The Mosaic Company: A guide and comprehensive analysis

The Mosaic Company: A guide and comprehensive analysis (Part 1 of 9)

The Mosaic Company: An investor’s guide to MOS’s business

The Mosaic Company

The Mosaic Company (MOS), headquartered in Plymouth, Minnesota, is the largest combined phosphate and potash producer in the world. These are two of the primary crop nutrients required for plant growth, while nitrogen is the third. Mosaic mines, processes, and distributes its own products. As of May 2013, Mosaic produces 7.8 million tonnes of phosphate, which accounts for 12% of global phosphate production, and 8.2 tonnes of potash, which accounts for 13% of global potash production. For interested investors, it’s worthwhile to note that Mosaic has changed its fiscal year to end in December 31 from May 31, starting in 2013.

World's Largest P+K CompaniesEnlarge Graph

Main competitors

Mosaic’s main competitors include CF Industries Holdings (CF), PotashCorp (POT), Agrium (AGU), Intrepid Potash (IPI), and Sociedad Quimica y Mindera de Chile (SQM) in the U.S. Internationally, companies like Uralkali (URKA) in Russia, Belaruskali in Belarus, and Israel Chemical (ICL) in Israel represent the biggest players in the industry. These companies account for a significant part of product supply. But some companies are able to influence product prices through production cuts and layoffs.

Revenue segments

With annual sales of around $10 billion, Mosaic has set itself up as an industry leader. As stated in the company’s filings of 2013 (May 31), phosphate sales represent around 65% of revenue (38% of earnings), while potash sales account for 35% (62% of earnings). The company has diversified itself internationally, with almost 70% of its sales outside the U.S. The company is present in approximately 40 countries, including Brazil (19%), India (13.5%), Canada (7%), and Australia (2.7%).

The importance of price

Phosphate and potash are global commodities that are sold by negotiated contracts or by reference market prices. These can vary significantly from year to year based on industry supply and demand. To a large extent, market prices are out of the scope of producers’ control—although producers could adjust production to support price declines. For the past few years, prices for these products have been decreasing, causing Mosaic’s sales to dramatically decrease and thereby directly damaging the MOS stock price.

The Realist Discussions

  • Joe

    Well written. Thanks for the thought provoking article.