Mosaic (MOS) Q4 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Wednesday, Feb. 25, 2026 at 11:00 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Bruce Bodine
• Executive Vice President and Chief Financial Officer — Luciano Siani Pires
• Executive Vice President, Commercial — Jenny Wang
• Vice President, Investor Relations — Jason Tremblay

TAKEAWAYS

• Revenue Resilience -- North America segment gained market share as sales volumes outperformed industry declines in potash and phosphate shipments.
• Phosphate Production -- Produced 1,700,000 tons in the fourth quarter despite an extended Bartow turnaround and deliberate curtailments, with full-year output at its highest in three years for Florida and record mining at Miski Mayo.
• Phosphate 2026 Guidance -- Management expects at least 7,000,000 tons production this year, with operating rates at U.S. facilities trending toward 80% as asset reliability initiatives strengthen utilization.
• Potash Outlook -- Esterhazy site returned to full rates post-safety incident; record production expected in 2026 with targeted output roughly 9,000,000 tons, matching 2025 levels despite planned Carlsbad sale.
• Cost Savings Achieved -- Achieved $150,000,000 of cost savings ahead of schedule in 2025, led by mine optimization, reduced fixed labor, and supplier consolidation; targeting an additional $100,000,000 reduction for 2026.
• Phosphate Conversion Costs -- Cash cost of conversion in the fourth quarter was $112 per ton, down ~$20 sequentially due to improved production volumes and structural cost actions.
• Potash Cash Costs -- Production averaged $75 per ton in 2025, elevated due to the Colonsay extension but otherwise within Analyst Day target ranges.
• Mosaic Fertilizantes Costs -- Blended rock cost per ton fell to $97, the lowest since 2021.
• Sulfur Impact -- End-of-year sulfur price spike expected to "significantly compress margins in our Phosphates and Mosaic Fertilizantes segments well into 2026," prompting Brazil asset curtailments at Araxá and Fospar.
• Inventory Build -- Working capital use reduced cash flow by $960,000,000, driving an $829,000,000 increase in net debt; excess phosphate inventory stands at 240,000 tons ($140,000,000 in potential working capital release).
• Working Capital Outlook -- $300,000,000-$500,000,000 working capital release anticipated through inventory reduction and demand recovery, improving EBITDA-to-cash conversion rates from mid-30s% in 2025 toward historic ~70% levels.
• Capital Expenditure Plans -- 2026 CapEx guided to ~$1,500,000,000—up from 2025—due to multiple gyp stack, clay settling area, and tailings dam projects; management identifies this as a temporary "ceiling." CapEx expected to trend toward $1,000,000,000 by 2030.
• Phosphate Demand Dynamics -- U.S. phosphate demand dropped sharply due to affordability and government support uncertainties but is "emerging" as spring planting approaches; international demand remains strong, with China restricting exports and DAP netbacks higher abroad than at NOLA.
• Mosaic Biosciences Performance -- Net sales doubled to $68,000,000 in 2025, with 40%+ gross margins; five products were launched and 60-plus registrations achieved across 16 countries. Doubling net sales again is the 2026 goal.
• Asset Divestitures -- Divestments include Patos de Minas, Taquari, and a pending Carlsbad sale; $170,000,000 proceeds expected with $60,000,000 in asset retirement obligation reductions.
• Brazil Market Strategy -- Credit constraints in Brazil limit fertilizer shipment and volume growth; company opts for prudent credit risk management over aggressive market share, with intent to expand as conditions normalize.
• Capital Allocation Outlook -- Free cash flow expected to exceed minimum dividend after CapEx and other spend, supporting debt reduction and potential for extraordinary shareholder returns pending operational progress and margin recovery.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Management noted, "sulfur prices spiked at the end of the year, which we expect will significantly compress margins in our Phosphates and Mosaic Fertilizantes segments well into 2026."
• Bruce Bodine said, In 2025, we faced significant market volatility. We moved quickly to protect margins and profitability. We have idled Araxá and Fospar in Brazil, our lowest margin operations, until further notice.
• Cash flow "remains constrained by lower EBITDA, a result of the sharp increase in sulfur prices since December," per Luciano Siani Pires, with Q1 2026 EBITDA facing a $250,000,000 headwind.
• Persistent credit issues in Brazil and high interest rates are creating "major shift in the industry." Increased retailer and grower bankruptcy filings are constraining volume outlook and requiring a conservative sales strategy.

SUMMARY

The Mosaic Company (NYSE:MOS) entered 2026 following a year marked by pronounced demand drops and working capital absorption, which resulted in higher net debt and curtailed production at certain assets. Management expects a multi-hundred-million-dollar working capital release in 2026 as inventories normalize and U.S. and international fertilizer demand recover. Mosaic Biosciences delivered substantial top-line growth with high-margin expansion, positioning it as a scalable growth vector for the company. Capital allocation is weighted toward essential maintenance and regulatory projects in 2026, temporarily elevating CapEx but set to decline in subsequent years according to detailed project timelines shared on the call. Free cash flow in 2026 is projected to surpass required dividends after capital outlays, supporting incremental debt reduction and, contingent on operating results, potential resumption of extraordinary shareholder distributions.

• Management disclosed that $900,000,000 was raised in November through three-year and five-year notes primarily to address the fourth quarter surge in working capital and retire short-term commercial paper.
• Luciano Siani Pires stated that "EBITDA-to-cash flow from operations conversion rate reached the low point in the mid-30s range in 2025 versus a more normalized level of 70%," and that "as working capital unwinds, we expect a meaningful improvement in this conversion rate."
• Production improvements at key U.S. phosphate facilities achieved or approached 80% operating rates, with the largest plant, New Wales, expected to attain this after completing its Q1 turnaround.
• Mosaic's management confirmed that Araxá and Fospar operations in Brazil will remain idled until further notice due to unprofitable margin structure from raw material inflation.
• Segment commentary revealed that Fertilizantes blended rock costs fell to $97 per ton, with EBITDA maintained near $50,000,000 in Q4 despite sharp volume and margin pressures.
• No revaluation of inventory occurred in North America, with Luciano Siani Pires stating, "there is absolutely no revaluation of inventory. There are no gains recorded on EBITDA."

INDUSTRY GLOSSARY

• P2O5: Chemical abbreviation for phosphorus pentoxide, a key measure of phosphate concentration in fertilizer production.
• Stripping Margin: The difference between selling price of a fertilizer (such as DAP) and its primary variable input costs, typically sulfur, ammonia, and phosphate rock; a key profit metric for the phosphate segment.
• Gyp Stack: Engineered structure for storing phosphogypsum, a byproduct of phosphate fertilizer manufacturing, frequently subject to regulatory capital requirements.
• SSP: Single superphosphate, a phosphate fertilizer produced primarily in Brazil and referenced within Mosaic Fertilizantes operations.
• NOLA: New Orleans, Louisiana, a major U.S. fertilizer pricing and trade hub referenced for benchmark DAP prices.

Full Conference Call Transcript

Operator: Good morning. And welcome to The Mosaic Company’s fourth quarter and full year 2025 earnings conference call. At this time, participants have been placed in a listen-only mode. After the company completes their prepared remarks, the lines will be open to take your questions. Please note, this conference is being recorded. And now, I will turn it over to Jason Tremblay.

Jason Tremblay: Thank you, and welcome to our fourth quarter 2025 earnings call. Opening comments will be provided by Bruce Bodine, President and Chief Executive Officer. Luciano Siani Pires, Executive Vice President and Chief Financial Officer, will review financial results and capital allocation progress. We will then welcome Jenny Wang, Executive Vice President, Commercial, to join Bruce and Luciano as we open the floor for questions. We will be making forward-looking statements during this conference call. These statements include, but are not limited to, statements about future financial and operating results. They are based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results.

Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release published yesterday and in our reports filed with the Securities and Exchange Commission. Please note, in today's presentation and in our press release and performance data, we will refer to and provide various financial measures, including adjusted EBITDA, adjusted earnings per share, free cash flow, cost per tonne, and adjusted effective tax rate, either on a total company or segment basis. Unless we specifically state otherwise, statements regarding these measures refer to our adjusted non-GAAP financial measures. Reconciliations of these measures to our most directly comparable GAAP financial measures can be found in our earnings release.

Now, I would like to turn the call over to Bruce.

Bruce Bodine: Good morning. Thank you for joining our call. As we look back on 2025, I want to start by recognizing the work our teams delivered across The Mosaic Company throughout the year. We asked a lot of our people and they responded with tremendous effort. Other members of the executive team and I are grateful for their dedication. I will start today's call with a high-level review of the markets and our business. Then Luciano will provide some details on our financial expectations for 2026. And Jenny is here to address your market-related questions.

Our key messages for today are, first, while the fourth quarter was weaker than we expected due to phosphate demand in the United States, U.S. demand is emerging as farmers prepare for spring planting in North America, and global ag fundamentals are solid. Second, we are on track to improve phosphate production performance and we have posted consistently good potash production throughout 2025. The work we have completed has restored our operational foundation and positioned The Mosaic Company for a strong 2026. Third, we delivered meaningful cost and efficiency progress in 2025, and we have committed to achieve further reductions in 2026.

Fourth, our extensive market access continues to provide a powerful platform for growth, especially in our Mosaic Biosciences business. And finally, in our capital allocation program, we have divested several noncore assets, Patos de Minas and Taquari, as well as a pending transaction to sell Carlsbad. That will allow us to focus attention and capital where it matters. Before I get into a more detailed review of the business and our outlook, I will turn to a high-level view of the market conditions and explain why, despite the tough ending to 2025, our long-term outlook remains constructive. U.S. demand, especially for phosphate, fell sharply in the fourth quarter, pressured by affordability challenges and uncertainties surrounding government support.

Recently, we have seen an increase in spring inquiries as growers look to nourish their soil, especially after last year's big crop and corresponding nutrient removal. As we enter the buying season across several key geographies, a compressed demand time frame is possible and could place additional strain on logistics capabilities. While overall North America potash and phosphate shipments declined in 2025, The Mosaic Company’s North America sales volumes proved more resilient, indicating we captured additional market share. Looking ahead, phosphate supply and demand dynamics are supportive, as China continues to restrict exports to prioritize domestic demand. Lithium iron phosphate battery demand continues to consume an even larger share of the world's phosphoric acid.

Potash markets remain balanced with prices that appeal to the world's farmers and fertilizer producers alike. As we look at 2026, we expect global potash shipments to approach record levels, driven by broad-based demand across most key geographies. And as a result, we expect to continue producing at high operating rates. While credit constraints remain a challenge in Brazil, expanding planted acreage and rising crop yields bode well for long-term Brazilian fertilizer demand. Demand also remains strong in other key growing regions of the world, including China and India. Now I will move on to discuss our business and outlook.

In phosphate, we delivered strong rock production last year, with Florida reaching its highest level in three years and record mining production at Miski Mayo. Our top strategic priority in 2025 was to restore stability in our operations and normalize costs. While the recovery of our production volumes has taken longer than expected, we accomplished a great deal toward that goal. In our U.S. phosphate business, we invested time and money across our assets to set ourselves up for reliably strong production, and we are seeing positive results. The key measure of our success is P2O5 output because acid gives us the ability to flex grades and products to meet demand, and P2O5 production improved during the year.

Our phosphate fertilizer production also rose through the year, and we expect consistently good production in 2026. We produced 1,700,000 tons in the fourth quarter even with an extended turnaround at our Bartow facility as well as deliberate steps to adjust production amid soft U.S. demand. We are off to a strong start this year, and we expect to produce at least 7,000,000 tons of phosphate in 2026. In potash, we are back at full operating rates at Esterhazy since the tragic fatality in December, and our HydroFloat project is ramping up. We expect to achieve record production at Esterhazy in 2026. International sales volume set a record last year and we anticipate continuing strong demand in 2026.

In fact, we expect to produce around 9,000,000 tons of potash this year, a level similar to 2025, even after we complete the Carlsbad transaction. On the cost front, we are maintaining disciplined cost management through all market conditions. In 2025, we faced significant market volatility. When sulfur prices spiked at the end of the year, which we expect will significantly compress margins in our Phosphates and Mosaic Fertilizantes segments well into 2026, we moved quickly to protect margins and profitability. We have idled Araxá and Fospar in Brazil, our lowest margin operations, until further notice.

Turning to managing our controllable costs and driving operating efficiency, we made excellent progress on this front last year, executed our mine optimization plan, improved our fixed labor costs, consolidated suppliers where possible, and managed corporate costs well. Our business in Brazil was a standout, delivering cost improvements through increased mine production and the elimination of high-cost imported rock. In fact, rock output in Brazil reached near record levels in 2025. In phosphate, we began to reverse the cost pressures that arose from extensive maintenance activities in the first half of the year.

Fourth quarter cash cost of conversion was $112 per ton, which is an improvement of approximately $20 per ton compared with a high watermark earlier in the year. This improvement is structural, not one-off. In potash, our cash cost of production averaged $75 per ton in 2025 and would have been within our Analyst Day target range if not for the extension of Colonsay, which carries higher cost. At Mosaic Fertilizantes, blended rock cost per ton reached $97, the lowest level since 2021. We achieved our $150,000,000 cost savings objective ahead of schedule in 2025.

As we enter the new year, we are advancing a broad set of technology-enabled initiatives to drive the next wave of efficiencies, from optimizing supply chains in North America and Brazil to improving how we manage contracts and vendors to enhancing productivity. These efforts have positioned us to deliver another $100,000,000 in savings in 2026. Our other strategic pillars are leveraging our market access and redefining our growth, and here too, we have made important strides. In 2025, we expanded our Brazil distribution capacity with the completion of a 1,000,000-ton blending facility in Pomeranci in the fast-growing agriculture region in northern Brazil.

The facility positions us to better serve customers in the area and to meet rising demand as credit conditions normalize. One of our most promising growth stories is Mosaic Biosciences. Our global market access, the strength of our brand, and our long-term customer relationships provide significant strategic advantages for us. We launched five new products in 2025 and expanded commercialization in the Americas, China, and India. Mosaic Biosciences is capitalizing on previous investments in R&D by expanding registrations of current products to our core markets and new geographies, now reaching 60-plus registrations and selling into 16 countries. The business consistently delivers stable gross margins in the 40s, and future product launches should provide a pathway to higher margins over time.

In 2025, Mosaic Biosciences doubled net sales to $68,000,000. Looking ahead to 2026, our expectation of continued adoption across our current portfolio, along with eight to 10 anticipated new product launches, positions us to achieve another year of doubling net sales. Mosaic Biosciences is delivering on the promise we saw from the start; it has become a truly scalable growth platform. The final element of our strategy is reallocating capital in pursuit of stronger returns. We continue to reshape our portfolio and strengthen our financial foundation last year.

On the capital reallocation front, the transactions announced in 2025, including Carlsbad, are expected to generate approximately $170,000,000 in proceeds over time and also allow for a reduction of $60,000,000 in asset retirement obligations. More importantly, we will avoid significant capital expenditures that these assets would have required. While the proceeds from the transactions announced last year are modest, this continues the process that began three years ago and has already generated significant value. As an example, our position in Ma’aden equity is currently valued at about $2,100,000,000. Looking ahead to 2026, we expect progress on multiple fronts. We are pursuing strategic alternatives for selected Brazilian assets, including unlocking incremental value from co-products, niobium, and other critical minerals.

We also expect to generate value through monetization of some of our Florida land holdings. A note on capital expenditures. We expect CapEx in 2026 to come in around $1,500,000,000, higher than 2025 due to mine, gyp stack, and clay settling area expansions in Florida. At the same time, cash spending on asset retirement obligations and environmental reserves are expected to decline by roughly $50,000,000, partially offsetting the increase, as much of our closure work, particularly at Plant City, is complete. Looking further ahead, we continue to expect capital expenditures to trend down, reaching approximately $1,000,000,000 by 2030, with ARO and environmental reserve cash spending also declining to about $200,000,000 by 2030.

Now I will turn the call over to Luciano.

Operator: Luciano?

Luciano Siani Pires: Thank you, Bruce. Good morning, everyone. 2025 was a challenging year for The Mosaic Company from a cash flow perspective. Inventory builds in both finished products and raw materials weighed on cash flow for much of the year and intensified as demand weakened significantly in the fourth quarter. The impact was significant. Working capital reduced cash flow by $960,000,000 for the year and contributed to an $829,000,000 increase in net debt. The buildup in working capital changed our plans for the balance sheet. In November 2025, we successfully raised $900,000,000 through three-year and five-year notes.

While the original intent was to refinance a portion of the 2027 maturity, the fourth quarter demand downturn and the resulting increase in debt led us to reassess and to redirect the proceeds towards retiring short-term commercial paper. Next maturity is not until 2027, and we continue to monitor markets for opportunity. Looking forward, how do we see 2026 cash flows, debt, and shareholder returns? In the near term, cash flow remains constrained by lower EBITDA, a result of the sharp increase in sulfur prices since December. Phosphate stripping margins are under pressure. Every $10 increase in sulfur prices adds approximately $10,000,000 of quarterly expense.

Compared with the prior year first quarter, we thus expect a roughly $250,000,000 headwind to Q1 2026 EBITDA. This margin pressure also led us to idle Araxá and Fospar in Brazil until further notice. And given the uncertainty surrounding our production plans in Brazil, we are not providing full-year 2026 Mosaic Fertilizantes sales volumes guidance. We expect cash flow to improve progressively as the year unfolds. We expect our owned phosphate production to improve, supporting better fixed cost absorption and higher profitability on incremental volumes. Phosphate prices are rebounding from recent lows in Brazil, and working capital release is expected to drive a significant cash flow uplift this year.

On working capital, we exited 2025 with about 240,000 tons of excess inventory in phosphates versus the prior year. At current inventory values, this represents roughly $140,000,000 of potential working capital release over the next few quarters from demand recovery alone. While the typical seasonal inventory build in Fertilizantes will offset part of this capital release in the first quarter, it will set up a more pronounced working capital benefit in the second and third quarters. But beyond demand recovery, higher phosphate production provides another source of working capital release, as we currently hold excess phosphate rock in stockpiles.

In addition, movements in sulfur and ammonia could provide some relief, and, taken together, we believe a $300,000,000 to $500,000,000 working capital release is highly possible, supporting meaningfully higher cash flow generation in 2026. EBITDA-to-cash flow from operations conversion rate reached the low point in the mid-30s range in 2025 versus a more normalized level of 70%. As working capital unwinds, we expect a meaningful improvement in this conversion rate. Now, how should we think about capital allocation in 2026? We will continue to invest in our business. Capital expenditures are expected to be higher in 2026 than in 2025, driven primarily by required investment in new gyp stacks at multiple sites.

The positive offset, though, is that asset retirement obligations and environmental reserves spending is expected to trend down. Taken together, as Bruce mentioned, total cash outlays for CapEx, ARO, and environmental reserves are expected to be modestly higher than the prior year. This is a way of thinking that we suggest you adopt going forward, as ARO and environmental reserve spending will trend down for the next few years. We continue to see opportunities to reduce CapEx towards $1,000,000,000 by the end of the decade, with ARO and environmental reserves steadily edging down to approximately $200,000,000. Overall, we expect to generate free cash flow after CapEx and other cash spend above the minimum dividend in 2026.

This will allow us to prioritize debt reduction and subsequently pave the way to resume extraordinary returns to shareholders. I will stop here and turn the call back to the operator for questions and answers.

Operator: Thank you. We will now begin the question and answer session. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause for just a moment to assemble our roster. And today’s first question comes from Duffy Fischer at Goldman Sachs. Please go ahead.

Duffy Fischer: Yes. Good morning, guys. First question is just on phosphate, or DAP. Can you triangulate what you are thinking? I mean, Q4 you are telling us the pricing was too high and farmers kind of balked at that. You know, pricing has come down now, but so have your margins pretty significantly in a tight market. You would argue you should be able to get margin expansion. So do you think you will be able to price for that higher sulfur as we go through this planting season? And if you do, do you think farmers will actually buy, or will they forego DAP applications this year, or do you think they just pushed it to the spring?

Bruce Bodine: Hey, Duffy. Thanks for the question. So on DAP, we definitely recognize that affordability for the farmers is still challenged, although better, and we see that improving in 2026 versus 2025 just given the dynamics on the ag commodity side. But to your point about pass-through on sulfur price, I do not know that we will be able to pass through as much as maybe historically in a tight market given the affordability issues. But we do see, at least for us, anything above a stripping margin above $300 we still see as very constructive, being in the middle of the cost curve, and that is kind of how we are looking at that.

So it will be interesting to watch what happens to sulfur coming out of Q1. We do see things looking to improve. I do not think that sulfur will revert back to some three-year-old, two-year-old number with a one handle or two handle on it, but we do see sulfur getting better, which should help on stripping margins. And then, in addition to how we are thinking about that, is that the more we push on getting to our full capacity on phosphate fertilizer production, it is just going to continue to expand with that fixed cost absorption our margin to insulate us even more from some of the uncontrollables on the raw material side.

So farm affordability, I think, is going to govern it. How much we can pass through, there probably is a limit. But we have still a lot of room to go before we feel a lot of pressure on margin, from a stripping margin standpoint, for profitability around phosphate. Jenny, any comments to add?

Jenny Wang: I just want to add one point, Bruce. DAP price in North America, in the U.S. market, has been pretty stable, and that is basically impacted by the farm affordability issues, very acute in the U.S. market. If you look at the international market, we see very different dynamics, and you have some major DAP-consuming countries. Between China and India, these two countries, the government basically subsidize their farmers. Therefore, we are seeing the price increases over the last five weeks for DAP in the international market. In fact, today, international market price, the net for DAP netback, is actually higher, at a premium, than NOLA price. So I understand the concerns of affordability.

This is probably more severe in the U.S. market than the rest of the world.

Bruce Bodine: Yeah. I think that is a great point, Jenny, for everyone, is that the international market is a little bit disconnected from an affordability and constructiveness standpoint than maybe just the U.S., which is great given our distribution access. We will pivot as necessary to take advantage of that.

Operator: Thank you. And our next question today comes from Christopher S. Parkinson of Wolfe Research. Please go ahead.

Christopher S. Parkinson: Great. Thank you so much. Bruce, let me take a step back, and we just look at 2026 versus your Capital Markets Day expectations in terms of turnarounds. Can you just kind of give us a walk through of the phosphate production or asset portfolio? You know, where we were trending towards the end of the fourth quarter and where you expect to be in ’26? You are back down to Q1 2012 in terms of your conversion costs. How should we think about that as it relates to your greater than 7,000,000-ton production guidance for ’26? Thank you so much.

Bruce Bodine: Yes, Chris. No, thanks for the question. I think our guide is based on, and we talked about this the last quarter, kind of trailing demonstrated, but by no means does that mean that is where the status is going forward. So I can see where there is some disconnect and confusion, and I am happy to try to give you some color. So in fourth quarter—well, first, let me back up. To get to kind of the 8,000,000-ton rate, we need an operating factor of low 80s, 81% of our overall fertilizer assets in North America. We were there in Bartow for much of 2025. We got there in Louisiana in the fourth quarter.

We were in the mid-70s at Riverview in the fourth quarter. New Wales was a little behind with some issues that they were facing, still working through some operating consistency. As we have moved into—so good quarter—saw improvements particularly on P2O5 production from quarter three to quarter four. We are continuing to see that going into quarter one. Bartow continues to run at its plus 80% operating factor. Louisiana is running also at that 80% threshold. Riverview is also approaching that 80%.

So when you look at those three facilities in aggregate, we are kind of already at that 80% operating factor, and we are seeing more and more days strung together at all facilities where they are at or above kind of that ultimate aspiration that we want to get back to. New Wales is in a turnaround as we speak. We expect as they come out of turnaround into quarter two that they will be approaching that 80%. And again, New Wales is our biggest facility at 3,000,000 tons of granular capacity. So we expect in the first half of the year, to get through some of these turnarounds. Bartow has no more turnarounds for the year.

New Wales will get through this major turnaround. Riverview has a turnaround in second quarter of this year. We expect, even coming out of that turnaround, to be better than they have been. So we are feeling very optimistic about production in the back half of the year. Hence, we said seven plus. Seven is kind of where we have been over the last two quarters, but we see some upside, Chris, to your point.

Luciano Siani Pires: May I comment on the cost side? The $112 per ton in phosphates is where it should be given the current production volumes. The $131 of Q3 was actually very abnormal because of lots of repairs done outside of turnarounds. And the rule of thumb is every 100,000 tons per quarter should represent kind of a $7 to $8 decline through cost absorption on this $112. So, therefore, if that path from 1.7 to 2.0 would imply kind of a between $20 and $25 per ton decline over current levels of phosphate conversion costs.

Bruce Bodine: Yes. So, Chris, we remain confident in our ultimate objective. We talked about in Analyst Day both on volume and cost, to Luciano's point, getting below a $100 conversion cost. And then we are continuing to focus on some of the last things of talent and training, discipline around our operations management system, better asset predictive maintenance and analytics, which continue to take us kind of to that next frontier.

Operator: Thank you. Our next question today comes from Jeffrey John Zekauskas with JPMorgan. Please go ahead.

Jeffrey John Zekauskas: Thanks very much. I can see where your capital expenditures come through your cash flow statement. Where does your ARO and environmental reserves cash spend come through? Is that part of operations, or is that a capital cost, the $400,000,000 in cash spend that you talk about for 2026?

Bruce Bodine: Thanks, Jeff. I am just going to hand this over right to Luciano. He’s got that.

Luciano Siani Pires: Jeff, it actually is spread around a few lines. It all comes through the operational part of cash flows, nothing on the capital expenditures. But it is in between a few lines. You have accrued liabilities—for example, the current portion of ARO. When you spend on that, you decline accrued liabilities. You have a little bit on the net income line itself. Part of that offsets the accretion expenses. So it is a little complicated, but it is in the operational part of the cash flow statement.

Operator: Thank you. And our next question today comes from Vincent Stephen Andrews at Morgan Stanley. Please go ahead.

Vincent Stephen Andrews: Thank you, and good morning, everyone. Just to follow up on the CapEx, maybe the inventory a little bit. I think the Street had CapEx coming down about $300,000,000 from ’25 to ’26. So I know you called out why it is going up. Could you talk about sort of what changed and what triggered the need to do this in 2026 and your confidence that this will not leak into ’27 and beyond? And then secondarily, you called out on the inventory line that you have excess phosphate rock inventory.

So I would just be curious if you could help us understand, is that because you thought you were going to produce more last year, you bought excess rock, or you thought rock prices were going to go up, so you bought ahead of that increase? Trying to understand how you are going to work that number down. Thank you.

Bruce Bodine: Vincent, thanks for the question. On CapEx, as Luciano and I talked about, we had an interesting confluence this year of a number of waste disposal projects in gyp stacks and clay settling areas and a tailings dam in Brazil as well that have all kind of hit from a timing standpoint at the same time. That is unusual. But I would tell you that the $1.5 billion that we have said is, I would say, really the ceiling. We probably see that as a worst-case outcome and actually have some upside to that.

But just to give you an example, you do not know exactly how much a gyp stack, for example, is going to cost until you do some of the ground survey work, and then you find that out and have to tweak the estimates. So those are the types of things that happen. It is just clarification of what those waste costs are and then the timing of those given the exhaustion of existing capacity. So we have a gypsum stack at New Wales, a gypsum stack at Bartow, a gypsum stack in Louisiana, all happening in 2026.

We have a tailings dam at Tapira, and then we have two clay settling areas, one winding down and another one being built at Four Corners. The good news is once you get beyond these, and that is why we have confidence that this number will come down in time, you do not build another gyp stack for another four, six, eight, even sixteen years, depending on the facility. And then clay settling areas last anywhere from two to five years. So these are lumpy when they do come through. It is unfortunate that they have all lined up together. It is not by choice. It is by necessity.

And then, once we are through this, we are very confident that the tail down to $1,000,000,000 towards the end of the decade is definitely possible. On the rock side, just a little bit, we do not buy rock on the external market like maybe other nonintegrated producers do. Our production of rock—I am not going to say is decoupled from the consumption—but they are largely two processes, and then you manage rock production, rock inventory, because we have millions of tons of available storage for rock inventory, to kind of manage through the near term, the next two to three years.

But given that production on the fertilizer side, with all the work that went into asset reliability in the first half and into the second half of the year, actually, we did not consume as much. We built some of that rock inventory. But as I just talked about two questions ago, we are seeing very good run rates. We will start to more balance that out and actually start to reduce that rock inventory as we pull through more of that into finished goods.

Luciano Siani Pires: There is a slide in the presentation that shows a $46,000,000 increase in raw materials. That includes both sulfur, ammonia, and also the rock inventories work in process, and it is about half-and-half the increase. So the potential is, with increased production rates, to release that roughly $170,000,000 to $180,000,000 of excess rock inventory.

Bruce Bodine: And the other thing that inventory allows us to do on the rock side, particularly in Florida, is, as we move into new areas—which we are going through a major area relocation right now at South Fort Meade—it gives us even some buffer to make sure that we do not run out of rock or the ability to blend our rock for consistency to our acid facilities. So it serves that purpose as well. Vincent, thank you.

Operator: And our next question today comes from Lucas Beaumont with UBS. Please go ahead.

Lucas Beaumont: Thanks. Good morning. Just going to Fertilizantes. I just wanted to kind of ask about the volume outlook there. I mean, you guys talked about the continued kind of challenges on the credit issues in Brazil, and that your first quarter volumes are going to be down year-on-year. So if we assume that means maybe sort of 1,700,000 tonnes or so, then your phosphate production is curtailed at least through sort of the first half, with the cost challenges there. I mean, that probably gets us to something flattish around 9,000,000 tons for the year again. I mean, last year coming into the year, you guys were sort of looking at 10 to 10,800,000 tonnes in volumes.

You know, you have added the capacity there, so you clearly have room to grow. So I guess, could you just kind of help us frame how should we think about the volume outlook there for 2026? And then how we should sort of see your leverage to the upside to grow going forward? Thanks.

Bruce Bodine: Yeah, Lucas. Appreciate the question. I am going to ask Jenny to talk a little bit about the market side of Brazil. But we are still very much a believer in being in Brazil. As we talked about before, we have been there for well over two decades and know how to navigate in that environment. You know, the credit issues that are being faced in Brazil caused headwinds to the type of market capture that we were hoping for when we put those 10.8 kind of million ton numbers out there. To not take risk in what you see maybe with some of our competitors have experienced, we have not had as much problems there.

So we have taken a more conservative approach, but we do have, as you have said, that kind of buffer to grow as the market rebounds and more stabilizes, not only in our existing facilities, but to your point, at our new Pomeranci facility as well. So, Jenny, maybe you want to talk about how the market looks in ’26 and then even beyond.

Jenny Wang: Sure. Thanks. The market has been, as everyone knows, challenged by the high interest rate and the credit issues. We have really seen some major shift in the industry both at the retailer side and also at the farmer side. The number of the filing of Chapter 11, the U.S.-equivalent Chapter 11, cases have increased over the last two years. The positive part of these challenges are the consolidations have started to happen as well, both at the retailer side and also at grower side. For 2026, we foresee this is going to be a challenging year as we go through this process.

Therefore, if you think about the overall fertilizer shipment in the country, we may see some uncertainties, which are related to the farm economics and affordability, and probably also related to the supply availability, especially on phosphate with the restriction of the Chinese export. So overall market is likely going to be flat, and our own distribution volume, we will make prudent decisions on how much we want to sell, which customers we want to sell. We are not going to take credit risk, and we are not going to compete in the market where the business quality is not really good.

Lastly, I would say last year was a significant application of low-quality NP products out of China, and we have started to see official reports on the yield impact. And if there is any further under-application of fertilizer in the current crop year, the ongoing safrinha corn or the coming season, the Brazilian farmers will have a very clear decision to make on what application rate they need to manage. So in midterm, we are very optimistic to this market. Brazil is growing. It is expanding, and yield is very important for farmers. But before the market turns the tide, we need to manage through this process, especially in this year.

Bruce Bodine: So, Lucas, I am going to ask Luciano to talk a little bit on the cost side and the resiliency of Fertilizantes from a financial perspective. But no doubt, the raw material prices have provided some headwinds in that business, and we have made some moves. We are going to watch that closely before we decide on what to do next for maximizing shareholder value. And a lot of that depends on what happens with sulfur price and what happens with fertilizer price, and probably, hence, why we did not guide in this regard.

There is a lot to unfold in the next, say, month to three months for us to watch to get more comfortable on how things are going to come out. But regardless of that, I think it is worth Luciano talking about kind of the financial performance of that business.

Luciano Siani Pires: Yeah. There has been some reactions, with some disappointment about the performance of Fertilizantes in the fourth quarter, but I would like to offer a different perspective. Because of high sulfur prices, we actually curtailed production. We removed 30% of our SSP production in Brazil. We also put our major site in turnaround, which was Uberaba. We anticipated a turnaround we were not expecting, so it became stopped. So we produced significantly less. Our distribution margins, because of the credit issues, they narrowed quite significantly. Sales dropped precipitously at the end of the quarter, and with all of that, still, the business generated almost $50,000,000 on EBITDA.

And so that would be, I would say, a phenomenal performance for the set of circumstances that we faced and that we actually decided to impose to the business in the fourth quarter. So the platform is there. As soon as the market conditions improve, you are going to see results rebounding pretty quickly.

Operator: Thank you. And our next question comes from Andrew D. Wong at RBC Capital Markets. Please go ahead.

Andrew D. Wong: I just had a couple of questions on the U.S. First, on the phosphate demand, it has been down pretty significantly for the past four years, but yields, the crop yields, have still been pretty strong. So what should we take away from that dynamic? Are the soils just extremely, extremely depleted? Have farmers just been really efficient with applications? And then secondly, on the U.S. countervailing duties, I think that is up for review this year. Can you just go over that process and how the current high-priced phosphate market affects that review?

Bruce Bodine: Thanks, Andrew, for your question. Let me start with your latter one, and I am going to turn it over to Jenny to talk about the lower phosphate North American demand and any yield impacts to answer the first part of your question. On the countervailing duties, there really is no correlation to that on the process itself. But this process this year enters into its sunset review, which will kick off in April. We are evaluating our needs to participate in that process as we speak. So a lot more to come there.

And just to remind, as that process unfolds, duties do stay in place until an ultimate decision is made on the countervailing duties from the sunset review. I will turn that over to Jenny now to talk about yields in North America.

Jenny Wang: Sure, Andrew. I just want to remind ourselves on the shipment of phosphate in North America. Basically, the change is really in the U.S. market. That was down to below 9,000,000 tons in 2022, recovered in 2023 to 10,000,000 tons, 2024, 10,000,000 tons, and now we see a major drop last year to 8,500,000 tons. So whether we should see yield impact, it is going to come from the coming season, the current season. So last year, the drop of this 14% to 15% of shipment of phosphate in the North American market, majority of them happened in fall application, meaning that is the tons go to the field in the spring for the spring crop.

So the yield impact likely, if there is major impact, is likely going to be the current crop, the crop going to be going into the field. I would also say the precision ag has made a lot of farmers make their decisions on cutting rate at the mean, at the same time looking for product that they are able to improve the use efficiency, where that is the biologicals come in play. Biologicals like our Barcoder and BioPath, they are not able to increase the supply of phosphorus, but in the time in one year or two, when the rate is not going to be applied as high as normally they do, the efficiency effect will come into play.

So, in short, whether we will see a yield impact in North America, in the U.S., like we see in Brazil, it is just going to be this crop we will watch.

Operator: Thank you. Our next question today comes from Evan McCall at BMO Capital Markets. Please go ahead.

Evan McCall: Change password update. That was the expectation for now. A year later, we are—yeah. End of year—targeting 1.7 to 1.8.

Operator: Evan, this is the operator. I apologize. You are coming through softly. Let me turn up volume here. The question was pretty garbled.

Bruce Bodine: I do not know if it is your connection or where you are. If you want to drop and try to get back in.

Evan McCall: Okay.

Operator: Alright. Evan, can you ask your question now, sir?

Evan McCall: Yes. Yeah. Sorry about that. So thanks for the question. Just wondering what changed with the 2,000,000 per tonne—sorry—million per quarter in phosphate, and now the expectation is a bit lower at 1.7 to 1.8 million tons a quarter. Is that just the turnaround in the first half, and you would expect to be higher after that? Or what are your thoughts on that?

Bruce Bodine: Yeah. No. As we have talked about in, I think, prior quarters, where we started, our guide is going to be on actually demonstrated prior trailing three months, which means that there is likely upside to the numbers, Evan. But until we see them, we are just being more cautious on that. As you know, we probably got ahead of our skis in the past. So by no means have we lost confidence.

And I think, hopefully, the proof points that I gave earlier to, I think, second question on where we are from an operating factor, alludes to the progress that we are making and the confidence that we have in ultimately getting to that full utilization to hit 8,000,000 tons.

Operator: Thank you. And our next question today comes from Kristen Owen at Oppenheimer. Please go ahead.

Kristen Owen: Hi. Good morning. Thank you so much for the question. Two brief ones for me. First is on mix. Just given some of the netbacks comments that you made, Jenny, can you help us in terms of how you are thinking about product mix and geographic mix in 2026? And then my second question just relates to the working capital. Can you give us a sense of how much of that working capital is tied up in Brazil? Thank you.

Bruce Bodine: Thanks, Kristen. I will start with the working capital one and maybe turn it over to Luciano to give you a little more color on that one.

Luciano Siani Pires: So thinking about a release of $300,000,000 to $500,000,000 through a combination of factors, through some release of rock inventories, the sales above production in the phosphate business, Brazil as well, which ended up with slowed-down sales at the end of the quarter, and therefore we had to pay a lot of accounts payable for purchased nutrients that we did not repurchase. So that dragged down working capital as well. So all these factors, with normalization of demand and production, should come down. And our estimate is $300,000,000 to $500,000,000 of contribution for cash flow this year.

Bruce Bodine: And then, Kristen, on product mix and geographic mix, I am just going to turn it over to Jenny to give you the latest thoughts on that.

Jenny Wang: Hey, Kristen. I think your question probably more towards phosphate. Usually, our phosphate production goes around 55% to 60% stay in North America and the rest for the export market. This year, we are going to watch the market trend and demand very closely, especially in the U.S. market. I would not be surprised to see increased sales of phosphate to the international market and a less percentage in North America. It is really market demand driven.

Bruce Bodine: Thanks. And I think, Kristen, what is driving that, to Jenny's point, is how disciplined China stays to their export constraints. If it goes beyond the first half of the year, there may be even more opportunities on the international side. But we are getting reach-out from customers who are traditionally maybe served more by the Chinese export market looking for tons. And I think it is important to understand that, from our view anyways, that phosphate market is a supply-constrained market. So people are out there, particularly in India, Southeast Asia, looking for tons that would otherwise more traditionally have been supplied through China.

And given their discipline and policy announcements, there could be meaningful reduction again this year on exports available from China. And one of the reasons why the Corporate segment is actually improving performance is because of our sales to and through China and India, which are accounted for in that segment. So there is increased EBITDA contribution within the Corporate segment, which is—the negative amount is declining.

Operator: Thank you. Our next question today comes from Benjamin Theurer with Barclays. Please go ahead.

Benjamin Theurer: Hey. This is Rahi on for Ben. So just a couple questions. From the $300 per ton in sulfur cost in your cost of goods sold in April, and the benchmark level is hitting about $500 in late fourth quarter, is it reasonable to assume some average around $400 per metric ton for sulfur cost in 1Q? Or would this boost automatically, you think, already in 1Q to $500 per metric ton per sulfur? And then also for Fertilizantes, is the $50,000,000 EBITDA the go-forward per quarter if production stays curtailed? Thanks so much.

Bruce Bodine: Thanks for your question. Let us start with your first one, sulfur. I will probably ask Jenny to weigh in on this as well. But that sulfur price, as you have well noted, does flow through inventory. We do see in our current forecast—but more to come through—that sulfur will moderate in price as the year goes on. But sulfur in COGS through quarter one to quarter two may actually increase as that higher-cost sulfur that we negotiated in quarter one flows through inventory. Jenny, anything to add?

Luciano Siani Pires: And then on the second part of the question—what was the second part? I will turn it over to Luciano. Sorry. $50,000,000 is not—I mean, there are a lot of factors that go into quarter-by-quarter EBITDA. One is product mix. Seasonally, quarter four, quarter one, are always kind of low, just given product mix. More nitrogen products and lower volume, less on our performance products like MicroEssentials, which pull through a margin premium, as an example. So there are a lot of things that depend on that, but $50,000,000 is not the new normal. It is definitely going to be better than that. First and foremost, Araxá will be coming back, and normalizing its level of production will uplift this.

And we should expand our distribution margins as well. So we should expect a much higher EBITDA on a quarterly basis going forward. The wildcard is continuing to be Araxá, which right now is idle, and currently, the expenditures are hitting—although we are saving on CapEx and other things—the expenditures are continuing to hit EBITDA at a rate of around $10,000,000 per month. But still, with that, performance should improve.

Operator: Thank you. Our next question today comes from Edlain Rodriguez with Mizuho. Please go ahead.

Edlain Rodriguez: Thank you. Good morning, everyone. This is a question for Jenny. Jenny, so we saw the demand deferral or destruction in phosphate in Q4. Are you surprised that farmers took a holiday in phosphate but not on potash, especially given the two mineral fertilizers tend to be applied in tandem?

Jenny Wang: Thanks. I guess your question is probably more referred to the U.S.

Edlain Rodriguez: Yes.

Jenny Wang: Am I surprised to the demand destruction on phosphate? I would say when we had this earnings call back in October for Q4, we did mention there were some uncertainties on the demand in Q4 on both phosphate and potash. One is related to when the U.S. government payment is going to be made, and the second part is really weather. Eventually, the weather did not really come through. That basically cut off some of the application, which could have been in November and December. The demand destruction on phosphate was far greater than potash. A big part of the reason is potash affordability. The prices are much more affordable than phosphate and nitrogen.

The last question that you asked—that was a very interesting one because I thought the same—the U.S. farmers, they would not go to the field only put down potash without getting nitrogen and phosphate in, and indeed it happened in November and in December. Some of the farmers, they basically decided to wait until phosphate price got reset, which, of course, we all know it is unlikely going to happen given the tight supply situation. But yes, indeed, there are farmers—they went to the field for potash application without phosphate. It is not very common.

Operator: Thank you. Our next question today comes from David Symonds at BNP Paribas. Please go ahead.

David Symonds: Thanks. Just a couple of modeling ones left. So you mentioned that 50% more ammonia available in 2026 than it was in 2025. I do not know how low we got in 2025, but can you just confirm if you did 7,000,000 tonnes of phosphate production, how much of your ammonia requirement is served by Faustina in 2026? Then the second one, I am not totally clear how you accounted for the increased value of your sulfur inventory. So, could you just tell me, was there an inventory gain in your EBITDA, your adjusted EBITDA, in the phosphate business for the increase in the sulfur value?

Bruce Bodine: Yeah. On the ammonia one, just to confirm, David, we will, given the turnaround we just did in quarter four and the upgrades that we have made at that facility, we expect 50%—up to 50%—more production out of that facility going into 2026 now that it is up and running. That will consume a larger percentage of our portfolio as produced ammonia, and that is going to be 35% to 40% of the portfolio versus much less than that, which we would have been exposed to market on. So the biggest component still remains kind of our strategic contracts, which are cost-based-ish. Then we have got 35% to 40%, at times maybe a little bit more, from Faustina.

Not only will Faustina consume its own ammonia fully, we will have enough to ship into the Florida system, and then we will be much less exposed with the remainder to spot.

Luciano Siani Pires: David, so there is absolutely no revaluation of inventory. There are no gains recorded on EBITDA. The reason why prices affect inventory is mostly in Brazil, because in Brazil you have purchased nutrients. So if prices go up, you need to pay higher prices, and therefore your inventory is recorded at a higher value. But in North America, where everything is produced, inventory is recorded at cost of production and is not revalued, and there is no gain or loss.

Operator: And our final question today comes from Mike Sison with Wells Fargo. Please go ahead.

Mike Sison: Hey, good morning. Just one quick one. You all said there is a $250 headwind in the first quarter. Given the stripping margins are at—if Slide 14, the February 26 metrics, do not change, is that a similar headwind for the rest of the quarters? And I understand sulfur is supposed to come down, hopefully. And any sensitivity on how that $250 goes away and what the important variables are as the year unfolds? Thank you.

Bruce Bodine: Yeah. Thanks, Mike. Obviously, if sulfur price persists at that level, the component of margin erosion—or stripping margin erosion—that sulfur would play would stay constant. And we also see ammonia prices coming down throughout ’26 as well. So there is some offset to that. And then ultimately, it depends on what we talked about earlier in the call, which is how much can be passed through on price and what ultimately happens with price to the realization on stripping margin. The other benefit that we will see is we will see better—from ’25 to ’26—better turnaround and idle cost.

And we will also see, as production improves, better fixed cost absorption on conversion cost that will buffer out some of that. So not all is static. There are a lot of moving parts, but those are the variables, the key variables, that go into that. Luciano, anything else to add?

Luciano Siani Pires: Yeah. So realized stripping margins in the fourth quarter were $444 per ton. And so if you correct for the current sulfur prices compared to the $306 that was recorded in the fourth quarter, it would have somehow $400 per ton of stripping margins. And so what would be the impact to the bottom line? So just to give you an example, today, at $444, the EBITDA margin per ton was $108. That per se suggests—if you just take $444 less $108—that the $336 would have been. However, there is about a $50 penalty to the breakeven point at Q4, just because of turnaround expenses and other SG&A expenses divided by a very small sales volume.

So I would say these two lines are kind of $50 above what they should be. So that puts us at a $280 breakeven. And, if you add the cost dilution that we expect in going forward for 8,000,000 tons, we should be around $250 per ton of stripping margin breakeven. So in a normalized world, at a $400 stripping margin, we should be making about $150 per ton, approximately. Just a ballpark for you to reason around the phosphate performance.

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

Bruce Bodine: Thank you, everyone, for joining us. To conclude our call, I would like to reiterate our key messages for today. Clearly, 2025 was challenging for The Mosaic Company in the agriculture business, especially in the U.S. We saw demand drop significantly as farmers dealt with tough economics and uncertainty around government payments. That said, our outlook for 2026 is positive, in part because demand is emerging in the U.S. and remains strong in other key areas of the world, but also because of the progress we have made to strengthen The Mosaic Company. We are on track to improve phosphate production, and we expect a strong year for potash production.

We have made good progress on cost and efficiency, and we expect further strides this year. Our Mosaic Biosciences platform is growing quickly and holds meaningful promise for the future. And our capital allocation program continues to produce results with several divestitures of noncore assets in 2025. So overall, The Mosaic Company is well positioned to weather the storm and deliver strong earnings as business conditions improve. Thank you very much, and have a safe day.

Operator: Thank you. That concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.