Company Reports

Mosaic announced it would produce lower potash and phosphate volumes in 2024 as a result of unplanned outages. After reviewing the announcement, we're maintaining our $40 fair value estimate and no-moat rating. While we see a limited impact on Mosaic's 2024 results due to lower volumes, we do not expect any longer-term impact.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2023, potash generated around 57% of total gross profits, with phosphates around 33%. The balance is derived from the Brazilian fertilizer business. Mosaic’s US phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.

Mosaic's second-quarter results reflected lower fertilizer prices, primarily potash, as companywide operating earnings were down 37% versus the prior-year quarter. The results were consistent with our outlook for the year for lower fertilizer prices and resulting profits. Having updated our model to incorporate the second-quarter results, we're maintaining our $40 fair value estimate for Mosaic. Our no-moat rating is also unchanged.

Commodity data firm ICIS reported that Canpotex (Nutrien and Mosaic's potash export joint venture) agreed to a potash contract with India importers at a price of $283 per metric ton. This price is higher than both contracts signed last week. It is $4 per metric ton above the contract signed between India and potash producer Belaruskali and $10 per metric ton above the contract signed between China and Russian potash producer Uralkali. The $283 price is nearly at the midpoint of our potash contract forecast range for Canpotex of $270-$300 per metric ton.

Commodity data firm ICIS reported that Russian potash producer Uralkali agreed to a potash contract with Chinese importers at a price of $273 per metric ton. We think this deal will set the contract price for Canpotex (Nutrien and Mosaic's potash export joint venture) contracts with China and India this year and will set a floor price for the potash spot market. The price was in line with our view that potash contract prices would fall to a range of $270-$300 per metric ton, down from the prior China contract price of $307 per metric ton in 2023.

Potash prices have fallen 75% since reaching an all-time high in April 2022. The price spike was driven by a supply shock from temporarily reduced exports, which, in turn, reduced near-term demand. With supply back to normal levels and demand still recovering, prices overcorrected. Potash now sells at roughly $305 per metric ton, based on World Bank data. This is below what we view as the long-term marginal cost of production. In the near term, prices should remain low. We see the India-Canpotex contract, which informs spot prices, being set at a multiyear low below $300 per metric ton in 2024.

Mosaic's first-quarter results reflected the continued decline of fertilizer prices from the all-time high levels reached in 2022. Our outlook for near- and long-term potash and phosphate prices is largely unchanged. Mosaic announced a deal to sell its 25% stake in its Saudi phosphate joint venture to JV partner Ma'aden in exchange for common equity shares in Ma'aden, which we view as value-neutral.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2023, potash generated around 57% of total gross profits, with phosphates around 33%. The balance is derived from the Brazilian fertilizer business. Mosaic’s U.S. phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2023, potash generated around 57% of total gross profits, with phosphates around 33%. The balance is derived from the Brazilian fertilizer business. Mosaic’s U.S. phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.

Mosaic's fourth-quarter earnings reflected our near-term outlook for lower fertilizer prices as companywide adjusted EBITDA was down nearly 40% versus the prior-year quarter. After updating our model, we're maintaining our $40 fair value estimate. Our no-moat rating is also unchanged.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2022, potash generated around 50% of total profits, with phosphates around 30%. The balance is derived from the Brazilian fertilizer business. Mosaic’s U.S. phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.

Mosaic's third-quarter results reflected lower fertilizer prices; spot prices for potash and phosphate generally bottomed out near the beginning of the quarter, before slightly rising during the quarter. We think lower fertilizer prices, which now generally sit near our long-term price forecasts, will result in farmers applying more volume this year and in 2024. Having updated our model to incorporate these results, we maintain our $40 fair value estimate. Our no-moat rating is unchanged.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2022, potash generated around 50% of total profits, with phosphates around 30%. The balance is derived from the Brazilian fertilizer business. Mosaic’s U.S. phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.

Fertilizer stocks rallied following the Hamas attack on Israel and the Israeli military response. Of the three primary fertilizers, Israel is a major exporter of potash, accounting for around 6% of global exports based on Nutrien's 2022 fact book. The country is not a major exporter of nitrogen or phosphate. We think the market may be reacting to the increased potential for a supply disruption if the conflict leads to the destabilization of export volumes from Israel.

On Aug. 29, Mosaic announced current CEO Joc O'Rourke plans to step down at the end of 2023. Beginning in 2024, Mosaic's new CEO will be Bruce Bodine, who is currently senior vice president of North America. Despite the planned leadership change, we see no reason to change our outlook for Mosaic. Accordingly, we maintain our $40 per share fair value estimate for the company. Our no-moat rating and standard capital allocation rating are also unchanged. At current prices, we view Mosaic shares as fairly valued with the stock trading just below our fair value estimate and in 3-star territory. As such, we recommend investors wait for shares to offer a greater margin of safety below our fair value estimate before considering the stock.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2022, potash generated around 50% of total profits, with phosphates around 30%. The balance is derived from the Brazilian fertilizer business. Mosaic’s U.S. phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.

We maintain our $40 per share fair value estimate for Mosaic following the company's second-quarter earnings. Our no-moat rating is also unchanged. At current prices, we view Mosaic shares as fairly valued, with the stock trading just above our fair value estimate.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2022, potash generated around 50% of total profits, with phosphates around 30%. The balance is derived from the Brazilian fertilizer business. Mosaic’s U.S. phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.

We maintain our $40 per share fair value estimate for Mosaic after incorporating the company's first-quarter earnings into our valuation model. Our no-moat rating is also unchanged.

Mosaic is a leading producer of potash and phosphate fertilizers. In 2022, potash generated around 50% of total profits, with phosphates around 30%. The balance is derived from the Brazilian fertilizer business. Mosaic’s U.S. phosphate rock mines and Canadian potash assets provide the company with a stable input base for its products. Over the long run, Mosaic should benefit from growing global demand for fertilizer.