The Mosaic Company: Mosaic Announces 2021 Third 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

MediaBen Pratt

The Mosaic Company [e-mail]

InvestorsPaul Massoud

The Mosaic Company [e-mail]

THE MOSAIC COMPANY REPORTS STRONG THIRD QUARTER 2021 RESULTS

• Third quarter net income of $372 million, adjusted EBITDA of $969 million
• Fourth quarter phosphate and potash realized prices expected to reflect material increases over the third quarter
• Repurchased 956,404 shares to date; raised 2022 annual dividend target by 50 percent; retired $450 million of long-term debt

TAMPA, FL, November 1, 2021 - The Mosaic Company (NYSE: MOS), reported net income of $372 million, or $0.97 per diluted share, for the third quarter of 2021. Adjusted EPS(1) was $1.35 and adjusted EBITDA(1) was $969 million. Gross margin was $865 million compared to $355 million a year ago, as all three operating segments benefited from higher prices and transformation efforts, partially offset by lower volumes. Reported earnings were negatively impacted by primarily non-cash notable items of $168 million.

"Mosaic's third quarter results were the strongest in more than a decade, as our business continues to realize the benefits of a favorable market amplified by our transformation efforts. From the acquisition and optimization of Mosaic Fertilizantes to the acceleration of our Esterhazy K3 potash mine and the recent restart of the Colonsay potash mine, Mosaic has evolved into a business that we believe can deliver results throughout the cycle," said Joc O'Rourke, President and CEO. "These efforts are generating significant free cash flow, which we are using to strengthen the balance sheet and invest in the business, while returning capital to investors."

Highlights:

• Third quarter revenues were up 44 percent year-over-year to $3.4 billion, as stronger pricing more than offset lower volumes. Gross margins in the quarter were up 143 percent from the prior year period. The gross margin rate in the quarter was 25.3 percent, up from 14.9 percent in third quarter of 2020.
• The company generated $423 million in cash flow from operations during the quarter. Year-to-date cash flow from operations totaled $1.8 billion. Cash and equivalents totaled $843 million as of September 30, 2021.
• Repairs to address the impacts of Hurricane Ida at our Louisiana phosphate plants and the mechanical failure at our New Wales facility have proceeded in line with early expectations. Louisiana operations have now been restored to normal operating levels, and repairs at New Wales are nearly complete. Operating rates in the phosphates segment are expected to reach normalized levels during the fourth quarter.

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

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• In October, the second production hoist at Esterhazy K3 entered service, one month ahead of schedule, and Colonsay successfully ramped up to its targeted annual run rate of approximately 1 million tonnes. Total potash production is expected to exceed recent historical levels by the end of the first quarter of 2022, as Esterhazy reaches full operation.
• Mosaic Fertilizantes achieved transformation benefits of $65 million in the third quarter. The segment has now exceeded its $200 million target, well ahead of 2023, by optimizing commercial positioning and addressing its cost structure. The North America business remains on schedule to reach its goal of a $500 million EBITDA benefit from transformation efforts by the end of 2023, having already achieved more than half through the third quarter of 2021.
• The company expects upward pricing momentum to continue, with about 90 percent of fourth quarter sales committed and priced, and some customers are now requesting commitments as far forward as the second quarter of 2022. Phosphate average realized prices in the fourth quarter are expected to be $55 to $65 per tonne higher than prices realized during the third quarter. Fourth quarter phosphate raw material costs per finished tonne are expected to be $5 to $10 higher than third quarter costs. Potash average realized prices are expected to be $110 to $130 per tonne higher than third quarter realized prices.
• The company continues to allocate capital across its three priorities:
• • Mosaic strengthened its balance sheet by retiring $450 million of long-term debt in August.
  • Mosaic's Board of Directors approved a 50 percent increase to the targeted annual dividend, to $0.45 per share, effective with the next declaration, which is expected to be in December 2021. The company also began to execute its recently expanded share repurchase program, repurchasing 956,404 shares at an average price of $35.72 per share through October 31.
  • Growth investment in the business is expected to total approximately $450 million in 2021, reflecting the acceleration of Esterhazy K3 development, reserve additions for a mine extension at South Fort Meade, and high returning opportunistic projects throughout the business. Capital expenditures were $340 million in the third quarter and are expected to total $1.3 billion for the full year.

Third Quarter Segment Results
Potash Results*	3Q 2021		2Q 2021		3Q 2020
Sales Volumes million tonnes	1.8		2.3		2.3
MOP Selling Price(2)	$290		$243		$170
Gross Margin (GAAP) per tonne	$131		$93		$48
Adjusted Gross Margin (non-GAAP) per tonne(1)	$131		$100		$56

*Tonnes = finished product tonnes

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

1. Average MOP Selling Price (fob mine)

Net sales in the Potash segment totaled $589 million for the third quarter, up from $464 million one year ago, due to higher prices partially offset by lower volumes. Gross margin for the second quarter was $236 million compared to $108 million for the same period a year ago.

Third quarter sales volumes were down 456,000 compared to the prior year quarter, reflecting low inventories and lower production volumes as a result of the June closure of the Esterhazy K1 and K2 shafts. Sales volumes are expected to return to more normal levels of approximately 2 million tonnes in the fourth quarter. In October, the second production hoist at Esterhazy K3 entered service, one month ahead of schedule, and Colonsay successfully ramped up to its targeted annual run-rate of approximately 1 million tonnes. Total potash production is expected to exceed recent historical levels by the end of the first quarter of 2022, as Esterhazy reaches full operation.

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MOP cash costs were $72 per tonne in the third quarter, compared to $52 per tonne in the prior year quarter, primarily reflecting the lower operating rate from both the early closure of Esterhazy K1 and K2 and the initial startup of Colonsay. Cash costs per tonne were also negatively impacted by the strengthening Canadian dollar.

Mosaic Fertilizantes Results*	3Q 2021		2Q 2021		3Q 2020
Sales Volumes million tonnes	3.4		2.3		3.6
Brazil MAP Selling Price(3)	$622		$589		$366
Average Finished Product Selling Price (destination)	$524		$442		$318
Gross Margin (GAAP) per tonne	$99		$78		$49
Adjusted Gross Margin (non GAAP) per tonne(1)	$98		$81		$49
*Tonnes = finished product tonnes

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

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

Net sales in the Mosaic Fertilizantes segment were $1.8 billion for the third quarter, up from $1.1 billion in the prior year period due to higher year-over-year prices, partially offset by lower volumes. Higher costs of goods sold reflect raw material cost increases, including purchased nitrogen and potash products for distribution, as well as sulfur and ammonia for phosphate production. Gross margin was $332 million, compared to $177 million for the same period a year ago, primarily as a result of improved pricing and transformation benefits, partially offset by higher raw material costs, inflationary pressures on production costs, lower volumes, and unfavorable foreign currency impacts.

Lower production volumes in phosphate mines combined with local currency inflation negatively impacted costs, but much of the impact was mitigated by transformation benefits. The company expects mined volumes to revert to normal levels in the fourth quarter, and conversion rates to remain above 90 percent.

Phosphates Results*	3Q 2021		2Q 2021		3Q 2020
Sales Volumes million tonnes	1.8		2.0		2.1
DAP Selling Price(4)	$605		$544		$307
Gross Margin (GAAP) per tonne	$198		$156		$11
Adjusted Gross Margin (non-GAAP) per tonne(1)	$208		$156		$11

*Tonnes = finished product tonnes

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

(4)Average DAP Selling Price (fob plant)

Net sales in the Phosphates segment were $1.3 billion for the third quarter of 2021, up from $745 million in the prior year period, due to higher year-over-year prices, partially offset by lower volumes. Gross margin was $364 million, compared to $22 million for the same period a year ago, as improved pricing was partially offset by lower volumes and higher raw material costs. Gross margin per tonne was $198 compared to $11 in the prior-year period.

Production of finished phosphates totaled 1.7 million tonnes, down 15 percent year-over-year, and sales volumes totaled 1.8 million tonnes, down 11 percent year-over-year, reflecting a 70 percent operating rate as a result of the previously announced impact of Hurricane Ida and an equipment failure at New Wales. Operations in Louisiana have been restored to full capacity rates and repairs at New Wales are nearly complete. Looking ahead, we expect fourth quarter sales to be in the range of 1.8 to 1.9 million tonnes, in line with production, and returning to normalized levels in early 2022.

The price of ammonia realized in cost of goods sold increased to $424 per tonne during the quarter, up $151 per tonne from the prior year period. The realized cost was well below the $608 per tonne average spot price in the quarter reflecting the benefits of internal production and the long-term, natural gas-based CF Industries ammonia contract. Roughly two-thirds of our ammonia consumption reflect production economics, providing us with a

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competitive advantage. The company is receiving the maximum volume of ammonia, approximately 720,000 tonnes per year, under the CF contract.

Cash costs of conversion in the segment totaled $68 per tonne, up from $63 per tonne in the prior year period, reflecting the quarter's lower operating rate. Cash costs of mined rock were $41 per tonne up from $39 per tonne in the prior year period due to turnarounds.

Other

Selling, general, and administrative costs (SG&A) were $98 million, flat from the year-ago period, and include continued spending on our strategic priorities, including transformation and technology projects.

Total Asset Retirement Obligation cash spending in the quarter was $38 million, which continued to reflect spending related to the Plant City closure.

The effective tax rate during the quarter was 31.9 percent, reflecting the shift in earnings in the quarter toward higher tax jurisdictions. The company expects an effective rate for full year 2021 in the mid-20 percent range under current tax laws and regulations.

Market Outlook and Key Assumptions

Strong agricultural commodity pricing trends are expected to continue driving demand for fertilizers through the end of the year and into 2022. Rising input costs have narrowed grower profitability, but farmer economics in most global growing regions remain attractive as a result of strong crop demand and favorable weather. In North America, Brazil and China, domestic crop prices continue to justify nutrient application to drive higher yields, while in India, the recently increased government subsidy rate for fertilizer is expected to improve importer economics and increase availability of phosphates.

China's domestic phosphate industry is undergoing significant change as growing industrial phosphate demand competes with agricultural applications. Through the first nine months of 2021, China's phosphate exports totaled 10 million tonnes, up 45% from the prior year period, but exports are expected to slow in the fourth quarter and into 2022 as a result of the directive from China's National Development and Reform Commission limiting new export commitments in order to ensure adequate supply is available for China's domestic demand. We expect fourth quarter exports to be down from last year, leaving total 2021 exports to end the year up 1.0 to 1.5 million tonnes from 2020 levels.

In potash, low inventories in India, down 59% year over year, and China, down 26% year over year, suggest the potential for early settlement of contracts for 2022. In the U.S. and Brazil, demand remains solid though we expect the pace of growth to slow in 2022. In Southeast Asia, strong palm oil prices are expected to drive significant demand growth.

Approximately 90 percent of expected fourth quarter phosphate and potash segment sales are already priced. In phosphates, the company expects to realize fourth quarter price improvements of $55 to $65 per tonne over the third quarter. Fourth quarter per tonne raw material costs are expected to be $5 to $10 higher than the third quarter. Potash prices in the fourth quarter are expected to be $110 to $130 per tonne higher than third quarter average realized prices.

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The company provided the following modeling assumptions for the full year 2021:

Modeling Line Items	Full Year 2021
Depreciation, Depletion & Amortization	$800 - $820 million
Selling, General, and Administrative(1)	$390 - $410 million
Net Interest Expense	$160 - $170 million
Effective tax rate(2)	Mid 20's %

(1)Mark-to-market adjustments on equity-based incentive compensation may drive further changes to SG&A expectations.

(2)The company expects cash taxes for the full year 2021 to be approximately $215 million, dependent upon earnings levels and geographic mix.

Capital Expenditures Expectations	$ in Billions
Sustaining Capital	$0.80-$0.85
Growth Capital	$0.45
Total Capital	~$1.3
.

Sensitivities Table Using 2020 Cost Structure

The company provided the following sensitivities to price and foreign exchange rates to help investors anticipate the potential impact of movements in these factors.

These sensitivities are based on 2020 adjusted EBITDA of $1.56 billion. The company hedges approximately 50 percent of its Brazilian real exposures over time.

Sensitivity	Full year adj. EBITDA impact(1)	2020 Actual
Average MOP Price / tonne (fob mine)(3)	$10/mt price change = $65 million (2)	$181
Average DAP Price / tonne (fob plant)(3)	$10/mt price change = $105 million	$310
Average BRL / USD	0.10 change, unhedged = $13 million(4)	5.15
Average CAD / USD	0.01 change, unhedged = $13 million	1.35

1. See "Non-GAAP Financial Measures" for additional information and reconciliation.
2. Includes impact of Canadian Resource Tax
3. Approximately 20% of DAP price sensitivity impact is expected to be in the Mosaic Fertilizantes segment.; approximately 5% of the MOP price sensitivity impact is expected to be in the Mosaic Fertilizantes segment.
4. The company hedged about 50 percent of the annual sensitivity. Over longer periods of time, inflation is expected to offset a portion of currency benefits.

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