MOSAIC (MOS) Q1 FY26 earnings call: guidance and Q&A

Can you provide an updated directional range for working capital release, considering changes in production guidance and raw material prices?

The previous estimate of $300 million to $500 million working capital release for the year still stands, but it's influenced by two opposing forces: higher raw material prices (sulfur, ammonia) tend to reduce the release, while production curtailments tend to increase it. Q1 saw a $120 million release from phosphate finished goods, partially offset by seasonal inventory build in Brazil and higher input costs.

“So the $300 million to $500 million pretty much continues to be our estimate for release.”

asked by Justin Pellegrino · answered by Luciano Pires

Discuss the differences in U.S. vs. international phosphate market dynamics, especially regarding strengthening international prices, and how Q3 order book and production guidance are being influenced by anticipated sulfur price increases.

International phosphate demand is strong, particularly in Asia (India, Pakistan, Ethiopia) due to low inventories and government support, leading to premium prices over North America. Despite this, current and anticipated Q3 sulfur and ammonia input costs make stripping margins unsustainable, forcing production curtailments. The company is preserving Q2 sulfur for longer and will monitor raw material prices and net stripping margins globally.

“But at today's input costs on sulfur and ammonia, even at the international prices going into Q3 and Q4, given an anticipated rise in sulfur price, we see stripping margins being in a place that may not make as much sense for us.”

asked by Chris Parkinson · answered by Bruce Bodine

What milestones are you watching for the second half of the year, and how do you view the market in Brazil going into H2?

Key milestones include fluidity in the Strait of Hormuz and normalization of sulfur prices and availability. The current situation is temporary; long-term fundamentals remain strong due to under-application of fertilizer impacting future yields. Ag commodity prices are expected to improve, enhancing farmer affordability. Brazil faces a likely contraction in fertilizer use in FY26 due to nutrient availability issues, but Mosaic remains bullish on the long-term outlook and is positioned to grow with the market.

“Make no mistake, sulfur availability and subsequent affordability are the biggest things driving our view from a Mosaic standpoint on where we can participate and what we can produce to participate.”

asked by Kristen Owen · answered by Bruce Bodine

Why are ammonia values in the phosphate segment so high ($626/tonne), given 80-85% internal/contracted supply? Also, how much sulfur is currently blocked on ships behind the Strait of Hormuz?

80% of ammonia needs are met by internal supply (Faustina, ~30% on a normalized basis) or market-advantaged contracts tied to natural gas, with 20% exposed to spot. Q1's $626/tonne average was influenced by rising spot prices and turnarounds. There is no good visibility on the exact amount of sulfur blocked on ships, but refinery damage in the Arab Gulf will also impact supply. The marginal cost of sulfur is currently $1,200/tonne and ammonia $800/tonne, which drives production decisions, making marginal stripping margins below variable costs.

“But on a normalized basis, roughly 30% comes from Faustina supply, again, depending on turnarounds and what's going on in any given quarter. And then the remaining up to 80% is better than market, much of which is natural gas tied contracts with producers. And then we're exposed to 20% on spot.”

asked by Jeffrey Zekauskas · answered by Unknown Executive

How does Mosaic balance the need to raise phosphate prices to recover margins with the risk of demand deferral due to high prices and farmer affordability issues?

The current situation is unsustainable, with compressed stripping margins for producers and distressed farmer affordability. At $1,200/tonne sulfur, much of the producer cost curve is underwater, leading to global curtailments. The company believes this is temporary; the Strait of Hormuz will eventually normalize, and ag commodity prices will improve due to nutrient under-application, leading to better farmer affordability and a healthier market. Mosaic is positioned to capitalize on this eventual recovery.

“Rarely, if ever, have we seen where stripping margins on the phosphate producer side are this compressed and farmer affordability at the same time being distressed, something has to give.”

asked by Edlain Rodriguez · answered by Bruce Bodine

How much production is being curtailed in Q2, what would production have been otherwise, and how does this impact the long-term 8 million tonne target?

The partial curtailment at Louisiana affects about half of its 1.4 million tonnes finished product capacity, and Bartow about half of its 2 million tonnes annualized capacity. These are temporary and can be quickly unwound. While Q1 saw good progress with 3 of 4 facilities at target rates, the current situation mutes the ability to demonstrate further improvements. The curtailments are not expected to impact longer-term production targets, but if the situation protracts, further curtailments are an option if stripping margins don't improve.

“So Louisiana partial curtailment is about half of its production capacity at 1.4-ish million tonnes of finished product capability and about half of Bartow's capacity at 2 million tonnes of annualized capacity.”

asked by Lucas Beaumont · answered by Bruce Bodine