The Mosaic Company — FY2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter report. Mosaic produces and markets phosphate and potash crop nutrients and related products through its Phosphates, Potash, and Mosaic Fertilizantes segments, serving customers in approximately 40 countries. The supplied filing text does not provide a clear standalone Q4 financial summary.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $12.36 billion | $8.68 billion |
| Gross margin | $3.20 billion; 25.9% of sales | $1.06 billion; 12.3% of sales |
| Operating earnings | $2.47 billion | $412.9 million |
| Net earnings attributable to Mosaic | $1.63 billion | $666.1 million |
| Diluted EPS | $4.27 | $1.75 |
| Cash from operations | $2.19 billion | $1.58 billion |
| Capital expenditures | $1.29 billion | $1.17 billion |
| Cash and cash equivalents at year-end | $769.5 million | $574.0 million |
| Long-term debt, including current maturities | $3.98 billion | $4.58 billion |
Net sales rose 42% year over year, while gross margin increased substantially as higher fertilizer selling prices more than offset higher input and operating costs. Net earnings comparisons also reflect unusual tax items: FY2020 included a $609 million discrete tax benefit, while FY2021 had a $597.7 million income tax provision. FY2021 operating cash flow included a $629.7 million unfavorable working-capital change, principally from receivables and inventories, partly offset by payables and accrued liabilities.
At year-end, current assets were $5.33 billion and current liabilities were $4.79 billion. In addition to long-term debt, Mosaic reported $302.8 million of short-term debt and $743.7 million of structured accounts payable arrangements. The company had $2.49 billion available under its $2.5 billion revolving credit facility.
Material changes and segment performance
- Phosphates: Net sales increased 58% to $4.92 billion; gross margin rose to $1.31 billion from $125.5 million. Average finished-product selling price increased 72% to $618 per tonne, while finished-product sales volumes fell 10% to 7.7 million tonnes. Sulfur constraints and Hurricane Ida affected production.
- Potash: Net sales increased 30% to $2.63 billion; gross margin rose 126% to $1.06 billion. Average finished-product selling price increased 49% to $321 per tonne, but sales volumes fell 13% to 8.2 million tonnes, mainly reflecting the early closure of Esterhazy K1 and K2.
- Mosaic Fertilizantes: Net sales increased 46% to $5.09 billion; gross margin rose to $842.7 million from $419.6 million. Higher prices were partly offset by higher raw-material and production costs and lower volumes.
- Consolidated gross margin expanded to 25.9% from 12.3%. Total sales volumes were pressured by operating interruptions and product availability, even as selling prices strengthened across segments.
Outlook, management commentary, risks, and unusual items
- Management described phosphate and potash markets as tight, supported by strong farmer economics and global supply-demand conditions. It expected strong prices to continue into early 2022; the filing also said potash supply could remain tight during 2022, including due to sanctions affecting Belarus. These are forward-looking statements, not guarantees.
- Esterhazy K1 and K2 were permanently closed in 2021 after increased brine inflows, resulting in $158.1 million of pretax closure costs. K3 became fully operational in December 2021 and was expected to reach full capacity in Q1 2022. Colonsay restarted in Q3 2021 to partly replace lost output. The closures are expected to eliminate future brine-management expenses at K1 and K2.
- Management expected approximately $1.1 billion of capital expenditures in 2022. Environmental capital expenditures were expected to be approximately $300 million, with about $170 million for reclamation, Gypstack closure, and water treatment activities.
- Capital returns: Mosaic repurchased approximately $410.9 million of shares in 2021 and paid $135 million of dividends. The board approved a 50% dividend increase to $0.45 per share annually beginning in 2022; after year-end it approved an increase to $0.60 annually beginning with the Q2 2022 payment, a planned $400 million accelerated share repurchase, and a subsequent $1 billion repurchase authorization.
- Material risks include fertilizer price and demand cyclicality, seasonal working-capital needs, volatile sulfur, ammonia and natural-gas costs, operating and transportation disruptions, foreign exchange and geopolitical exposure, labor availability, mining and tailings risks, environmental requirements and permitting, and potential effects of climate regulation. COVID-19-related labor and logistics disruptions were reported, but management said adverse financial and operating effects had been limited at that time.
- Environmental and closure obligations are significant: asset retirement obligations were $1.75 billion on the balance sheet, and undiscounted estimated ARO cash outflows were $3.80 billion. The filing identifies water-treatment cost estimates as a critical audit matter. Other matters include litigation over alleged radiation impacts on reclaimed Florida land, Brazilian legal and tax contingencies, and challenges to countervailing-duty determinations on phosphate imports from Morocco and Russia.
- Auditor KPMG issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. The filing identifies deferred-tax-asset realizability as a second critical audit matter.
Important facts for investors to verify
- Whether K3 achieved expected full operating capacity in Q1 2022, and how its ramp-up and K1/K2 closure affected potash volumes and costs.
- Whether fertilizer pricing and demand remained strong, and whether sulfur, ammonia, natural gas, and other cost inflation reduced margins.
- Actual 2022 capital spending and environmental, reclamation, Gypstack, and water-treatment expenditures versus management’s estimates.
- Cash generation and liquidity after seasonal working-capital movements, share repurchases, dividend increases, and scheduled debt maturities.
- Changes to ARO estimates, financial-assurance requirements, and outcomes or developments in the disclosed environmental, tax, and other legal matters.
- The filing’s mineral-reserve comparisons require care: reporting changed from Industry Guide 7 to SEC Regulation S-K 1300, and the filing attributes reserve changes to both methodology and operating-plan changes.