Mosaic (MOS) Benefits from Higher Demand, Cost Reductions
The Mosaic Company MOS is benefiting from demand strength for phosphate and potash and actions to improve its cost structure amid headwinds from weak fertilizer prices.
Mosaic, which is among the prominent players in the fertilizer space along with Nutrien Ltd. NTR, CF Industries Holdings, Inc. CF and The Scotts Miracle-Gro Company SMG, is well-placed to gain from strong demand for phosphate and potash. Higher agricultural commodity prices and attractive farm economics are driving demand for fertilizers globally. Farmer economics remains attractive in most global growing regions on strong crop demand, affordable inputs, and favorable weather.
Demand for grains and oilseeds remains high along with strong farm economics. Strong agricultural commodity pricing trends and improved farmer affordability are likely to drive demand for fertilizers in the balance of 2023. Strong demand is expected to support the company’s sales volumes.
Mosaic is also taking actions to reduce costs amid a still-challenging operating environment. Its actions to improve its operating cost structure through transformation plans are expected to boost profitability.
The company also remains committed to carrying out investments with high returns with moderate capital expenditures, such as the expansion of MicroEssentials capacity at its Riverview facility, constructing a new blending and distribution center in Palmeirante, Brazil, executing the construction of a purified phosphoric acid plant for sale in North Americ, and installing a Hydrofloat flotation system at Esterhazy's K2 mill. The estimated total capital expenditures for 2023 are $1.3-$1.4 billion.
Mosaic also aims to return substantial free cash flow in 2023 to shareholders. The company strives to maintain a healthy balance sheet.
However, prices of phosphate and potash retreated since the back half of 2022 from their peak levels attained in the first half riding on the impacts of the Russia-Ukraine war and disruptions due to the sanctions in Belarus. Lower selling prices hurt sales and margins across the company’s Phosphate and Potash segments in the second quarter of 2023. Despite some recovery of late, weaker year-over-year fertilizer prices are expected weigh on the company’s profitability.
Mosaic’s second-quarter adjusted earnings per share of $1.04 missed the Zacks Consensus Estimate of $1.07. Net sales declined roughly 37% year over year to $3,394 million in the quarter. It surpassed the Zacks Consensus Estimate of $3180.3 million. The decline in sales was primarily due to lower selling prices.
Nutrien also missed earnings estimates in the second quarter. Its adjusted earnings per share of $2.53 lagged the Zacks Consensus Estimate of $2.83. Sales fell around 20% year over year to $11,654 million in the quarter. The figure, however, surpassed the Zacks Consensus Estimate of $11,179.7 million.
CF Industries’ second-quarter 2023 earnings of $2.70 per share fell from $5.58 in the year-ago quarter. The figure, however, surpassed the Zacks Consensus Estimate of $2.15. Net sales fell around 48% year over year to $1,775 million in the quarter and missed the Zacks Consensus Estimate of $1,850 million.
Scotts Miracle-Gro’s fiscal third-quarter adjusted earnings were $1.17 per share, down from $1.98 a year ago. It also missed the Zacks Consensus Estimate of $1.41. Net sales fell around 6% year over year to $1,118.7 million and missed the consensus mark of $1,160.6 million.
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