affected by a seasonal inventory increase of about $160 million in preparation for higher sales in Q2 and Q3, as well as taxes and profit sharing expenses. Looking ahead, improved cash flows are expected due to stronger demand and inventory reduction, though working capital will remain $150 million higher by year-end, largely due to increased sales in Brazil and higher raw material costs, particularly sulfur. Discussions on reallocating capital from non-core potash assets, Carlsbad and Taquari, have progressed, as these investments are not the best fit for the company's portfolio. Overall, Mosaic reports a solid quarter and anticipates a positive 2025, bolstered by operational improvements and a strong financial position.

In the paragraph, Christopher Parkinson asks Bruce Bodine about the company's progress with projects at Bartow, New Wales, Riverview, and Louisiana, comparing the status in the first and second quarters and looking forward to the second half of the year. Bruce Bodine responds, noting that they are in a similar position as anticipated, having faced some challenges with equipment and unexpected issues, such as brick work in a reactor at New Wales. Despite some commissioning struggles, especially with the first train of a new Gypsum handling system, the company has seen benefits and target rates met at both New Wales and Bartow. They have also accelerated additional gyps handling work at New Wales into the first half of the year.

In the paragraph, the company is optimizing operations by applying lessons from a previous project to improve performance for the second half of the year, despite potential increased downtime in the first half. They express optimism about these efforts paying off. A question arises regarding the impact of tariffs on ammonia costs, to which Bruce Bodine responds that their ammonia purchases have not been affected by tariffs. Most of their supply comes from the U.S. under strategic contracts, and they are producing adequately from their own assets in Louisiana, minimizing exposure to market fluctuations.

In the paragraph, David Symonds from BNP Paribas asks about phosphate-related topics during a discussion: Specifically, he questions the potentially conservative pricing of DAP (Diammonium Phosphate) and requests insights into April's price realization. He also inquires about maintenance costs, noting an increase of $20 million year-on-year despite lower production and reduced idle and turnaround costs. Luciano Siani Pires addresses the maintenance cost question, attributing the increase to fixed cost absorption and extraordinary maintenance expenses aimed at improving reliability. Jenny Wang is then handed the discussion to address the DAP pricing inquiry.

The paragraph discusses the resilience and potential for price increases in the DAP (di-ammonium phosphate) market, indicating that April DAP prices exceeded expectations and forecasting strong prices for the remainder of the quarter. There is no anticipated price reset after the spring season in North America, with global prices staying around $700. Additionally, Bruce Bodine mentions expected conversion costs returning to a range of $95-$100 per ton later in the year. Joel Jackson then poses a question, noting the strength of the potash market due to demand and comments on Belarusian potash exports being high in April, suggesting no supply issues or maintenance cuts affecting the market. He's curious about the strategic implications for the company, given Belarus's continued strong export volumes.

In the paragraph, Jenny Wang responds to Joel's question about potash exports and shipments, specifically focusing on the situation in China. She mentions that while there's no observed reduction in Belarusian shipments, there have been production cuts in China and an announcement from Chile's SQM about repurposing potash production. For the first quarter, China, the largest potash market, experienced a 7% reduction in imports and decreased domestic production, leading to significantly low inventory levels, both at ports and with local producers. This reduction in shipments and low inventory levels in China make the upcoming contract negotiations critical. The conversation then shifts to Kristen Owen from Oppenheimer, who asks about the cost of potash production, which Bruce Bodine begins to address.

The paragraph provides a corporate update on Mosaic's production issues and future outlook. The Belle Plaine site faced weather-related production constraints but is now fully operational, improving supply chain fluidity. The Esterhazy hydrofloat project is on track to add 400,000 tons in the latter half of the year, leading to improved cost per ton. Luciano Siani Pires indicates that achieving their target range could happen as early as the second quarter. In response to a question from Andrew Wong of RBC Capital Markets, Bruce Bodine highlights new supply and demand graphics in Mosaic's earnings deck and projects rising production of phosphate and potash in the latter half of the year, which could affect market balances and pricing, although U.S. summer prices might stay stable.

The paragraph discusses the constraints in the phosphate supply and demand balance, with a particular focus on the impact in India. Supply is limited, affecting demand, and increased production from companies like Mosaic is expected to help meet this demand partly. India, facing a significant demand increase for the upcoming Kharif season, is anticipated to purchase 2 million tons of DAP, with the government supporting this need through agreements with suppliers like OCP. While the North American phosphate market may experience some demand challenges, particularly due to the differences in subsidy levels and farm economics, the demand in Brazil is expected to offset these challenges, resulting in an overall tight global market for phosphates.

The paragraph discusses the current phosphate market dynamics, where Mosaic is monitoring affordability issues in the U.S. market as spring season demand picks up. Some U.S. customers are purchasing summer phosphate supplies at current prices to mitigate potential price increases. The market is tight, and pricing will determine phosphate distribution. There is speculation that global phosphate demand might stabilize, but there's concern about potential yield impacts if deficits persist. The use of biologicals to increase phosphate availability is also noted. Steve Byrne from Bank of America questions the sustainability of projected demand trends, and Jenny Wang acknowledges that the world requires more phosphate to support agricultural yields.

The paragraph discusses the slowdown in yield increases over the past few years due to reduced global phosphate application and how biologicals can help farmers improve the efficiency and return on investment (ROI) of their phosphate investments, especially given high prices. It mentions that investing in biological products can benefit farmers in North America and Brazil by increasing yields and enhancing ROI. The conversation then shifts to financial matters, with Vincent Andrews from Morgan Stanley asking about cash flow deviations and free cash flow conversion. Luciano Siani Pires responds by indicating no major anticipated deviations in cash flow and that increased EBITDA should largely convert to cash flows, although specific free cash flow conversion percentages are not provided.

The paragraph provides a discussion between company representatives and analyst Ben Isaacson regarding the financial expectations and plans for Mosaic Biosciences. The company targets $70 million in revenue for the current year, with profitability anticipated by the fourth quarter. They aim for $200 million in EBITDA within five years. The discussion touches on the anticipated shape and margins of EBITDA growth, with a consideration on whether to spin off the business to avoid it being affected by a commodity multiple. Jenny Wang responds, indicating positive results and potential upside to the forecasted numbers, reiterating statements from a previous Analyst Day.

The paragraph discusses the growth projections for Mosaic's bioscience segment, emphasizing two types of products: their own developed products and licensed third-party products. Own products, which have a gross margin of about 60%, are developed and registered by Mosaic, while licensed products have a lower gross margin of 30-40%. Major new product introductions are planned in all major markets after obtaining necessary registrations to accelerate growth. The company's recent product launch, Neptunion in China, marks the beginning of this strategy. Additionally, there's optimism about the business's future growth and the potential financial benefits as EBITDA increases. The speaker then invites a question from Richard Garchitorena of Wells Fargo and suggests transitioning the discussion to Brazil.

The paragraph discusses the expected EBITDA upside for the second quarter, mentioning a potential increase of $150 million driven by sales volumes. In the first quarter, sales volumes were up 8%, and there is an expectation of a 15% increase for the full year. This growth is attributed to improvements in sentiment since early in the year, with Brazil benefiting from trade dynamics. Luciano Siani Pires notes that the first quarter's performance in Fertilizantes was mainly from production, with limited impact from distribution. He explains the financial impact by calculating EBITDA contributions from increased distribution sales and production business, estimating a $150 million EBITDA floor for Q2, while also expecting production sales to grow during the quarter.

The paragraph discusses the growth expectations for the Brazilian market, driven by increased acreage of corn and soybean and changes in trade flows benefiting Brazilian farmers. Mosaic is planning to capture growth by expanding into new regions, notably the northern part with the Palmeirante facility starting operations in July. However, challenges include credit issues and high interest rates. The conversation then shifts to a question about Mosaic's phosphate production outlook. Despite keeping the annual target unchanged, the current guidance suggests a need for over 2 million tons of production in the second half to meet the lower end of the annual range, raising questions about potential production levels for meeting or exceeding the target.

In the paragraph, Bruce Bodine discusses the company's annual guidance for phosphate production, estimating a range of 7.2 to 7.6 million tons and noting potential upside in their quarterly output based on facility capabilities. He expresses confidence in the company's capacity post-reliability improvement projects and feels optimistic about achieving full capacity in the latter half of the year. When asked by Edlain Rodriguez about capital allocation between phosphate (P) and potash (K), Bodine acknowledges the challenge but highlights that while phosphate has sustained high stripping margins, potash remains promising, though dependent on new supply dynamics. Overall, he is optimistic about phosphate margins.

The paragraph discusses the financial dynamics of the potash and phosphate sectors, highlighting that while EBITDA to cash conversion is better in potash due to lower capital expenditure needs, phosphate offers significant operating leverage and potential for cash flow generation during market upturns. The speakers indicate a balanced approach to investing in both sectors, adapting investments based on market trends over the coming years. Bruce Bodine concludes by emphasizing the strength of agricultural and fertilizer markets, improvement efforts in phosphate production, and the strategic advantage of market access, which are all contributing to the company's growth.

The paragraph discusses Mosaic's successful performance, highlighting strong results in Brazil, rapid growth in its Bioscience sector due to distribution access, and efforts to reallocate underperforming capital for better shareholder returns. Overall, Mosaic is well-positioned to capitalize on favorable market conditions in the near and medium-term. The paragraph concludes a call, thanking participants for joining.

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