Mosaic : Reports Third Quarter 2020 Results

The Mosaic Company

101 E. Kennedy Blvd., Suite 2500 Tampa, FL 33602 www.mosaicco.com

FOR IMMEDIATE RELEASE
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Ben Pratt	Laura Gagnon
The Mosaic Company	The Mosaic Company
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THE MOSAIC COMPANY REPORTS THIRD QUARTER 2020 RESULTS

TAMPA, FL, November 2, 2020 - The Mosaic Company (NYSE: MOS), reported a net loss of $6 million, or $0.02 per share, for the third quarter of 2020. Adjusted EPS(1) was $0.23 and adjusted EBITDA(1) was $438 million. Gross margin was $355 million compared to $280 million a year ago, an increase of 27 percent, as a 3 percent increase in finished goods sales volumes and improved costs offset the impact of lower year-over-year prices in all three segments. Reported earnings were negatively impacted by notable items of $93 million after tax, or $0.25 per share, of which $68 million, or $0.17 per share, resulted from noncash charges from an annual review of estimated future phosphate asset retirement obligations and an environmental remediation reserve.

"Mosaic's results for the third quarter continue to reflect the positive impact of our transformation work, which drove earnings growth despite year-over-year realized price declines," said Joc O'Rourke, President and Chief Executive Officer. "Prices and demand for our products are recovering in 2020, positioning us to benefit from strong price realization in the fourth quarter in addition to our improved cost profile. With improving grain and oil seed prices and limited inventories of fertilizer in all channels, we expect strong business conditions to continue into 2021."

Highlights:

• Unrestricted cash totaled $923 million as of September 30. The company generated $341 million in cash flow from operations in the quarter, and lowered short-term debt by $389 million.
• • Subsequent to quarter end, the company repaid over $200 million in short-term debt, completing the repayment of all borrowings incurred in the first quarter of 2020.
  • In July, the company increased the capacity under its corporate revolver from $2.0 billion to $2.2 billion and extended the maturity by one year to November 18, 2022. At quarter end, Mosaic had a liquidity position in excess of $3 billion.

(1)See "Non-GAAP Financial Measures" for additional information and reconciliation.

• Total sales volume in the third quarter was 3 percent higher than the same period one year ago.
• • Mosaic Fertilizantes recorded its highest quarterly sales volumes since Mosaic acquired Vale's fertilizer production assets. Year-to-date Mosaic Fertilizantes volumes are up 17 percent.
  • Phosphates sales volumes were down 6 percent year-over-year due to inventory limitations resulting from a very strong spring season. During the quarter, planned turnarounds and severe weather negatively impacted third quarter 2020 production volumes, and together with continued customer demand, limited the company's ability to rebuild inventory levels. As a result, a portion of tonnes produced and committed late in the third quarter will instead be shipped in the fourth quarter. Year-to-date volumes were up 1 percent.
  • Potash sales volume of 2.3 million tonnes in the third quarter was down 2 percent year-over-year due to timing, as seasonal sales in North America and Brazil occurred earlier in 2020 than 2019. Year-to-date volumes were up 6 percent.
  • Performance products, including MicroEssentials®, Aspire®, and K-Mag® were 13 percent of total sales volumes in the third quarter, down slightly from 14 percent in the prior year period.
• The company continues to transform its cost structure. After achieving five of seven 2021 cost targets in the second quarter, the company announced new targets for 2023 on September 18.
• • Mosaic Fertilizantes remains on track to exceed its full year transformation target of $50 million.
  • Cash costs of MOP production, excluding brine costs, were $52 per tonne in the third quarter, down from $61 in the prior year period as the company continues to shift production to its new, low-cost Esterhazy K3 facility and transform overall operations.
  • Cash costs of brine management in the quarter were $16 million, down from $24 million in the year ago period. These costs are expected to be eliminated by 2022.
  • Phosphates' cash conversion and mining costs per tonne were flat with last years' quarter, as turnarounds and weather-related slowdowns negatively impacted volumes. Total fixed costs in the third quarter, however, were down 8 percent year-over-year, as a result of continued cost structure improvement under the business unit's transformation program.
• Mosaic filed petitions seeking countervailing duties on phosphate fertilizer imports to the U.S. from Morocco and Russia on June 26. The Department of Commerce is expected to publish its preliminary findings as to subsidies and any preliminary duties by November 23, and the company expects the final determinations of the Department of Commerce and the International Trade Commission to be issued in the first quarter of 2021.
• As Covid-19 continues to impact the global economy, agriculture and food security remain global priorities resulting in limited impact to agricultural inputs, including fertilizer and its supply chains. Mosaic's response to the pandemic has continued to be effective in limiting its impacts on our operating facilities, employees, supply chain and logistics.

Capital expenditures totaled $265 million in the quarter, down from $322 million in the prior year period. Mosaic's total cash and cash equivalents, excluding restricted cash, were $923 million compared with $641 million a year ago, and net debt decreased to $3.9 billion at the end of the quarter, from $4.1 billion at June 30, 2020.

Third Quarter Segment Results
Potash Results*	3Q 2020	2Q 2020	3Q 2019
Sales Volumes million tonnes	2.3	2.6	2.3
MOP Selling Price(2)	$170	$180	$235
Average Finished Product Selling Price (destination)	$205	$217	$266

*Tonnes = finished product tonnes

1. Average MOP Selling Price (fob mine)

Net sales in the Potash segment totaled $464 million for the third quarter, down from $616 million one year ago, due to lower sales prices. Gross margin for the third quarter was $108 million compared to $158 million for the same period a year ago. The decrease reflects a $65 per tonne decline in MOP selling prices, partially offset by lower production costs and resource taxes.

Actions taken to optimize production and accelerate development of our Esterhazy K3 project drove net cash costs of production excluding brine management costs to $52 per tonne compared to $61 in the year-ago period.

Mosaic Fertilizantes Results*	3Q 2020	2Q 2020	3Q 2019
Sales Volumes million tonnes	3.6	2.6	3.4
Brazil MAP Selling Price(3)	$366	$314	$406
Average Finished Product Selling Price (destination)	$318	$308	$405

*Tonnes = finished product tonnes

1. Average MAP selling price (Brazil production, delivered price to third party customers)

Mosaic Fertilizantes achieved record quarterly sales volumes of 3.6 million tonnes, reflecting ongoing strength in Brazilian agricultural economics. Net sales in the Mosaic Fertilizantes segment were $1.1 billion for the third quarter, down from $1.4 billion in the prior year period due to lower year-over-year prices, partially offset by stronger sales volumes. Gross margin was $177 million, compared to $132 million for the same period a year ago, as lower costs and higher volumes offset the impact of lower year-over-year prices.

Cash costs of phosphate rock production per tonne were R$324 in the quarter, higher than second quarter 2020 or third quarter 2019, as the volumes were impacted by turnarounds and the mix of mining temporarily shifted to higher cost

mines. Cash costs of phosphate conversion per tonne were R$302 in the third quarter, down from R$351 in the year ago period.

Mosaic will provide a detailed update on the segment during the November 9, 2020 Mosaic analyst presentation.

Phosphates Results*	3Q 2020	2Q 2020	3Q 2019
Sales Volumes million tonnes	2.1	2.2	2.2
DAP Selling Price(4)	$307	$287	$310
Average Finished Product Selling Price (destination)	$354	$338	$355
*Tonnes = finished product tonnes
(4) Average DAP Selling Price (fob plant)

Phosphates gross margin per tonne improved to $11 from negative $10 in the prior year period, as lower DAP selling prices were more than offset by lower raw material costs, primarily sulfur, and lower production costs. Globally, phosphate prices declined through the second quarter before rebounding in the third quarter. As sales prices are typically set 45 to 60 days in advance of delivery, approximately 60 percent of sales recognized in the third quarter were priced below $300 per tonne. As prices recovered during the third quarter, Mosaic's gross margin per tonne increased, reaching $27 per tonne in the month of September.

Other

Selling, general and administrative costs (SG&A) were $98 million, up from $78 million in the year-ago period, due to higher costs related to executing our strategic priorities, as well as higher incentive compensation as a result of improved performance. The company expects SG&A expenses to end 2020 approximately $10 to $15 million above its stated target.

Other operating expenses in the quarter were $159 million, compared to $62 million in the third quarter of 2019, and included the following non-cash notable expenses: a $73 million increase to the Phosphates asset retirement obligation (ARO) reserve from changed assumptions related to future spending, and a $35 million increase to an environmental remediation reserve. Total Phosphates ARO cash spending in the quarter was $28 million.

Tax

While cash taxes are expected to be approximately zero in 2020, the effective rate for full year 2020 is expected to be in the mid-to-high 50 percent range due to the mix of earnings by jurisdiction. The full year effective tax rate for 2021 is expected to be in the mid-30 percent range under current tax regulations.