Morgan Stanley: Mosaic’s third-quarter profit falls short of consensus, while fourth-quarter phosphate and potash guidance diverges

Where did third-quarter results fall short?

Mosaic’s third-quarter EBITDA was $324 million, 4.7% above Morgan Stanley’s estimate but 3.9% below market consensus. Its adjusted loss per share was $0.19, wider than the bank’s estimate by $0.05 and wider than consensus by $0.17.
By segment, Mosaic Fertilizantes’ EBITDA exceeded both the bank’s estimate and market consensus, while the phosphate and potash businesses fell short of both. Morgan Stanley expects a potentially negative market reaction, with attention focused on details of the improvement in fourth-quarter operating cash flow.

Third-quarter phosphate net sales were $1.295 billion, 14.6% above market consensus, mainly because volumes exceeded expectations; however, the segment’s EBITDA was 19.7% below consensus.
Sulfur supply constraints caused production cuts, and phosphate sales volumes fell from 1.6 million tonnes a year earlier to 1.4 million tonnes. After the company idled higher-cost capacity in Louisiana, unit cash conversion costs fell from $131 a year earlier to $117 per tonne.
Production at the South Fort Meade and Miski Mayo mines is expected to decline further in the fourth quarter. The average sulfur price fell from $715 per long ton in the third quarter to a fourth-quarter contract price of $615, but previously purchased high-cost raw materials will still be included in cost of sales. The company expects phosphate EBITDA to decline further.

Phosphate sales volume guidance is 1.3 million–1.6 million tonnes, with a midpoint of 1.45 million tonnes, above Morgan Stanley’s estimate of 1.2 million tonnes and market consensus of 1.3 million tonnes. The midpoint of diammonium phosphate ex-works price guidance is $830 per tonne, also above the respective estimates of $804 and $820.
Potash sales volume guidance is 2.3 million–2.6 million tonnes, with a midpoint of 2.45 million tonnes, below the bank’s estimate of 2.72 million tonnes and consensus of 2.47 million tonnes. The midpoint of potassium chloride mine-gate price guidance is $265 per tonne, also below the respective estimates of $299 and $314.
Third-quarter potash production fell from 2.2 million tonnes a year earlier to 2.1 million tonnes. The company attributed the decline to maintenance and lower ore grades at Esterhazy, and expects grades to improve. Meanwhile, potash production guidance for 2026 was cut from 9 million tonnes to 8.6 million tonnes, and net interest expense guidance was raised from $220 million–$240 million to $240 million–$260 million.

Mosaic Fertilizantes’ third-quarter sales volumes fell from 2.8 million tonnes a year earlier to 1.9 million tonnes because of lower domestic production and constrained customer credit, with the latter expected to persist. Although the segment’s third-quarter EBITDA exceeded consensus by 21.3%, the company expects it to be below the third-quarter figure of $41 million in the fourth quarter.
Third-quarter free cash flow was $2 million, compared with negative $135 million a year earlier; a decline in finished goods inventory helped drive operating cash flow to $284 million. The company expects working capital releases and cost reductions to further improve operating cash flow in the fourth quarter.
The company set its 2027 capital expenditure target below $1 billion, versus Morgan Stanley’s estimate of $1.4 billion. The bank has an Equal-weight rating and a $26 price target on Mosaic, valuing it at approximately 8 times expected 2027 EBITDA.