The Mosaic Company

The Mosaic Company (NYSE: MOS) produces and sells phosphate and potash fertilizers. Its Phosphate and Potash segments supply agricultural and other customers, while Mosaic Fertilizantes combines fertilizer production and distribution in Brazil. Sulfur and ammonia are important inputs for phosphate fertilizer, so strong selling prices can coexist with weak manufacturing margins.

Cash and earnings moved in different directions

Third-quarter operating cash rose to $284.4 million from $228.5 million a year earlier. An inventory cash release of $433.5 million replaced a $200.8 million use of cash. Our comparison finds a $634.3 million inventory swing, greater than the $55.9 million increase in total operating cash.

Adjusted EPS removes selected items such as investment marks, foreign-exchange effects, environmental charges and related taxes. Adjusted EBITDA also removes interest, income taxes, depreciation, depletion, amortization, asset-retirement accretion and share-based compensation. The prior-year profit included a $308 million mark-to-market gain on Mosaic's Ma'aden investment, versus $39 million in the current notable-items table.

The phosphate input-cost delay

Phosphate adjusted EBITDA fell to $49 million, from $128 million in the second quarter and $280 million a year earlier. The new fourth-quarter sulfur contract costs $615 per long ton, compared with $705 for the third quarter. The average sulfur cost already consumed in third-quarter cost of goods sold was $715 per long ton, a different measure from the supply contract.

Mosaic expects further fourth-quarter phosphate earnings pressure as higher-cost materials pass through its two- to three-month inventory cycle. It expects sequential cash improvement sooner, with the main cheaper-input earnings benefit in the first quarter of 2027. August's release had already warned that the higher third-quarter contract would mainly affect fourth-quarter results.

DAP selling prices of $838 per metric ton and rounded sales of 1.4 million metric tons were within August's forecasts. Fourth-quarter guidance is 1.3 million to 1.6 million metric tons and DAP prices of $820 to $840 per metric ton. Cash conversion cost of $117 per metric ton produced excludes raw materials, idle costs and other items; it does not capture the whole production bill.

Potash and Brazil add different pressures

Potash adjusted EBITDA was $284 million, versus $329 million a year earlier. Cash production cost improved to $73 per metric ton from $84 in the second quarter. Lower-than-expected ore grades at Esterhazy reduced the annual production outlook to 8.6 million metric tons from about 9 million. Management calls the issue temporary and retains a longer-term target above 9 million.

Brazil's adjusted EBITDA fell to $41 million from $241 million. Sales volume of 1.894 million metric tons includes purchased distribution products as well as Mosaic's own production. Credit constraints, expensive inputs and lower production weighed on results. Management said distribution margins had returned to positive levels.

Cash, debt and portfolio changes

September cash was $272.6 million. Short-term borrowings, current maturities and long-term debt totaled $5.913 billion, versus $5.054 billion at year-end. Structured accounts payable of $402.4 million were a separate financing balance. Mosaic said its $2.5 billion revolver remained fully available and that it had refinanced and extended long-term maturities through 2028.

Lower capital spending helped quarterly free cash flow reach roughly breakeven before $69.9 million of common dividends. The $1.2 billion annual capital-spending forecast is unchanged from August; management now targets less than $1 billion in 2027.

The Araxa facilities sale process in Brazil remains in progress. The Carlsbad potash mine sale closed in April, rather than being a new November transaction.