Mosaic Company (The)

Good morning, and welcome to the Mosaic Company's fourth quarter and full year 2025 earnings conference call. At this time, all 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'll turn it over to 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 Ciani-Perez, Executive Vice President and Chief Financial Officer, will review financial results and capital allocation progress. We will then welcome Jenny Wong, 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. The 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 ton, 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'd like to turn the call over to Bruce.

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 Mosaic throughout the year. We asked a lot of our people, and they responded with tremendous effort. The 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 Luciana 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 position Mosaic 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 non-core assets, Patos de Minas and Tecori, 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 uncertainty 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 timeframe is possible and could place additional strain on logistics capabilities. While overall North America potash and phosphate shipments declined in 2025, Mosaic'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, and 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 base 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'll 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 Mesquimayo. 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 1.7 million tons in the fourth quarter, even with an extended turnaround at our BARTO facility, as well as deliberate steps to adjust production amid soft U.S. demand. We're off to a strong start this year, and we expect to produce at least 7 million tons of phosphate in 2026. In potash, we're back at full operating rates at esterhazy since the tragic fatality in December, and our hydroflow project is ramping up. We expect to achieve record production at Esther Hazy 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 million 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 phosphate and mosaic for lasagne segments well into the first half of 2026, we moved quickly to protect margins and profitability. We have idled Ayrshire and Fosbar 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. We 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 water mark 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 Collance, which carries higher costs. At Mosaic for Lizanche's, blended rock cost per ton reached $97, the lowest level since 2021. We achieved our $150 million 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 million 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 million ton blending facility in Pomerantse 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 million. Looking ahead to 2026, our expectation of continued adoption across our current portfolio, along with 8 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 million in proceeds over time and also allow for a reduction of $60 million 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 modern equity is currently valued at about $2.1 billion. Looking ahead to 2026, we expect progress on multiple fronts. We're pursuing strategic alternatives for selected Brazilian assets, including unlocking incremental value from coproducts, 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 $1.5 billion, higher than 2025 due to mine, jib 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 million, 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 billion by 2030, with ARO and environmental reserve cash spending also declining to about $200 million by 2030. Now, I'll turn the call over to Luciano. Luciano?