The Mosaic Company: Mosaic Announces 2021 Second Quarter Earnings Release (opens in a new window)

		The Mosaic Company
		101 E. Kennedy Blvd., Suite 2500
		Tampa, FL 33602
		www.mosaicco.com
FOR IMMEDIATE RELEASE
Media	Investors	Investors
Ben Pratt	Laura Gagnon	Paul Massoud
The Mosaic Company	The Mosaic Company	The Mosaic Company
813-775-4206	813-775-4214	813-244-0669
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THE MOSAIC COMPANY REPORTS SECOND QUARTER 2021 RESULTS

TAMPA, FL, August 2, 2021 - The Mosaic Company (NYSE: MOS), reported net income of $437 million, or $1.14 per diluted share, for the second quarter of 2021. Adjusted EPS(1) was $1.17 and adjusted EBITDA(1) was $829 million. Gross margin was $752 million compared to $257 million a year ago, reflecting improved per tonne margins in all three operating segments as a result of higher prices and transformation benefits, partially offset by lower volumes. Reported earnings were negatively impacted by notable items of $27 million.

"Mosaic's results for the second quarter of 2021 highlight the benefits of our transformation efforts in a strong pricing environment," said Joc O'Rourke, President and CEO. "Underlying agricultural markets remain constructive, and this is driving demand for fertilizer. The second half of 2021 is expected to be one of our strongest periods in more than a decade."

Highlights:

• Second quarter revenues were up 37 percent year-over-year to $2.8 billion, as stronger pricing more than offset lower volumes.
• Gross margins in the quarter were up 193 percent from the prior year period, primarily as a result of year-over- year price increases. The gross margin rate in the quarter was 26.9 percent, up from 12.6 percent in second quarter of 2020 and the highest gross margin rate since the first quarter of 2013.
• The company generated $1.0 billion in cash flow from operations during the quarter, or $718 million after subtracting capital expenditures.
• Third quarter phosphate and potash segment sales are approximately 90 percent committed and priced.
• • Phosphate average realized prices in the third quarter are expected to be $90 to $100 per tonne higher than prices realized during the second quarter. Raw material costs in the third quarter are expected to

increase $15 to $25 per finished tonne above second quarter costs.

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

• • Potash average realized prices are expected to be $25 to $35 per tonne higher than second quarter realized prices.
• Mosaic's balance sheet continued to strengthen. Net debt as of June 30 totaled $3.0 billion, down $1.1 billion from the year ago period and included unrestricted cash and cash equivalents of $1.4 billion. In August, the company is proceeding with the early retirement of $450 million of long-term debt that matures in November 2021.
• Capital expenditures were $297 million in the second quarter. Full year capital expenditures are expected to increase from $1.1 billion to approximately $1.2 billion as the company further accelerates the ramp up of the Esterhazy K3 potash project and takes advantage of high returning growth opportunity projects.
• Phosphates sales volumes were down 11 percent year-over-year to 2.0 million tonnes as sales were limited by production. Segment revenues over the same period were up 54 percent as a result of strong price increases. Improved pricing, partially offset by higher raw material and conversion costs, resulted in gross margin increasing to $156 per tonne, up from last year's $7 per tonne. Sulfur availability negatively impacted production volumes, which totaled 1.8 million tonnes in the second quarter, but this issue has been resolved with the recovery of U.S. Gulf refinery operating rates. Production volumes in the second half of 2021 are expected to return to normal levels.
• Potash sales volumes of 2.3 million tonnes in the second quarter, down 9 percent year-over-year, were negatively impacted by rail issues that slowed Canpotex sales. In early June, Mosaic shut down its K1 and K2 shafts, accelerated the shift of ore production to the new K3 project at Esterhazy, and began the process to restart operations at Colonsay. The company now expects the net negative impact to sales volumes to be approximately 500,000 tonnes in the second half of 2021, down from the original estimate of 800,000 tonnes. As a result of strong demand and limited supply, average MOP prices, fob mine, in the second quarter were up $61 per tonne year-over-year and up $43 per tonne from the first quarter of 2021. Gross margin per tonne in the second quarter was $93, or $100 per tonne excluding the notable costs related to the accelerated depreciation of K1 and K2.
• Mosaic Fertilizantes recorded net sales of $1.0 billion in the second quarter of 2021, up 32 percent from the year ago period, as higher prices offset an 8 percent decline in volumes. In the quarter, Mosaic Fertilizantes generated a gross margin per tonne of $78, or $81 per tonne on an adjusted basis, primarily due to higher prices. The business is ahead of schedule in reaching its targeted $200 million of annual EBITDA contribution from transformation in the 2019 to 2022 period.
• The company released its annual sustainability report noting progress on meeting its 2025 environmental targets, reporting reductions of freshwater use and GHG emissions since our baseline year of 18% and 10%, respectively.

Second Quarter Segment Results
Potash Results*	2Q 2021	1Q 2021	2Q 2020
Sales Volumes million tonnes	2.3	2.0	2.6
MOP Selling Price(2)	$243	$200	$182
Gross Margin (GAAP) per tonne	$93	$71	$51
Adjusted Gross Margin (non-GAAP) per tonne	$100	$82	$60

*Tonnes = finished product tonnes

1. Average MOP Selling Price (fob mine)

Net sales in the Potash segment totaled $663 million for the second quarter, up from $555 million one year ago, due to higher prices partially offset by lower volumes. Gross margin for the second quarter was $217 million compared to $132 million for the same period a year ago.

MOP cash costs excluding brine management costs, were $62 per tonne, compared to $56 per tonne in the prior year quarter. Cash costs per tonne were negatively impacted by lower operating rates and the strengthening of the Canadian dollar. Esterhazy idle plant costs related to the closure of K1 and K2, included in costs of goods sold, totaled $7 million, but these costs are expected to be eliminated as K3 ramps up to full production. Brine management cash costs in the quarter were $13 million. With the closure of K1 and K2, brine management costs will no longer be reported. Closure costs for Esterhazy K1 and K2 were $158 million in the quarter, primarily reflecting asset write-downs.

Mosaic now expects the net production impact of the closures to be approximately 700,000 tonnes, which is 300,000 tonnes lower than earlier estimates and reflects the acceleration of the completion of the second production hoist at K3 and the restart of Colonsay. The expected impact to sales in 2021 has now been lowered to approximately 500,000 tonnes.

Mosaic Fertilizantes Results*	2Q 2021	1Q 2021	2Q 2020
Sales Volumes million tonnes	2.3	2.1	2.6
Brazil MAP Selling Price(3)	$589	$421	$314
Average Finished Product Selling Price (destination)	$442	$370	$308
Gross Margin (GAAP) per tonne	$78	$50	$39
Adjusted Gross Margin (non GAAP) per tonne	$81	$50	$39

*Tonnes = finished product tonnes

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

Net sales in the Mosaic Fertilizantes segment were $1.0 billion for the second quarter, up from $787 million in the prior year period due to higher year-over-year prices. Gross margin was $185 million, compared to $101 million for the same period a year ago, as improved pricing and transformation benefits were partially offset by inflationary pressures on production costs and unfavorable foreign currency impacts.

Lower reported sales volumes were the result of limited inventories, lower operating rates, and an increase in produced volumes sold through the company's own distribution system. The mined volumes and conversion plant operating rates were impacted by turnarounds in the second quarter, which also impacted cost per tonne metrics. The company expects both operating rates and mined volumes to revert to normal levels in the second half of 2021.

Phosphates Results*	2Q 2021	1Q 2021	2Q 2020
Sales Volumes million tonnes	2.0	2.1	2.2
DAP Selling Price(4)	$544	$426	$287
Gross Margin (GAAP) per tonne	$156	$84	$7
Adjusted Gross Margin (non-GAAP) per tonne	$156	$84	$12
*Tonnes = finished product tonnes
(4) Average DAP Selling Price (fob plant)

Net sales in the Phosphates segment were $1.2 billion for the second quarter of 2021, up from $762 million in the prior year period due to higher year-over-year prices partially offset by lower volumes. Gross margin was $309 million, compared to $18 million for the same period a year ago, as improved pricing and transformation benefits were partially offset by lower volumes and higher raw material costs. Gross margin per tonne was $156 compared to $7 in the prior-year period.

Production of finished phosphates totaled 1.8 million tonnes, reflecting previously disclosed sulfur availability issues in the first half of 2021. This issue has been resolved, and we expect normal production operating rates in the third and fourth quarters. Finished product inventories remain low, and we expect our sales to be roughly in line with production in the second half of 2021.

While the spot price of ammonia in the quarter was $530 per tonne, up $296 per tonne over the prior year period, Mosaic's realized cost used in production was $382 per tonne, up $93 per tonne, reflecting the benefits of internal production and the long-term, natural gas-based CF contract. Roughly one third of our ammonia consumption is purchased on the spot market, providing us with a competitive advantage. The company has given CF notice that it intends to increase purchase volumes under the contract in the second half of 2021.

Higher cash costs in the segment are primarily the result of near-term volume declines. The increase in U.S. mined rock cash costs reflected lower volumes as a result of moving to new mining areas at South Fort Meade. Cash conversion cost increases primarily related to the volume impact of sulfur constraints during the quarter.

Other

Selling, general and administrative costs (SG&A) were $108 million, up from $95 million in the year-ago period, which primarily reflected spending on our strategic priorities, including transformation and technology projects.

Total Asset Retirement Obligation cash spending in the quarter was $41 million, which continued to reflect spending related to the Plant City closure.

The effective tax rate during the quarter was 20.7 percent, reflecting the benefits of strong phosphate earnings in the U.S. Tax jurisdiction. The company expects an effective rate for full year 2021 in the mid-20 percent range under current tax regulations.

2021 Market Outlook and Key Assumptions

Strong agricultural trends driving demand for fertilizers are expected to continue through the second half of 2021 and beyond. Grower economics in most global growing regions remain attractive as a result of strong crop demand, higher priced but still affordable inputs, and favorable weather. In three of the four major fertilizer markets, North America, Brazil and China, domestic crop prices continue to incent nutrient application to drive higher yields. In the fourth country, India, a normal monsoon and good crop prices are incenting growers to maximize yields. However, supply may be limited by importer economics, where margins are negative given the market prices, current subsidy, and the government set retail price. India shipments are likely to remain constrained until the situation changes. However, even with recent lower shipments to India, global markets are expected to remain tight.

Phosphate producer and channel inventories remain well below normal levels. While Chinese phosphate exports were up

2.1 million tonnes in the first half of 2021 to meet the strong global demand, China's National Development and Reform Commission has requested phosphate producers stop exporting to focus on supplying domestic needs. We currently expect 2021 exports to end the year down from 2020 levels. Recent industry restructuring is expected to further limit supplies available for export beyond 2021.

Approximately 90 percent of phosphate and potash segment sales expected to be realized in the third quarter are already priced. In phosphates, the company expects to realize $90 to $100 per tonne average realized price improvement in the third quarter over the second quarter, all related to increasing market prices and reflecting approximately a 60-day lag between visible market prices and price realization. Raw material costs are expected to increase $15 to $25 per finished tonne in the third quarter from the second quarter. Potash prices in the third quarter are expected to be $25 to $35 above second quarter average realized prices.