The Mosaic Company (MOS) Earnings

Management highlights

### Market Context & Near-Term Actions - Sulfur supply is severely disrupted by the ongoing Strait of Hormuz closure and Kazakhstan blockade, pushing spot sulfur prices to unsustainably high levels that make phosphate production uneconomical for much of the global industry. Mosaic has curtailed phosphate production in the U.S. and Brazil to preserve margins and avoid building high-cost inventory. - Global phosphate production is expected to fall by up to 30 million tons year-over-year due to sulfur constraints, combined with severely reduced Chinese export volumes. Mosaic maintains an advantage over peers via long-standing supplier relationships that secured Q3 U.S. sulfur supply at prices well below spot market levels. - The potash market remains balanced with steady strong global demand, and long-term announced capacity expansions are expected to be absorbed by growing demand. ### Operational & Cost Management - Aggressive permanent cost cutting has reduced SG&A by 20% year-over-year in Q2, with further SG&A declines expected in H2 2026 from spending discipline, reduced labor costs, lower bad debt, and divestiture benefits. - Production curtailments are being managed to preserve asset health; facilities idled in stasis have deferred non-critical turnaround CapEx while maintaining required investments for long-term structural asset health. - Phosphate operating rates are currently constrained by sulfur supply: Bartow runs at ~40%, Louisiana facilities are fully offline, and New Wales and Riverview run at low-to-mid 70% utilization. Management can adjust facility utilization dynamically to optimize product mix for shifting demand. ### Capital Allocation & Portfolio Strategy - Mosaic fortified liquidity by extending short-term debt maturities via a new $1 billion term loan, maintaining an untapped $2.5 billion revolver for additional flexibility if market weakness persists. - Non-core asset divestitures are progressing: the Carlsbad sale has closed, and the process to divest the Ayrshire complex in Brazil and evaluate strategic options for Arishaw and Patrocinio is advancing. - Capital is reallocated from non-core underperforming assets to high-potential growth opportunities: the Rainbow Rare Earth Elements project in Brazil shows strong potential, and Mosaic Biosciences is a fast-growing resilient new business line.

Guidance

- For Q3 2026: Expected realized sulfur costs of $700 to $710 per ton, ammonia costs of $610 to $620 per ton, and DAP FOB pricing of $820 to $840 per ton, resulting in implied realized shipping margins that remain well above historical averages, despite sequential declines from Q2. Phosphate sales volume is guided to 1.1 to 1.4 million tons, down from 1.4 million tons in Q2. - Full-year 2026 capital expenditure is lowered to $1.2 billion from the prior guidance of $1.25 billion. - Working capital release for full-year 2026 remains guided to $300 to $500 million, with ~1/3 of the release expected in Q3 and ~2/3 in Q4, due to delayed customer prepayments in Brazil and curtailed production that eliminates inventory rebuild needs. Sequential free cash flow improvement is expected in Q3 and Q4 2026. - Potash unit production costs are expected to decline in H2 2026 from Q2's $84 per ton. - Management expects phosphate prices to hold at current levels, with limited global availability due to supply constraints. If current market conditions persist into Q4 2026, U.S. phosphate production levels will remain unchanged from Q3.

Segment performance

1. **Phosphate Segment**: Produced and sold 1.4 million tons in Q2 2026. In Q2, U.S. phosphate realized an average shipping margin of $422 per ton, with average raw material costs of $522 per long-ton for sulfur and $621 per ton for ammonia. Ongoing production curtailments have led to limited fixed cost absorption and elevated idle/turnaround expenses in Q2: $60 million of Q2 segment EBITDA included $30 million in idle costs and $30 million in turnaround costs. Q3 phosphate is expected to see ~$10 to $20 million additional idle/turnaround expenses compared to Q2. 2. **Potash Segment**: The summer fill program was fully subscribed, with strong demand globally and inventory replenishment in China supporting a constructive market outlook. Q2 MOP production costs were $84 per ton, weighted towards higher-cost Colonsi volumes; unit costs are expected to decline in H2 2026 following the completed annual turnaround at Esterhazy and new volume from the Hydrofloat project. Potash demand and pricing remain balanced and stable relative to volatile phosphate markets. 3. **Fertilizantes (Brazil)**: Generated $60 million of EBITDA in Q2 2026, demonstrating business resilience amid phosphate production curtailments (only high-margin products are currently produced due to sulfur constraints). Co-product revenue (half from gypsum, which can be sold from existing stockpiles without active production) covers all fixed and turnaround costs for curtailed production operations. Distribution margins are slowly improving, and Mosaic Biosciences is expected to contribute ~$12 million in margin from $30 million of Brazilian sales in Q3. 4. **Mosaic Biosciences**: On track to double annual revenues for 2026, with strong growth resilience even amid current challenging farm economics, reflecting proven grower demand for its products.

Risks & headwinds

- Sustained sulfur supply disruption from geopolitical events (Strait of Hormuz closure, Kazakhstan export blockades) keeps input costs at unsustainably high levels, forcing ongoing production curtailments and fixed cost absorption pressure. - North America and Brazil are projected to see 30% lower phosphate application than normal levels in 2026, driven by affordability, credit, and availability issues. This has led to cumulative soil nutrient removal of ~1.4 million tons DAP equivalent in North America and ~1.3 million tons DAP equivalent in Brazil, which is already causing visible yield impacts in Brazil and increases the risk of more severe yield impacts in 2026/2027, compounded by El Niño weather risks. - Persistently weak farmer affordability could delay a demand recovery even after supply constraints ease. - Higher international freight rates reduce netbacks for export volumes, pressuring margins. - Low customer prepayments in Brazil in Q2 shift cash collection to Q4, creating near-term timing pressure on working capital release.

Analyst Q&A

• Q: What is the outlook for phosphate consumption in North and Latin America, and what are the impacts of under-application? /

  A: Last year North America phosphate application was 15% below normal, and 2026 is projected to fall an additional 20%, putting full-year 2026 application over 30% below normal. Brazil saw normal application last year, but 2026 is also projected to see a large decline. Cumulative under-application has resulted in 1.4 million tons of additional phosphorus removal from U.S. soils and 1.3 million tons from Brazilian soils. Yield impacts from this under-application are already visible in Brazil, and are expected to become more evident in the U.S. this year, compounded by weather events.

• Q: What drives the expected Q3 profitability decline for Fertilizantes in Brazil, and what is the upside from improving crop prices? /

  A: Q3 Brazilian fertilizer volumes are expected to increase 600,000 to 800,000 tons quarter-over-quarter in line with historical seasonality, but volumes are constrained by curtailed commodity phosphate production due to sulfur availability issues, which drives lower profitability versus Q2. Half of coproduct revenue comes from gypsum sold from existing stockpiles, so coproduct margins still cover all fixed production costs even with curtailments. Distribution margins are slowly improving, and Mosaic Biosciences will add ~$12 million in contribution margin in Q3. Stronger recent buying activity driven by higher crop prices represents upside potential not currently baked into guidance.

• Q: What is driving Q3 phosphate ammonia cost guidance, and what is the impact on Q3 phosphate earnings? /

  A: Higher Q3 ammonia costs reflect the flow-through of recent contracted price increases, plus a production mix effect: lower output means a larger share of volume comes from higher-priced contracted supply, rather than internal production. Lower production also increases fixed cost absorption pressure that will be more pronounced in Q3 than Q2, when full curtailments were not yet in place. These factors will push Q3 phosphate margins lower sequentially, but margins will still remain well above historical averages.

• Q: How quickly can Mosaic ramp phosphate production back to normal rates if sulfur supply normalizes, and can it secure below-spot sulfur contracts in Q4 if the Strait of Hormuz remains closed? /

  A: Even if the Strait of Hormuz reopens quickly, other disruptions (refinery damage, Kazakhstan export restrictions) will take time to resolve, so a rapid return to full production is not expected. Mosaic secured below-spot Q3 sulfur prices due to long-term symbiotic relationships with U.S. Gulf Coast refiners, who value Mosaic's consistent base-load off-take. Management expects this favorable dynamic to continue into future quarters if the closure persists.

• Q: What is driving elevated inventory days, and what was the recent non-cash write-down? /

  A: The non-cash write-down was for a previously planned purified phosphoric acid project for battery cathode materials, which management has ruled out pursuing. Raw material inventory values have risen due to higher prices, but physical inventory volumes are trending down as lower production reduces raw material needs; finished goods phosphate inventory is already down to a healthy 600,000-700,000 tons from 1 million tons in Q4 2025. Overall physical inventory levels are trending down, with only price effects raising the nominal value of inventories.