Mosaic (MOS) Q1 2026 Earnings Call Transcript

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DATE

Monday, May 11, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• President & Chief Executive Officer — Bruce M. Bodine
• Senior Vice President & Chief Financial Officer — Luciano Siani Pires
• Senior Vice President, Global Strategic Marketing — Jenny Wang
• Operator

TAKEAWAYS

• Phosphate sales volume -- 1.9 million tons sold, the highest in five years, with deferred 2025 demand returning and robust market access demonstrated.
• Phosphate production rates -- Three of four U.S. facilities operated at or above targeted phosphoric acid rates of 80% after improvements and a completed turnaround at New Wales.
• Phosphate finished goods inventory -- Declined by approximately $120 million during the quarter, aiding working capital improvement, offset by increased product positioning in Brazil.
• Phosphate segment sulfur cost -- Realized average sulfur cost of $379 per ton; guidance for the next quarter is a substantial increase to about $540 per ton.
• Phosphate segment ammonia cost -- Fiscal Q2 ammonia cost forecasted at approximately $610 per ton, with DAP pricing for the segment guided at $760 per ton to $780 per ton.
• Realized stripping margins -- Achieved near $400 per ton in phosphate for the fiscal first quarter (period ended March 31, 2026); fiscal Q2 expected to remain above $400 per ton for the segment's sales book, 60% of which is committed and priced.
• Conversion cost per ton (phosphate) -- Targeted $90 per ton before curtailments; with current curtailments, full-year expectations shift to $105 per ton–$110 per ton, primarily based on New Wales performance.
• Operating curtailments -- Announced partial curtailments at Bartow and Louisiana (affecting roughly half of each plant's capacity), and scaled back production in Brazil, citing high sulfur prices and availability constraints.
• Working capital release -- Company continues to target a $300 million to $500 million working capital release for the year, with curtailments accelerating the release despite higher input costs.
• 2026 capital expenditure guidance -- Lowered by $250 million to $1.25 billion by deferring less time-sensitive projects; company asserts this change will not affect long-term output targets.
• Annualized expense savings -- Initiated workforce reductions expected to generate $50 million in annualized savings, $15 million of which will be realized this year, supplementing the previously announced $100 million value-capture program.
• Asset sales and rationalization -- Sold three mines and idled underperforming assets in recent months, including Carlsbad potash mine (New Mexico) and SSP production at Araxá and mining at Patrocínio in Brazil, with additional asset alternatives under review.
• Biosciences revenue outlook -- Mosaic Biosciences expects revenues to double in 2026, with eight to 10 new products planned for launch through the year.
• Rare earth elements initiative -- Announced project development agreement with Rainbow Rare Earths for recovery from Brazilian gypsum stacks following a positive economic assessment, and is evaluating additional U.S. opportunities.
• Potash demand and operations -- Canpotex fully committed through June with prospects for a record year; international shipments set to be heavily weighted in the second half.

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RISKS

• Management stated, "Raw material prices and availability, especially for sulfur, are forcing us to revisit our production plan," leading to partial curtailments in key phosphate operations.
• CEO Bodine said, "at $1,200 per ton sulfur price, as an example, much, if not all, of the producer cost curve is underwater," signaling unsustainable raw material costs and industry-wide margin compression.
• Fertilizer shipments in Brazil projected to contract in 2026 due to "the sheer fact that nutrient availability is not there," compounded by credit headwinds and import dependency.
• Q&A confirmed commodity product margins (SSP, MAP, DAP) in Brazil are "in a very bad place" with "marginal stripping margins, are in a bad place," while visibility on fiscal Q2 segment performance is limited.

SUMMARY

Mosaic (NYSE:MOS) highlighted a challenging macro environment with geopolitical disruptions and highly volatile raw material markets, especially affecting the phosphate segment. Management executed immediate production curtailments in North America and Brazil to limit exposure to sharply rising sulfur and ammonia costs, while also lowering 2026 capital spending by $250 million to $1.25 billion and accelerating cost-reduction measures. The company reported proactive operating and portfolio adjustments, including asset divestitures, mine idling, and workforce reductions to preserve shareholder value and support near-term cash flow. Despite severe near-term margin pressure and regional demand headwinds, Mosaic maintains confidence in long-term nutrient fundamentals and is positioning to restore full production agility once market and supply chain conditions improve.

• Bodine stated, "Global phosphate prices reflect that shortage, and this has put additional pressure on farm economics," confirming demand disruption risks alongside persistent supply tightness.
• The NPK supply gap in Brazil is acute; Jenny Wang noted, "Brazil needs to import 85% of NPK that the country needs," and in-country inventories for all nutrients are "extremely low," with limited prospect for recovery in the near term.
• Mosaic's self-supplied ammonia (approximately 30% from Faustina, with up to 80% under favorable contracts) and U.S. sulfur (over 80% sourced domestically) provide partial cost insulation but cannot offset the impact of extreme spot pricing or constrained availability.
• Portfolio optimization efforts yielded strategic capital reallocation, including divestment of core mining assets and a focus on higher-return opportunities such as Mosaic Biosciences and rare earth extraction.

INDUSTRY GLOSSARY

• Stripping margin: The difference between the market price of a finished fertilizer product and the sum of raw material input costs, notably sulfur and ammonia, especially in the phosphate segment.
• SSP: Single superphosphate, a phosphate fertilizer with historically lower margins due to high import competition and weak pricing.
• K-Mag: A mined granular fertilizer product containing potassium, magnesium, and sulfur, whose volumes are now excluded from potash guidance.
• DCP: Dicalcium phosphate, a phosphorus supplement for animal nutrition with higher margin stability relative to commodity fertilizers.
• MicroEssentials: Mosaic's proprietary fertilizer products with a unique blend of micronutrients, characterized by a lower phosphoric acid content per ton relative to MAP and DAP.
• Canpotex: The Canadian potash export and marketing company jointly owned by major producers, driving international contract and shipment flows.

Full Conference Call Transcript

Bruce M. Bodine: Good morning, and thank you for joining our call. Our message for today is straightforward. The business climate is challenging, but it is allowing The Mosaic Company to differentiate itself by benefiting from our significant advantages and optimizing our capital. I will touch on these topics to begin. First, the business environment was and continues to be very dynamic. Geopolitical events are driving volatility throughout the global phosphate supply chain. Many producers are struggling to secure raw materials, resulting in an already tight market becoming even tighter. Global phosphate prices reflect that shortage, and this has put additional pressure on farm economics. Second, the current environment has allowed The Mosaic Company to differentiate itself.

The investments we have made in our U.S. phosphate assets over the last two years are driving higher production rates, with three of our four facilities operating at targeted rates at the end of the first quarter. With a planned turnaround at our largest facility, New Wales, now behind us, our production capability has improved significantly. The Mosaic Company maintains an advantaged geographic position as well as a greater diversity of sources relative to global peers when it comes to sulfur and ammonia supply. But we are not without risk. Raw material prices and availability, especially for sulfur, are forcing us to revisit our production plan. We will discuss this in more detail shortly.

But our key message on this topic is that we are making tough but responsible decisions that maintain shareholder value through the current environment without sacrificing our ability to benefit when conditions improve. This leads into my third point, which is that The Mosaic Company remains focused on a disciplined capital allocation and reallocation strategy. In addition to adjusting our operating plan, investing in our phosphate assets and optimizing our strong potash business, we are also shifting capital away from underperforming assets toward better opportunities. Over the last few months, we sold three mines and idled production at underperforming assets, and we are continuing to invest in new opportunities.

This is all happening as we manage through the current realities of our business with agility. We have reduced this year's CapEx and are adapting our production outlook to the current market environment, and moving inventory built at the end of last year to improve our working capital position. Before we dive deeper into our business, I would like to spend some time on the broader market. As all of you have seen, the conflict in the Persian Gulf has exacerbated an already stretched global fertilizer market. Roughly 20% of global phosphate, a third of urea, a quarter of ammonia, and half of seaborne sulfur volumes originate in the Middle East.

When combined with the product that comes out of the Black Sea, nearly half of all phosphate raw materials have been impacted by the conflicts in Ukraine and Iran. You can see these dynamics in current phosphate benchmark stripping margins, which are under severe pressure despite elevated finished product prices. Compressed margins and limited raw material availability have forced producers to curb production. For example, China has banned phosphate exports through August, and other competitors have significantly curtailed production primarily due to sulfur availability. To put it simply, there is not going to be enough phosphate to meet global demand. Demand for phosphate remains dynamic as well, with diverging trends around the world.

In the U.S., farm economics remain challenging, leading to careful nutrient purchasing decisions that impacted spring demand. In Brazil, farmer economics and access to credit remained significant headwinds and availability of nutrients and raw materials is weighing further on Brazilian agriculture. In contrast, demand from key markets in Asia has been stronger. In India, for example, the government has signaled that it will continue to support phosphate imports at today's prices. For regions grappling with affordability, demand disruptions should be temporary. There are real agronomic consequences caused by persistent underapplication. There is no substitute for phosphate, and when application rates are reduced too far or for too long, soil nutrient balances drop and yields are impacted.

While those effects may not appear immediately, they have historically been an important driver of demand normalization as growers respond. Shifting to potash, last year's stability has continued in 2026. Market fundamentals remain balanced, with robust demand in all major markets consuming global supply. U.S. growers see good value in potash at today's prices, and this is being reflected in spring demand. In Southeast Asia, attractive palm oil prices are driving strong application. In China, imports set a record in the first quarter as the country replenishes low inventories. Last month, Canpotex announced it was fully committed through June and on pace for a record 2026. As such, expect inventories to be tight through the second quarter.

With this market backdrop in mind, I will shift our conversation to The Mosaic Company's business performance and outlook. In phosphate, we sold 1.9 million tons in the first quarter, as deferred demand from 2025 returned. This was the highest quarterly sales volume total for the segment in five years and a reflection of the broad market access that allows us to position product where it is needed. On the production side, our investments in our assets are yielding results as well. In the past, we have talked about reaching finished product volumes of 1.8 to 2.0 million tons per quarter.

But one of the most significant production hurdles for us over the last few years has been in our U.S. phosphoric acid rates. This is where we are seeing real improvements. In the first quarter, Bartow, Riverview, and Four Corners had phosphoric acid operating rates at or above 80%, which is in line with our targets. Our largest facility, New Wales, completed a very extensive planned turnaround in March, which should allow for higher phos acid rates from that plant in the future.

Keep in mind that our finished product volumes will ultimately be driven by a combination of phos acid operating rates and the type of product our customers need, as some finished products like DAP and MAP require more acid than MicroEssentials. The recovery in our U.S. operating rates combined with our structural advantages for raw materials have helped us thus far. Roughly 80% of our U.S. ammonia needs are supplied by our own plant in Louisiana and below-market domestic supply agreements, some of which are tied directly to natural gas. And roughly 80% of our sulfur needs come from U.S. Gulf oil refineries in molten form, which we have been able to source through the second quarter with no constraints.

That said, we are not immune to the current environment as strong global sulfur demand competes for limited available supply, including product from our own backyard in the U.S. Today's spot sulfur prices imply compressed third quarter stripping margins that are well below our realizations in the first half of the year. Given this environment, we are reviewing our 2026 global production plan for phosphates and taking initial steps to curtail production. As part of these efforts, we are partially reducing production rates at Bartow and Louisiana and scaling back additional fertilizer production in Brazil. This is a temporary move that allows us to limit the need for incremental sulfur at today's prices and wait until the market normalizes.

Our second quarter sales volume guidance reflects these actions, but we are prepared to restart operations quickly when conditions improve. We are committed to staying nimble and adapting as needed over the coming quarter. Fortunately, our potash business has been unaffected by recent geopolitical turmoil and continues to produce strong results. Our Belle Plaine solution mine benefited from low-cost natural gas, and volumes from Esterhazy trended higher from the fourth quarter. With the strength of global demand, we have continued to run Colonsay, which is a higher-cost mine that can have an impact on our per-ton production cost.

That said, the ramp for the HydroFloat project and other optimization projects at Esterhazy are expected to drive costs meaningfully lower as we move through the year, and this should offset the cost impact of Colonsay. In Brazil, we have managed the business to adapt to the difficult credit environment. We have been selective in how we deployed capital, prioritized higher-quality counterparties, and adjusted sales pace where appropriate, while continuing to support growers and maintain our market presence. In the short term, as we just discussed, raw material availability will have an impact on near-term operating rates. However, long-term fundamentals in Brazil remain promising, and we are positioned to respond as conditions improve.

As we think about the enterprise as a whole, we remain committed to optimizing our portfolio, reallocating capital to our key assets, and investing in high-return opportunities. Free cash flow remains a key focus for us as we manage through the industry seasonality and the global trends we just discussed. Deferred fourth quarter phosphate demand meant we started the year with elevated inventories that we are now managing lower. Our phosphate finished goods inventory declined by roughly $120 million in the first quarter, although this was offset by product positioning in Brazil ahead of seasonal demand later this year. In addition to managing our working capital, we are taking a harder look at our CapEx profile and supporting costs.

After a thorough review of our project plans, we have lowered our 2026 CapEx guidance by $250 million to $1.25 billion. Our new outlook optimizes our portfolio of projects and defers any less time-sensitive projects to future periods. Our new plan will not have an impact on our longer-term production targets. In addition, we are moving deliberately to streamline the organization's support functions. In April, we initiated a workforce reduction that is expected to generate annualized expense savings of $50 million, of which $15 million will be realized this year. This is in addition to the $100 million value-capture program announced last year.

We also continue to make significant progress in our efforts to address non-core assets as part of our capital reallocation strategy. Last month, we announced the idling and demobilizing of SSP production at Araxá in Brazil, along with related mining activity at Patrocínio. We are assessing strategic alternatives for both sites, including a potential sale of the assets and the development of a niobium project at Patrocínio. In April, we completed the sale of our Carlsbad potash mine in New Mexico to International Minerals Carlsbad. These efforts to control costs and reduce future capital and ARO requirements create space for us to invest in new opportunities.

Mosaic Biosciences continues to grow rapidly despite the financial pressure on farmers, a clear indication that our products are delivering on their value proposition. We expect to launch 8 to 10 new products in 2026, including two new products that were launched during the first quarter. We expect Mosaic Biosciences revenues to double again in 2026. I also want to touch on our work on rare earth elements, which represents a long-term growth opportunity for The Mosaic Company. In March, we announced a project development agreement with Rainbow Rare Earths following a positive economic assessment of the Tapira/Ubaira gypsum stack in Brazil.

The project would recover rare earth elements from phosphogypsum rather than through traditional hard rock mining, leveraging existing byproducts from our operations. We are evaluating similar opportunities for rare earth extraction in the U.S., and early findings are encouraging. This is a long-term opportunity and we are advancing it in a disciplined phased manner consistent with our investment criteria. To conclude, clearly, we and the rest of the industry are operating in a challenging climate. Overall, we are managing with speed and agility, taking actions that are required by our current environment without sacrificing the long-term opportunities of our business. We believe we are well positioned to take advantage of the inevitable better market conditions when they arrive.

Now I will ask Luciano to provide more details on our financials.

Luciano Siani Pires: Thank you, Bruce. I will focus on what moved the numbers this quarter and the actions we took in response. In phosphates, prices have continued to rise as a result of tight supply and the growing incremental consumption in industrial markets. On the raw material side, our dedicated sulfur supply chain in the Gulf on one hand and some delay in the flow of higher-priced sulfur through inventories on the other enabled us to realize an average cost of sulfur of $379 per ton, which allowed us to realize stripping margins near $400 per ton for the quarter.

On the cost side, as Bruce mentioned, customer demand resulted in a product mix toward a higher percentage of sales represented by MAP and DAP. This had an impact on all lines in our cost of goods sold. To put this in perspective, on a per-ton basis, MicroEssentials are comprised of 33% to 40% phosphoric acid, depending on which MicroEssentials product we are talking about. However, MAP is comprised of 52% phosphoric acid. Higher acid content per ton of finished product we sell will have an impact on unit COGS, including conversion cost per ton and raw cost per ton. This dynamic will become less visible when our production volumes and product mix normalize.

Specifically with regard to raw costs, during the first quarter we moved all three of our South Fort Meade draglines to the new eastern extension and we performed a turnaround at the mine's beneficiation plant. As we have said in the past, transition to this new area defers the need to construct a new mine and beneficiation plant well into the future as a result of our ability to pump slurry much longer distances to existing plants. However, we are seeing increased overburden in the new area, which resulted in somewhat higher Florida cash mining costs of $63 per ton, but we expect some improvement as the year progresses.

Finally, in raw materials, we do expect to see further increases in sulfur and ammonia costs in our second quarter financials. Historically, we have stayed away from guiding towards sulfur and ammonia costs, but given today's dynamic market, we thought some guidance would be helpful. For the second quarter in our phosphate segment, we anticipate realized sulfur costs of roughly $540 per ton and ammonia costs roughly $610 per ton. When combined with our DAP pricing guidance for the segment of $760 to $780 per ton, this suggests that second quarter realized stripping margins will be in excess of $400 per ton for our sales book, 60% of which has already been committed and priced.

Shifting to Brazil, we managed through similar sulfur cost dynamics alongside a challenging credit environment, with performance for the quarter coming in better than expected. Our distribution business continues to differentiate itself through careful risk management. Per-ton distribution margins improved sequentially, despite a challenging environment for customer credit availability, and we expect further improvements in the second quarter. In production, as we previously reported, we made the decision to idle operations at Araxá and Patrocínio. Of the $442 million in charges associated with these actions, $328 million was noncash. While the former idling of FOSPAR in December was directly related to the current sulfur environment, our decision on Araxá and Patrocínio had been contemplated long before the recent disruptions.

This is very important. Sulfur prices have exacerbated the situation, but Araxá's returns have struggled to meet our internal hurdle rates for some time. Remember, that facility was exclusively focused on SSP production, a product whose margins have historically been challenged by significant import competition. Looking ahead, we believe this decision will result in improved operating margins for the segment, with annual maintenance CapEx savings of $20 million to $30 million helping cash flows. Also on the positive side, our 50% of the business benefited from sequentially lower turnaround and repair costs. Finally, as Bruce mentioned, we are very focused on cash flows.

Our updated CapEx guidance follows a thorough review of our project portfolio and a deferral of less time-sensitive projects to future periods. On working capital, we delivered on our promise to sell 1.9 million tons of phosphate products above production and thus we were able to release $120 million of inventories tied to finished goods in the phosphate segment. This release was mostly offset by purchases and increases in finished goods inventories in Mosaic Fertilizantes, in preparation for seasonal demand in the coming quarters. If you look straight into the balance sheet, total working capital was modestly higher in Q1, compared to an increase of roughly $400 million in 2025.

So what is the outlook for cash flow generation for the remainder of the year? 2026 cash flow generation will be influenced by higher raw materials prices, as higher sulfur and ammonia costs continue to pressure working capital, both in the raw materials inventory line and in finished goods inventory as well. Also, our production plan will influence cash flow generation, which we will continue to evaluate as market conditions evolve through the balance of the year. In the meantime, we will be diligent on things that we can control as we have shown through our cost-savings initiatives and our lower CapEx budget in 2026.

To close, we have taken decisive actions to face an uncertain environment, curtailing operations, reducing support function costs, cutting CapEx, and managing working capital. All these actions reflect our resilience and position us to benefit over the longer term. I will stop here and turn the call back to the operator for Q&A.

Operator: We will now open the call for questions. If you are using a speakerphone, please limit yourself to one question. Our first question today is from Vincent Stephen Andrews with Morgan Stanley. Please go ahead.

Vincent Stephen Andrews: This is Justin Pellegrino on for Vincent. I was just hoping you could help us a little bit on the working capital side. You had previously mentioned the $300 million to $500 million of working capital release. Understanding the world has changed since that was provided, but any sort of directional range including your change in production guidance or any other changes in raw materials would be helpful to directionally understand what is going on.

Bruce M. Bodine: Hey, Justin. Thanks for the question. We have been saying that $300 million to $500 million release of working capital. We saw a good chunk of that, all else being equal, as we came out of Q4 into Q1 materialize with that 300,000 tons of additional sales in phosphates over production. As Luciano talked about, it was about $120 million of cash, but we did see some offsets in that with working capital build, which is seasonal, by the way, in Brazil. But with these higher input costs, that helped offset that as well.

But given the production plan that we have talked about, I will turn it over to Luciano in a minute, we do see release of more working capital in second quarter and throughout the year. Luciano?

Luciano Siani Pires: Sorry. Just to understand the dynamics, if we were not to curtail production, actually the increase in the price of sulfur and ammonia would reduce that $300 million to $500 million of release. Just for you to understand, we do have about 30 days of inventory of sulfur. That equates to approximately 400,000 tons of sulfur. There is another 400,000 tons of sulfur in our finished goods inventory usually, give or take, so 800,000 tons of sulfur. If sulfur prices increase, for example, from $500 to $900 per ton, you can see $400 times 800,000 tons; it gives you a headwind of about $300 million of working capital additional build.

However, because of the curtailments, you should expect a more accelerated release of working capital, kind of offsetting a little bit the effect of sulfur. Of course, because this curtailment will be temporary, it is a little bit difficult to anticipate now what is going to be the actual release of working capital. But we see two opposing forces now: increased raw material prices reducing the release, which was mentioned in Q1, but the curtailment is actually increasing the release. So the $300 million to $500 million pretty much continues to be our estimate for release.

Operator: The next question is from Christopher S. Parkinson with Wolfe Research. Please go ahead.

Christopher S. Parkinson: Great. Thank you. Can you just talk a little bit about the U.S. versus international dynamics? I mean, even with rising ammonia and sulfur prices, the prices in the international market continue to strengthen even as of this morning in India. And obviously, that has not been a huge focus over the last few years. But can you just talk about how you are thinking about the two and perhaps more so the third quarter order book and whether or not your production guidance for the second quarter assumes that sulfur is going to rise even further for the third quarter contract in terms of how you are thinking about second-half dynamics as it relates to projected stripping margins?

Thank you.

Bruce M. Bodine: Yes, Chris, thanks. I think we are seeing it pretty similar to the way you have kind of framed the question. International prices are garnering a premium over domestic North American prices. But besides that, we are just seeing demand not as active in the Americas as in international. We have positioned product, trying to be cognizant of the North American farmer needs, but until buying actually happens, we have been forced to pivot to international markets. And to your point, prices have been pretty good.

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. So taking action today, even though demand continues to be active in certain parts of Asia. And Jenny can talk more about that in just a minute. We have been forced because we cannot get raw material in some jurisdictions, and then the price of that we can get in other jurisdictions simply has stripping margins beyond the place that we feel that we can reliably run.

So we are making the decisions today to preserve more Q2 sulfur for longer, as Luciano was saying, and we will have to make decisions in the future on what happens on the raw material front, and we will have to watch what happens with net stripping margins worldwide. But we only have so much sulfur that we feel comfortable with to meet the needs of where we do see active production or active demand in any jurisdiction. Jenny, you want to talk a little bit about dynamics in the world?

Jenny Wang: Yes. Speaking very quickly, Chris, the international demand is very strong, partially because of very low inventory as we ended 2025, and that is the effect of continuous strong demand and the restricted supply. And in the first quarter and also into the second quarter, it is particularly obvious in markets like India and also some others like Pakistan; you will see it. In some of the African countries like Ethiopia, those governments provide support and subsidies to their farmers; therefore, you can see that the demand is much more active even with the price that we are talking about as of today. And the latest Indian tender basically confirmed what we have assumed in the demand.

Operator: The next question is from Kristen Owen with Oppenheimer. Please go ahead.

Kristen Owen: Good morning. Thank you for the question. Similar type of question. I appreciate the Q2 visibility that you provided and, understanding that the world is very dynamic, maybe you do not have as much visibility into the back half of the year. But maybe you could help us walk through the milestones that you are watching for the second half. What are the scenarios as you see them playing out today? And maybe ask you to emphasize particularly how you are viewing the market in Brazil here going into the second half of the year. Thank you.

Bruce M. Bodine: Yes, thanks, Kristen. No doubt things are murky on clarity of what is going to happen. So the things we are watching, obviously, as everyone is watching, are what is happening on fluidity out of the Strait of Hormuz. Every day, there is a reaction, it seems like. So we are watching that. But what we will be watching, assuming the conflict comes to some resolution in a near-term scenario, is how quickly that fluidity gets back to normal, particularly for us on sulfur flows. 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.

That is the biggest driver of everything that we have done and continue to watch. So how quickly sulfur starts to get to more normalized levels from a cost standpoint and a fluidity standpoint are things we are going to watch. But think in the big scheme, no matter how frustrating and dynamic the current situation is, these are temporary issues. And we have to look beyond this Persian Gulf unrest; things will get back to normal at some point in time. The underapplication of fertilizer, particularly on phosphate, and in Brazil difficulty getting all nutrients, particularly nitrogen and phosphate, is going to have a yield impact on the future crops.

Yes, global grain and oilseed stock-to-use ratios sit in a not-crisis mode today, but it does not take much to upset that two to three percent. And we see ag commodity prices actually being pressured in a good way on the upside, where affordability concerns will get better for farmers in time. Ultimately, comfort will come from sulfur and the fluidity, and other commodities in the fertilizer space coming out of the Strait of Hormuz; things will return.

And we are making decisions on production curtailments today that we can quickly unwind and be flexible to come back with production when things, a) get more clear on what is going to happen with the raw materials and where demand will actually go, and b) as all of that starts to unwind, we know that tailwinds will exist for nutrient demand given the underapplication of phosphate that is going on, particularly in the Americas.

Operator: The next question is from Jeffrey John Zekauskas with JPMorgan. Please go ahead.

Jeffrey John Zekauskas: Thanks. I have a two-part question on raw materials. Your average ammonia prices were, I think, $626 a ton in your phosphate segment. And you say in your script that 80% to 85% of your needs are met through production from Faustina? I thought Faustina was maybe a third or a fourth. And the $626 number, that is very close to prices for ammonia. I mean, those were higher prices than what CF or Nutrien realized. Why are the ammonia values as high as they are? And then secondly, in sulfur, do we know how much sulfur is on ships that are currently blocked that would be released if the straits opened?

Bruce M. Bodine: Hey, Jeff. Thanks. Let us just go back through on our ammonia just to set the table. Eighty percent of our ammonia is either internally supplied or market-advantaged strategic contracts. It puts us at, say, 20% exposed to spot. But going into Q2, we did see sulfur and ammonia prices rising, unsettled monthly contracts. And I think probably in Q1 we had Faustina in some turnarounds. So that affected the mix of ammonia. But on a normalized basis, roughly 30% comes from Faustina supply, again depending on turnarounds and what is 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 20% on spot.

As far as sulfur goes and what is pent up on ships behind the Strait of Hormuz, I do not think there is good visibility into that, Jeff. That definitely is something that we are going to have to watch intently as things more normalize or resume to whatever new normal is going to be. But make no mistake, there has been refinery damage due to the conflict in different parts of the Arab Gulf, and how fast that is able to return to resume to kind of normalized levels of supply are yet to be determined as well.

So we know there will be some disruption, but getting fluidity back is key to seeing what we believe is a recovery and better participation. Luciano has something to say.

Luciano Siani Pires: Jeff, and for all, there is a big difference between the marginal cost of sulfur and ammonia, or the marginal cargo, which drives our decisions at the margin, and the average cost across our portfolio, and even the average cost across time because it takes time for portfolio prices to flow through inventories. And so every decision that you are seeing us taking today is driven by the marginal cost of sulfur, which today is at $1,200 per ton, and the marginal cost of ammonia, give or take, let us say $800 per ton.

So if you apply these marginal costs, for example, to the stripping margins that we realized in Q1, very quickly you are going to see that the marginal stripping margin is below variable cost. So it does not even cover variable cost. So it is very important to separate marginal costs from average costs, which are going to be much more favorable even in Q2 because of our portfolio and because it takes time for raw materials to flow through inventories. I just wanted to make that distinction.

Operator: The next question is from Matthew DeYoe with Bank of America. Please go ahead.

Matthew DeYoe: Good morning. I want to ask on potash a bit. I know mix changes a little bit, but we are kind of running the third potential quarter here of FOB mine potash prices with a $260 kind of on the low end would imply maybe on the lower end, just flat potash realizations for three quarters. Why is not that lower end improving at all, just given what we have seen as it relates to kind of market prices moving up? And then the Q2 potash shipments guidance may be a little bit weaker than I would have thought, and particularly in the general framework of 9 million tons, I guess, overall produced.

Is that just maybe a difference between production and shipments? Because it would seem like it implies a fairly strong second-half kind of shipment guidance. You know, not crazy, but maybe, considering the backdrop for the economics of the farmer in the second half, maybe a little heavier lift than we would have thought.

Bruce M. Bodine: Thanks, Matthew. I am going to turn it over to Jenny to answer the first part of your question, but let me, while I am on, take the second part. I think one thing that perhaps people are missing in our guidance is that K-Mag is no longer in our potash guidance, which depending on the quarter could be around 150,000 to 175,000 tons. So if you add that back in historically to the guidance that we gave, we are seeing pretty normal uptake rates in demand in our guidance number within North America and internationally. In fact, Canpotex is sold out through June and on pace to set a new record potentially this year.

And to your point, Matthew, that does mean record second-half shipments internationally out of Canpotex if that were to materialize. And then we see pretty much normalized North American shipments. So it is a heavier second half for potash shipments, but the guidance in Q2 is fairly normal without K-Mag in there, which I think would appear that it is lower than what it usually is because that math is not in there. Jenny, you want to talk about ASPs?

Jenny Wang: Yes. Matthew, let us start to say potash market is a stable and balanced market. The demand has been pretty strong and the supply was keeping up. So the price—why you are not seeing major change on the bottom end of the guidance? One factor that I probably want to remind you is Canpotex is selling potash in a pretty big contract market, which is the same price for the full year. The second part is that they are selling very far ahead of the delivery time, meaning Q2 most likely most of the sales were made probably in Q4 and into Q1.

Since February 28, we have seen very strong price appreciation in major spot markets, including Brazil, and that will reflect the selling price and the netback for Canpotex in the following quarters. And lastly, I would say in North America, over-the-screen in-season sales, we have seen a very nice price bump due to very strong demand by U.S. farmers. So that will be reflected in Q2 and also into Q3 in terms of the sales.

Operator: The next question is from Lucas Beaumont with UBS. Please go ahead.

Lucas Beaumont: Thanks. Good morning. Just getting back to the phosphate volumes. I mean, the production has been pretty steady for three quarters at about 1.65 million tons. You called out further improvements in the underlying asset base during the quarter. So can you kind of just frame for us exactly how much you are curtailing production into Q2? What would the production have been otherwise? And then as we look forward into the second half, if raw materials continue to be constrained how they are now, would you need to take production down further as we go into the third quarter? And is this helping or hurting your ability to get to that sort of 8 million ton target over time?

Is there any extra work you are going to do while things are down, or is this going to slow things down that way and maybe make improvements farther over time? Thanks.

Bruce M. Bodine: Lucas, appreciate the question. Let me just start by saying we are disappointed that we have to make these actions because we are seeing great progress in Q1. In fact, three of the four facilities were at our target rate, with the fourth, New Wales—our biggest facility—in turnaround. In fact, it was one of the longest and largest turnarounds that has been done in several years at New Wales, just by nature of the scope of things that were up for scheduled turnaround timing. So we were very optimistic coming out of that we would have seen further improved rates. How much is this going to affect? It is impossible to answer precisely.

But let me give you a little color of the magnitude of what the announcements are that we did make today. So Louisiana partial curtailment is about half of its production capacity at roughly 1.4 million tons of finished product capability, and about half of Bartow's capacity at 2 million tons of annualized capacity. As I said and as we said in the prepared remarks, these are temporary matters that can be quickly unwound, and if we see things change on raw materials, we will quickly undo that.

As far as doing more work during this down period, we were happy with where we were performing, and we are anxious to see coming out of this New Wales turnaround how all four facilities were going to perform. Unfortunately, this situation is going to mute our ability to prove that and demonstrate that in the short term.

So we are going to continue to invest in the things that we need to invest in, but with the production curtailments, we have made some decisions on postponing some CapEx, more probably around waste due to the lack of production on gypsum stacks and clay settling areas that we can get away with—mostly gypsum stacks—and other time-sensitive things that this creates an opportunity on. So we have been diligent in looking at how to do that to match up with our current thoughts on production plans.

If this situation becomes protracted and we do not see relief in sulfur price or net improvement in what we see as future realized stripping margins, we have more options that we are looking at and will execute on for further production curtailments. At the end of the day, if we do not see relief in stripping margins—however you want to calculate getting there, whether it is sulfur price, finished product price, or some other way—we do not feel good about the margins that we have in this business to be a reliable supplier of what the world needs.

So these are the difficult decisions that we are looking at day to day and watching what happens in the Middle East, and the Persian Gulf specifically, to see how we go from here.

Operator: The next question is from Edlain Rodriguez with Mizuho. Please go ahead.

Edlain Rodriguez: Thank you. Good morning, everyone. This is for Bruce and Jenny also. Bruce, this is about affordability in phosphate. If prices go up too high, you might see demand deferral or demand disruption. But at the same time, the industry needs to raise prices to recover more margins. What do you do?

Bruce M. Bodine: Yes, Edlain, this is an unsustainable situation that we are in. And I think you highlight that well. 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. And I think at $1,200 sulfur price, as an example, much, if not all, of the producer cost curve is underwater. And we are not immune to that. So that is why I believe you are seeing curtailments happen throughout the globe. That is why it is happening within The Mosaic Company.

It is because this sulfur price is unsustainable, given the other cost of raw materials and given the net stripping margin that we see boxed in by probably farmer affordability, given current ag commodity prices. As I said, what gives in the future and why we remain optimistic that this is a temporary issue and things will revert: at some point in time, the Strait of Hormuz will open up. At some point in time, the fluidity of sulfur will get better and improve. The nutrient removal last year, the lack of application in fall and spring this year, net-net for the crop year, is going to be significant, and yield response will show up.

We are already seeing ag commodity prices in whole since the beginning of the year rise—corn and soybeans not as fast as some of the others—but this is likely what is going to happen in the future. It will improve farmer affordability. Hopefully, you see improvements on raw material costs that go into phosphate. Net of net, a much more healthy environment at whatever new sustained level that is. But we see stripping margins actually getting back to something much more healthy once we get beyond this temporary issue. And remember, even before this Persian Gulf conflict, phosphate was tight. It was driving demand destruction just because there was not enough supply.

It has only been further exacerbated by this with a boxed-in barrier of farmer affordability, and that is mostly in the Americas. But we are seeing, to Jenny's point, participation in other areas, particularly in Asia, where government policy and subsidies and things like that help keep things moving. But again, eventually things will revert back. More likely, ag commodity prices will be better, given the need for nutrient replenishment and the fact that yields will be impacted due to lack of fertilizer application over this past six months. And we remain optimistic that the fundamentals will return. We are going to be positioned in a good place to capitalize on that.

With our production that is returning and the raw material supply and agreements that we have, we think in the long run still advantage us more than others.

Operator: The next question is from Joel Jackson with BMO Capital Markets. Please go ahead.

Joel Jackson: Hi. Good morning. It is Evan on for Joel. Just wanted to ask about Fertilizantes. Obviously, for the guidance for Q2, and usually Q2 is much higher earnings than Q1. If you would not mind outlining the puts and takes in Brazil for Q2, please.

Bruce M. Bodine: Yes, thanks, Evan. I will probably turn it over to Luciano and Jenny to provide some commentary. But no doubt there is uncertainty, hence why we pulled our recent practice of providing some type of indication on EBITDA for the segment. With the lack of ability to get sulfur into our production facilities, that is one contributing factor. But Brazil in general has to import much of their nutrient needs for fertilizer blends that go to the farm. Lack of nitrogen, lack of phosphate, and the uncertainty of when those things resume to more normal levels is why we pulled that guidance, because there is just lack of certainty.

Now before they get into the details, we are still very bullish on the long-term outlook in Brazil. Again, The Mosaic Company has positioned ourselves—our strategy we still believe in—that we will be there with our assets, particularly on the blending side, to grow as that market grows. But 2026 is likely going to be a contraction in fertilizer use in Brazil, just due to the sheer fact that nutrient availability is not there. Jenny, Luciano?

Luciano Siani Pires: Few reasons why Q1 performance was a little better. First, distribution margins surprised on the upside, and I would say they tend to continue to improve because with actually less volume to sell you can target your better customers, so distribution margins tend to increase. A little bit of pricing better than we expected in Q1, and also the appreciation of the Brazilian real has a short-term impact on some of our payables, especially the distribution payables. In equal parts, these are three things that explain the surprise and the upside for results. Looking forward to Q2, we do have parts of our portfolio of sales that are profitable in, I would say, any environment.

So part of sulfuric acid that we produce is tied into cost-plus contracts. We also produce DCP, which is a product that goes into animal nutrition, which has a much higher, I would say, willingness to pay. It is a much smaller percentage of the cost structure of these customers. But the commodity products—SSP is in a very bad place right now, and even the MAP and DAP products, as I indicated, with marginal stripping margins, are in a bad place. So put all of this together, it is very hard to predict where we are going to land in Q2.

Jenny Wang: Next, data points for Brazil market. Bruce mentioned we are likely going to see a decline of the shipment in Brazil. A big part of the reason is the availability of nutrients. And Brazil needs to import 85% of NPK that the country needs. In the first full month, especially April, we saw reduction of the imports, especially on nitrogen and phosphate. The in-country inventory is extremely low for all the nutrients, and the nitrogen and phosphate shipments are unlikely to catch up, given the low availability in the international market. So that is also the reason that we are not really giving guidance, given so much uncertainty.

Operator: The next question is from Duffy Fischer with Goldman Sachs. Please go ahead.

Analyst: Yes, good morning. Just two quick questions. One, what is going to be the cost impact of running the phosphate segment at lower operating rates in Q2, either absolute or on a per-unit basis? And then the second one is I just want to double check. Your base expectation is still that working capital generates at least $300 million of positive cash flow with the puts and takes. Did I hear that right?

Bruce M. Bodine: Yes, Duffy. I am going to turn it over to Luciano to address that.

Luciano Siani Pires: Starting with the second question, yes, the expectation continues to be there. As I laid out, two opposing forces—raw materials tending to push this down, but curtailment is tending to push this up. On the cost impact, we actually were aiming at getting close to a $90 per ton conversion cost in phosphates before the curtailments, which is actually significant. It is below the range we gave in Investor Day last year. With the curtailments, if they continue, it is probably going to land at $105 to $110.

So it is not going to be much lower than $110, and it is going to be driven mostly by better performance at New Wales—again, most of the tons come from there—after turnarounds, operating rates going up. So even with the curtailments, we see cost per ton coming down.

Bruce M. Bodine: It is hard to predict what is going to happen beyond Q2, and I know your question was more on the Q2 side. But that is why we are doing everything we can to control the things we can control, with looking at CapEx, looking at another round of cost savings—the $50 million we talked around for support function costs. That adds to an already $100 million target. So controlling the things we can control are the things we are going to focus on to continue to remain as cash positive as we can, given this difficult time.

Operator: Next question is from Michael Sison with Wells Fargo. Please go ahead.

Michael Sison: Hey. Good morning. When you think about phosphate volumes in Q2, you gave us guidance for that. If nothing really changes, is that sort of the level base case we should think about for the third quarter? And then I guess similarly with Fertilizantes, you did not give us specific volume guidance, but whatever you end up doing in the second quarter, is that kind of a base case heading into the third until everything gets better?

Bruce M. Bodine: Yes, Mike. Thanks. Really, that is why we pulled guidance—we do not feel comfortable being able to give you a forecast on that. I could say it could go either way, to be quite honest, depending on—if somebody could say this conflict ends in the Persian Gulf and fluidity gets back to normal within 60 days; I am just picking a scenario—that would probably improve things for us. If it became protracted, beyond Labor Day, and went on further, we are going to be struggling with this for longer, and it could actually be even more dramatic as sulfur availability is even more curtailed than what we currently may be thinking about.

So again, it comes down to affordability of sulfur—if you can find it, what is its affordability going to be? But more specifically, is it even available?

Luciano Siani Pires: A correction: I mentioned $110 to $105. This is more a second-half cost profile than Q2. Q2 is going to be somewhere in between what you saw this quarter and the second-half numbers.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Bruce M. Bodine for any closing remarks.

Bruce M. Bodine: Well, thanks, everyone. To conclude our call, I would like to take the long view. As we have talked about today, yes, the current environment is challenging for the phosphate industry. At The Mosaic Company, we are doing everything we can to weather the storm without sacrificing our ability to benefit when business conditions improve, and they will improve. Raw material prices are at unsustainable levels, and they will come down once global trade flows resume. But more importantly, the long-term phosphate supply and demand picture has not changed. Phosphate supply is very tight now and will remain tight when more normal economic conditions resume.

We have built The Mosaic Company to be resilient, and we are demonstrating that resilience now. Our improved asset reliability, extensive market access, diversified business, and strong financial foundation will allow The Mosaic Company to thrive in better markets. Thank you for joining our call, and have a great day.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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