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3 Key Takeaways From Mosaic Company’s Q1 Earnings Report Image source: Mosaic Company

3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

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Page 1: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Image source: Mosaic Company

Page 2: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Mosaic released its first-quarter earnings last week, reporting 19% and

13% year-over-year drops in its revenue and net income, respectively.

Beyond those numbers, here are three key takeaways from Mosaic’s earning report that you must know.

Page 3: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Fertilizer markets are in bad shape1

Page 4: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Numbers to note

NutrientSales volumes (in million tonnes)

Actual 2015 2016 previous projection

2016 revised projection

Phosphate 9.4 9-10 9-9.75

Potash 7.9 7.5-8.5 7.5-8

While Mosaic doesn’t give out full-year revenue or profit guidance, it lowered its sales volumes estimates in Q1.

Data source: Company financials

Page 5: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Why the lower outlookChina: No contracts for the year from the largest

potash consuming nation yet.India: Lower subsidies, drought conditions, and

unfavorable exchange rates hurting demand.Brazil: Weak demand due to economic turmoil. North America: Slow start to the spring planting

season, supply glut.The four markets account for nearly 70% of the

world’s total fertilizer consumption.

Page 6: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Costs are trending

lower2

Page 7: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Tight grip over expenses

Page 8: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Numbers to noteMosaic lowered its selling, general, and

administrative expenses by 10% year over year to $90 million in Q1.

Mosaic also improved its full-year SG&A expenses guidance to $340 million-$360 million from $350 million-$370 million.

Page 9: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Why it matters With margins under pressure, lower costs should help

offset some of the weakness in sales going forward.

Page 10: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Cash flows under

pressure? 3

Page 11: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Numbers to note

Mosaic generated only $30 million and $338 million in free cash flow during Q1 and the past twelve months, respectively.

MOS lowered its 2016 capital expenditures guidance by $100 million-$200 million in Q1. However, that may not boost FCF if profits decline substantially.

Page 12: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Key point to noteDividends paid > FCF by a gaping margin

Page 13: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

Despite deteriorating market conditions, Mosaic remains free cash flow positive and is doing a

good job curtailing expenses. These factors should help Mosaic get back on the growth track once

end markets rebound.

Foolish bottom line

Page 14: 3 Key Takeaways From Mosaic Company’s Q1 Earnings Report

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