Fertilizer Giant Faces Production Setbacks at Phosphate Operations
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Disclosures for The Mosaic Co., RBC Capital Markets, October 10, 2025:

Valuation: We derive our $30 price target by attributing an equal weighting to our SOTP EV/EBITDA and DCF valuation. Our SOTP EV/EBITDA analysis applies a 5.0x multiple to 2026 EBITDA estimates for the Potash, Phosphate, and Fertilizantes segments. These multiples October 10, 2025 Andrew D. Wong (416) 842-7830; [email protected] 6The Mosaic Company are below historical averages given preference toward nitrogen and potash vs. phosphate and recent phosphate production challenges. Our DCF analysis uses a 9% real discount rate. The implied return to our price target supports our Outperform rating.

Risks to rating and price target: Risks to our price target and rating include: 1) unpredictable weather events in North America or international markets can have an adverse impact on demand for agricultural inputs; 2) Mosaic has operations in the US, Canada, and other foreign countries, so currency fluctuations can have an impact on earnings; 3) nutrient prices can be volatile and can have a significant impact on Mosaic’s profitability; and 4) Mosaic uses natural gas, sulphur, and other inputs in producing its fertilizer products, so changes in the prices of these inputs can have an impact on its earnings.

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With phosphate operations continuing to fall short for The Mosaic Co. (MOS:NYSE), RBC Capital Markets Analyst Andrew Wong on October 10 lowered the stock's rating from Outperform to Sector Perform, and his price target from US$30 from US$40.

For 13 quarters, phosphate operations have not met full capacity, and Q3 appeared to follow this pattern based on Mosaic's operational update on the same day. Mosaic disclosed unexpected mechanical problems and utility disruptions that severely affected Q3 production.

Wong also revised the firm's expectations for sulfur input costs upward — the Q4 Tampa contract settled US$58/long tonne (lt) higher than in Q3, suggesting a ~$25/tonne decrease in phosphate stripping margins. This increase was unexpected, and phosphate producers are unlikely to pass this cost on to customers given the already high phosphate prices.

Ongoing operational difficulties raise concerns that Mosaic's phosphate operations might persistently underperform and fail to reach target capacity. We also believe that these ongoing issues, despite the company's relatively optimistic production outlook, will further damage investor sentiment, the analyst noted.

Challenges in Brazil Affecting Sales Volumes

Mosaic also reported that Q3/25 Fertilizantes volumes were approximately 2.8 Mt (million tonnes), lower than the previous year's Q3/24 volumes of 2.9 Mt, despite the launch of a new blending facility.

"Mosaic has been indicating Brazil ag conditions remain challenging, but the new blending plant was expected to offset the weaker ag environment," Wong wrote. "Q3 may receive help from bad debt insurance recoveries, but the challenging ag environment in Brazil for distributors may impact Fertilizantes at least into 2026."

Wong reduced RBC's Q3/25 EBITDA estimate to US$199 million (from US$218 million), below the company's previous guidance of more than US$200 million.

"The upside case remains compelling, but requires much better execution," Wong wrote. "We continue to see phosphate prices remaining elevated long term given a tight S&D outlook. However, production issues have limited the company's ability to fully benefit from high phosphate prices."

Wong said the firm still sees a potential upside if Mosaic's production returns to full capacity in a constrained phosphate market — raising production forecasts to full capacity and increasing RBC's EBITDA estimates by +10%. It could also lead to a re-rating of the multiple.

"However, we think this scenario will require much better execution and at least several quarters of production to win back investor confidence," the analyst wrote.

Valuation Thesis

Wong said RBC arrived at its US$30 price target by giving equal importance to its sum-of-the-parts (SOTP) EV/EBITDA and discounted cash flow (DCF) valuation. The SOTP EV/EBITDA analysis applies a 5.0x multiple to the 2026 EBITDA projections for the Potash, Phosphate, and Fertilizantes divisions. These multiples are lower than historical norms due to a preference for nitrogen and potash over phosphate, as well as recent challenges in phosphate production.

Potential Catalysts

Phosphate operations are poised to improve with significant reliability upgrades and equipment updates during recent overhauls, Wong wrote. Production has been below expected levels in recent years, but the company aims to return to an 8 Mt run-rate as operations stabilize.

Increased production will likely lead to reduced per tonne operating costs as fixed expenses are distributed over larger volumes. Potash costs should benefit from the ramp-up of the Esterhazy hydrofloat project in 2025. This project is expected to boost production by 400 Kt (kilotons) at Esterhazy, Mosaic's most cost-effective mine, and expand granulation capacity, enabling the production of higher-priced granular products.

Mosaic has invested in several moderate growth initiatives, including biologicals, MicroEssentials PRO, and additional distribution capacity in Brazil. The company anticipates these projects will contribute incremental growth over the coming years, Wong said.

The analyst noted that he expected Mosaic to generate substantial free cash flow, supporting plans for ongoing share repurchases and growth opportunities, such as increased MicroEssentials capacity, expanded Esterhazy potash capacity, and a new blending facility in Brazil.