The Mosaic Company reports $3.6bn revenue, down 8% YoY and $435mn net income, down 63% YoY in 1Q23 on the back of lower product prices. Mosaic reported an 8% YoY revenue decline to $1.4bn in Phosphates driven by an 18% average finished price decrease which was partially covered by 11% YoY sales volume growth to 1.84mt in the segment. Feedstock prices went down from their highest levels in 3Q22 but remained above last year’s levels: ammonia prices were up 14% YoY to $605/t, and blended rock prices were up 26% YoY to $77/t. Phosphate costs of goods sold were up 16% YoY as a result. Adj EBITDA in the phosphate segment was down 40% YoY to $382mn. The operating rate in the segment was 74% compared to 65% in 4Q22 and 70% in 1Q22. Potash revenue declined 14% YoY to $907mn with a 29% YoY gross margin decline. The average finished products selling price in the segment was down 20% YoY to $475/t while the MOP fob price saw a 28% decline to $421/t. The company increased sales volumes by 7% YoY to 1.9mt in 1Q23, while the operating rate was 69% (vs 80% a year ago) and production volumes were down 12% YoY. Mosaic Fertilizantes reported a 10% decline in revenue to $1,343mn driven by a 21% decline in the average price while total finished product sales were up 14% YoY to 2.08mt. The company cut phosphates produced in Brazil by 31% YoY to 510kt but that was above the 4Q level. The phosphates operating rate reached 78% and the potash operating rate was 65% in Brazil. Feedstock price for blended rock was up 18% YoY, while ammonia remained in line with last year’s price. The company said de-stocking of high-cost raw materials and distribution inventories is now largely complete and margins will be back to mid-cycle levels. The company reported a negative $1mn gross margin and a $3mn Adj EBITDA for the Brazilian subsidiary. The total revenue of Mosaic reached $3.6bn, down 8% YoY while the cost of goods sold increased by 18% YoY to $2.9bn. The company’s operating income fell by 57% YoY to $545mn compared to $1,256mn in 1Q22 and $700mn in 4Q22. Net earnings attributable to Mosaic reached $435mn, down 63% YoY, which corresponds to EPS of $1.28 per share (down 60% YoY). Mosaic’s adjusted EBITDA reached $777mn, down 46% YoY. Overall, results show weaker-than-expected potash demand and price, as well as a weaker fertilizer price and margin in Brazil. Lower feedstock prices and the destocking of costly inventories shall bring the company back to normalized mid-cycle margin levels.
We decrease your forecasts for 2023, meanwhile the market fundamentals remain strong. According to Mosaic, there are several supportive factors for the fertilizer market: fertilizer affordability for farmers improved versus last year, US fertilizer demand boosted in much of the Cornbelt as moisture prospects improve; stock-to-use ratio is below 15% for grain and oilseed stocks which is a 25-year minimum (world less China); agriculture commodities are at elevated level despite giving back war premium; global shipments of phosphates were down 10% and expected to continue a rebound to 72-75mt in 2023; feedstock prices are under pressure with ammonia close to the bottom; global potash demand will likely to bounce back from below 60mt in 2022 to 64-67mt in 2023; Indian potash stocks are low. Mosaic plans to sell 2.0-2.2mt of potash fertilizer at MOP price in a range of $325-375 per ton in 2Q23, 1.8-2.0mt of phosphate at DAP price of $550-600/t. The 2Q price guidance is below our expectations, given the inflation levels and strong soft commodity market. The capex may reach $1.3-1.4bn in FY23. We believe consumer inflation globally will move the normalized price levels higher for soft commodities and fertilisers. We update our valuation model. Our 12-month target price is $41.5 per share, down from $63.0 per share. We rate the stock Hold until fertilizer prices find a cycle bottom.
17 May 2023
Mosaic 1Q23: weak prices, even weaker guidance
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Mosaic 1Q23: weak prices, even weaker guidance
- Published:
17 May 2023 -
Author:
Marina Alekseenkova -
Pages:
6
The Mosaic Company reports $3.6bn revenue, down 8% YoY and $435mn net income, down 63% YoY in 1Q23 on the back of lower product prices. Mosaic reported an 8% YoY revenue decline to $1.4bn in Phosphates driven by an 18% average finished price decrease which was partially covered by 11% YoY sales volume growth to 1.84mt in the segment. Feedstock prices went down from their highest levels in 3Q22 but remained above last year’s levels: ammonia prices were up 14% YoY to $605/t, and blended rock prices were up 26% YoY to $77/t. Phosphate costs of goods sold were up 16% YoY as a result. Adj EBITDA in the phosphate segment was down 40% YoY to $382mn. The operating rate in the segment was 74% compared to 65% in 4Q22 and 70% in 1Q22. Potash revenue declined 14% YoY to $907mn with a 29% YoY gross margin decline. The average finished products selling price in the segment was down 20% YoY to $475/t while the MOP fob price saw a 28% decline to $421/t. The company increased sales volumes by 7% YoY to 1.9mt in 1Q23, while the operating rate was 69% (vs 80% a year ago) and production volumes were down 12% YoY. Mosaic Fertilizantes reported a 10% decline in revenue to $1,343mn driven by a 21% decline in the average price while total finished product sales were up 14% YoY to 2.08mt. The company cut phosphates produced in Brazil by 31% YoY to 510kt but that was above the 4Q level. The phosphates operating rate reached 78% and the potash operating rate was 65% in Brazil. Feedstock price for blended rock was up 18% YoY, while ammonia remained in line with last year’s price. The company said de-stocking of high-cost raw materials and distribution inventories is now largely complete and margins will be back to mid-cycle levels. The company reported a negative $1mn gross margin and a $3mn Adj EBITDA for the Brazilian subsidiary. The total revenue of Mosaic reached $3.6bn, down 8% YoY while the cost of goods sold increased by 18% YoY to $2.9bn. The company’s operating income fell by 57% YoY to $545mn compared to $1,256mn in 1Q22 and $700mn in 4Q22. Net earnings attributable to Mosaic reached $435mn, down 63% YoY, which corresponds to EPS of $1.28 per share (down 60% YoY). Mosaic’s adjusted EBITDA reached $777mn, down 46% YoY. Overall, results show weaker-than-expected potash demand and price, as well as a weaker fertilizer price and margin in Brazil. Lower feedstock prices and the destocking of costly inventories shall bring the company back to normalized mid-cycle margin levels.
We decrease your forecasts for 2023, meanwhile the market fundamentals remain strong. According to Mosaic, there are several supportive factors for the fertilizer market: fertilizer affordability for farmers improved versus last year, US fertilizer demand boosted in much of the Cornbelt as moisture prospects improve; stock-to-use ratio is below 15% for grain and oilseed stocks which is a 25-year minimum (world less China); agriculture commodities are at elevated level despite giving back war premium; global shipments of phosphates were down 10% and expected to continue a rebound to 72-75mt in 2023; feedstock prices are under pressure with ammonia close to the bottom; global potash demand will likely to bounce back from below 60mt in 2022 to 64-67mt in 2023; Indian potash stocks are low. Mosaic plans to sell 2.0-2.2mt of potash fertilizer at MOP price in a range of $325-375 per ton in 2Q23, 1.8-2.0mt of phosphate at DAP price of $550-600/t. The 2Q price guidance is below our expectations, given the inflation levels and strong soft commodity market. The capex may reach $1.3-1.4bn in FY23. We believe consumer inflation globally will move the normalized price levels higher for soft commodities and fertilisers. We update our valuation model. Our 12-month target price is $41.5 per share, down from $63.0 per share. We rate the stock Hold until fertilizer prices find a cycle bottom.