Good morning, ladies and gentlemen and welcome to The Mosaic Company’s Full Year 2021 Earnings Conference Call. [Operator Instructions] Your host for today’s call is Paul Massoud, Vice President, Investor Relations of The Mosaic Company. Mr. Massoud, you may begin.

Thank you and welcome to our fourth quarter and full year 2021 earnings call. Opening comments will be provided by Joc O’Rourke, President and Chief Executive Officer, followed by a fireside chat as well as open Q&A. Clint Freeland, Senior Vice President and Chief Financial Officer and Jenny Wang, Senior Vice President of Global Strategic Marketing, will also be available to answer your questions. We will be making forward-looking statements during this conference call. Statements include, but are not limited to, statements about future financial and operating results. They are based on management’s beliefs and expectations as of today’s date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release furnished yesterday and in our reports filed with the Securities and Exchange Commission. We will also be presenting certain non-GAAP financial measures. Our press release and performance data also contain important information on these non-GAAP measures. Now I’d like to turn the call over to Joc. Joc O’Rourke: Good morning. Thank you for joining our fourth quarter and full year 2021 earnings discussion. I hope you’ve had a chance to review our posted slides as well as our news release and performance data, which were made available on our website yesterday. I will provide some additional context before we respond to questions we received last night and then we will conclude with a live Q&A session. Mosaic delivered excellent financial performance in 2021 with total EBITDA for the year of $3.6 billion, our highest total since Mosaic listed on the New York Stock Exchange. Adjusted earnings per share, was $5.04, the highest since 2011. Our results were a reflection of strong performance across…

Thanks, Joc. Before we open the lines to the live Q&A, we are going to address some of the most common questions we received last night after our materials were released. To speed things along, we won’t identify each individual analyst, because many submitted similar questions. Our first question is on the issue of the potash market in Belarus. How should investors think about the impact of sanctions on the global market? Joc O’Rourke: Thank you. First, the potash market was already tight before any sanctions came into place. Higher crop prices, higher demand for fertilizer globally has led to a tightness in this market that was driving higher prices before the Belarusian sanctions. The Belarusian sanctions have simply exacerbated and made the tightness more serious. In terms of the length of the sanctions, we really don’t know and there is no obvious immediate resolution to that issue right now sort of maybe a regime change, I can’t see how that issue is going to be resolved. In terms of the shortfall, we believe it could be anywhere from a few million tons in the best case scenario to as much as 8 million tons if the sanctions remain all through the year. Our base case we are working on right now is that there will be about a 4 million ton deficit this year. Now, the best evidence for this from our perspective is not what we see, but what our buyers are saying. Our buyers are signaling that this issue could be longer lasting than some of our producers have suggested. India and China both signed 2022 contracts of $590 for longer durations than the previous 6-month contracts. And we are hearing similar sentiment from our other global customers. They cannot get the tonnage. And if they can, there is no method to pay for with U.S. banks. So, it’s fair to assume that every producer is likely already evaluating every economic ton that they can get out to the market, including us. But remember, in addition to maximizing and increasing tonnage, we cannot forget about the supply chain constraints. To substantially increase our logistics capability, producers will need more railcars or port capacity and all of this takes time and capital to overcome.

A follow-up question on this issue: how much can Mosaic raise volumes to help fill the gap? Specifically, what run-rates are you targeting and is there any potential upside in the near term? A - Joc O’Rourke: Yes. Thank you. Before the sanctions, Mosaic’s targeted run-rate by the end of the first quarter was about 10.5 million tons. And let me just quickly give you the breakup of that. Esterhazy in its existing form, we believe can run a consistent, sustainable 5.5 million tons; Belle Plaine, around 3 million tons; Colonsay before the shutdown was running somewhere around 1 million to 1.5 million tons, and we will find the right spot for that this year. That gives us an MLP tonnage of around 9.5 million to 10 million tons available today and then K-Mag at just a little over 700,000 tons takes our total to about 10.5 million tons of sustainable production capability. So as we look forward, what can we do to push our capabilities? We know we have some latent capacity at Colonsay and we are looking right now on how we can do a little extra development to put some mining panels into place that were shutdown a few years ago. In terms of K3, the run-rate of 5.5 million tons, we think we could run a little more than that and that will play out as we start getting more and more mining areas running and we get the 11th miner in position. The other issue at Esterhazy, we think, we think there is some pretty good debottlenecking projects that we are already studying and we believe some of those will lead to a little better tonnage coming out of Esterhazy. In terms of Belle Plaine, we believe it’s running pretty much at its maximum right now. So the easy tonnages will come from debottlenecking, Colonsay getting more miners into higher production panels and then pushing K3 and doing the small debottlenecking projects that come at the end of a long capital project.

Joc, the next issue is on the broader phosphate market in China, in particular. How much will China export this year? And could that export ban be lifted early? Joc O’Rourke: Thank you. We think China exports could be down as much as 2.5 million tons this year to about 9 million tons. We do expect that the ban could be lifted as early as the ending of the planting season. And we have to expect that at today’s prices, it wouldn’t be surprising to see China’s producers try to benefit from that high-price environment. But we do think that annual exports are going to continue to trend lower over time. Secular domestic demand in China will pull increasingly large amounts of phosphates away from the export market. And we cannot ignore industrial uses. Battery growth and domestic fertilizers will take precedence over exports, and we expect the Chinese government will continue to force suppliers to prioritize domestic demand.

Our next question focuses on farmer economics. And I think this one’s for you, Jenny. Our grower economics now at the point where nutrient demand destruction is a real threat to the market.

At today’s crop prices around all major growing regions, we are seeing farmers’ economics and affordability are very constructive. In the – it is probably lower than last year’s level, but it is far above the historical average. In North America, we are seeing customers and farmers behavior are as normal as the pre-spring season. In Brazil, especially over the last few weeks as sodium price rise, we are seeing very strong customer buying happening in the country. And in India, we expect the government is going to do, again, readjust their subsidy level in order to support their farmers’ demand to phosphate and potash as they did last year. If there is any threat to the consumption of demand, it is probably because of lack of availability across both phosphate and potash. And the global demand is there if the tons are available.

Joc, we’ve received quite a few questions on phosphate first quarter guidance. 1.6 million to 1.8 million tons seems like compared to history. What’s happening there? Is the lower sales volume guidance due to operational issues or due to demand destruction and buyers blocking at current prices? Joc O’Rourke: Well, thank you. In terms of our expected volumes for quarter one, I think there is really two big issues we have to consider when we look at our sales volume. The first of all is actually quarter four, where Hurricane Ida and subsequent repair events impacted at the beginning of the fourth quarter and left us with very, very low inventories entering this year, which, of course, tends to contribute to first quarter sales. In terms of the other issue from our perspective, it’s really the logistics. COVID and winter weather are having a major impact on the supply chain, including rail, ocean freight, ports and trucking logistics. The industry is seeing delays throughout the system, and that’s contributing to the lower-than-historical sales volume guidance. Just as an example, rail alone this year, we’re seeing about a 20% to 30% increase in cycle time for our trains. And you can expect that to have a big impact on rev rec at the very end of the quarter. That said, we expect our annual sales to be in line with historic norms for phosphates. Delayed shipments due to supply chain issues will resolve themselves as we come out of the winter weather and we get through this last wave of COVID. So we will see those come in the next quarter or two. The thing I would emphasize is we’re seeing normal buyer behavior. Yes, nutrient prices are up. The crop prices more than offset that and point to a very good year for grower profitability, even if it’s a small step back from the 2021 levels. We expect crop prices to continue to incentivize farmers to apply fertilizer as they normally would.

Clint, our last two questions are for you. The first set is on working capital. Can you add some color around working capital and what you anticipate needs to be in 2022?

Sure. Thanks, Paul. So I think, as everyone knows, our business is highly seasonal, and we can experience pretty significant working capital changes throughout the year. And over the last couple of years, we have put in new working capital facilities to help us manage through – excuse me, some of that seasonal dynamic. And in the current pricing environment and the environment that we’ve been in and the rate of change that we’ve seen, that just amplifies those seasonal working capital moves. And so more recently, we’ve upsized some of our working capital lines to better align our options and our tools to the needs of the business. Just to give you a sense, as we look at the second half of last year, our core working capital needs were up well over $1 billion, and majority of that was in the fourth quarter. And as we look forward to 2022, I think any incremental working capital needs are likely to be dictated by the pricing environment that we see to the extent that the pricing environment moderates and the rate of change moderates, then I think the working capital incremental needs will moderate. But if we do see a continuation of what we’ve seen in the last 6 months, I think we could expect to see increasing working capital requirements.

Clint, our final question is on our capital allocation strategy. We seem to be prioritizing share repurchases over other uses of capital. Is that correct? And what are those other uses? And is it possible to do it all and given our commitment to return up to 75% of our free cash flow to shareholders?

Thanks, Paul. As we look forward to the balance of 2022, we expect to generate a significant amount of earnings and cash flow. And as we think about capital allocation for this year, we intend to continue strengthening both our business and our balance sheet by continuing to invest in high-return and opportunistic investments and paying down debt. But we think we can do those things and return a significant amount of capital to shareholders this year within the construct that we’ve outlined. Today, we announced an increase in our dividend for this year and going forward as well as a buyback using an ASR tool. As we go through the balance of the year, we intend to remain disciplined and nimble and look at different ways of returning capital to our shareholders. But our current priority is on buybacks. We look at our share price, where it is, and we think that it is compelling given the environment that we see. So that’s our priority today. But again, we intend to remain flexible as we go through the year.

Thanks, Clint. That wraps up the fireside chat portion of this call. I would now like to turn it over to the audience for your questions.

Thank you. [Operator Instructions] Your first question comes from the line of John Roberts from UBS. Your line is now open.

Thank you. I assume in Brazil that the competitor distributors are significantly exposed to Russian and Ukrainian potash. If they have to – if they have trouble sourcing potash, if your competition is trouble sourcing potash, does that also impact their ability to cross-sell other inputs, that is if farmers have to turn to Fertilizantes for potash, are you likely to pick up the other inputs as well? Joc O’Rourke: Yes. Thanks, John. Certainly, that would offer an opportunity to us, but I suspect what will happen is that actually the blends will probably be adjusted for less potash if there is actual potash shortages. And we do believe there will be a real risk of potash shortages. The Brazil market should be fairly good. They have been delayed by rain and etcetera, so far. But we believe this will be a good market. So we do expect it’s going to be very tight for potash as the full impact of the sanctions really comes home to roost, if you will. So yes, we may pick up a little bit, but I don’t think it will be because of the blend opportunity versus others. I think it will just be because of people trying to get hold of potash.

Your next question comes from the line of Joel Jackson from BMO Capital Markets. Your line is now open.

Hi, good morning. If Nutrien decided that some of these issues around Belarus BPC are persistent and they wanted to really un-idle their millions of excess tons, hire a bunch of miners in Saskatchewan and really ramp up their volume, would you be supportive of that? What I mean is, in Canpotex, obviously, you would get your – you should get your pro rata sales share and Nutrien can add millions of tons to their production, and you cannot. You would not get – you would have to refuse the ability to produce pro rata and give it to Nutrien. Would you be supportive of that? Or would you seek to renegotiate a little bit how Canpotex works? Joc O’Rourke: I don’t want to be in any way evasive, Joel, but I cannot answer a question about confidential negotiations that would happen within Canpotex. So I think you can only wait to see what happens this year to know. Now having said that, I will say one thing. We have been flexible in the past, as you’re well aware, including last year when we had an inability to produce. We asked and allowed Nutrien to produce the gap, which they helped fill. So obviously, we are all very concerned and interested in supporting our customers globally. And so to do that, there will be an element of flexibility. But I can’t speak specifically about Canpotex.

Your next question comes from the line of Chris Parkinson from Mizuho.

Great. Thank you very much. You’ve done a pretty solid job of over the past few years completing Esterhazy and eliminating brine inflow costs. And now it appears Colonsay has had a nice gap down in cash costs post the issues you were facing in last year. So when we all kind of take a look at this year under the context of current contract spot pricing, higher operating rates, transportation costs and even the Canadian resource tax, can we just take a step back and just look at where you ultimately think the gross margins should be for this year? And perhaps just any additional considerations we should also have for 2023? Thank you. Joc O’Rourke: Okay. Thank you, Chris. I guess you’ve got to look at this in two ways: what’s the cash margin and what’s the gross margin after depreciation. Let me just talk about cash for a moment. And I’m going to be pretty general here. But if you look at – right now for standard, we have contract through Canpotex for $590 a ton. I think you can pretty much make estimates. We’ve announced Colonsay being $85 a ton. The others are significantly lower than that. And put a round number on transport, which is easy to do. I think you come up with a – quite frankly, a gross margin – a cash margin that is at least 50% plus.

Your next question comes from the line of Adam Samuelson from Goldman Sachs. Your line is open.

Hi. Yes. Thank you. Good morning. I was hoping you could give a little more color on the phosphate operating cost environment. Obviously, inputs have risen here, the way you frame DAP to margins and they have declined as a result of the market outlook, Joc. You didn’t provide any specific cost guidance in phosphate for the first quarter that you sometimes do or have done in the past. Any color there? And just as a quick follow-up to that last question, Joc, on the cash margin for potash. That’s at 3% before or after the resource tax? Joc O’Rourke: Well, we’re – we call resource taxes and royalties part of our cash cost. So we’re – or sorry, Clint, do you want to correct that if I’m...

Yes. So in calculating our cash cost per ton, we do include royalties in there but do not include CRT. Joc O’Rourke: Right. I think our other Canadian producer does not include royalties either. Is that correct? I think they call them both taxes. But there is some inconsistencies between the two of those.

But I would say that both of those are in our EBITDA calculation. Joc O’Rourke: Yes. And do recognize the resource tax is quite significant right now. So in terms of Florida cost, if you will, for phosphates, the way you can look at it is, first of all, our average ammonia cost, which if – we pay 20% of – sorry, 20% of the cost per ton of ammonia goes into – so if ammonia costs $600, you can – times that by 0.2, and that’s the cost inside that. But right now, market ammonia is probably in the range of, Jenny, $1,100. So that adds about $200 plus per ton to the cost of making phosphates. Now recognize our costs are significantly lower than that because two-thirds of ours is on a natural gas basis. So for our competitors, call it, $250 per ton. For us, probably more than half of that range would be the right number. In terms of sulfur, sulfur 40%. So if sulfur price is $300, then your cost in making DAP is probably $120-ish per ton. So you could look at that for our competitors being a total cost of up to $300 extra ton and for us, probably $220 or something, in that range.

Your next question comes from the line of Steve Byrne from Bank of America. Your line is now open.

Yes. Joc, I want to ask you maybe a two-part question on Ferlizantes. And the first one being these co-product sales. Is that the gypsum or – I know you have some titanium and overburden there. What’s driving that, the co-product sales? And then maybe a higher-level question on Fertilizantes is, where do you think you can take that business from here? Is the opportunity in expanding your domestic production there? Or being able to increase more imports with port expansions? Where do you see the most opportunity in Fertilizantes? Joc O’Rourke: Okay. So first, co-product sales, I think you’re absolutely right. The majority of the co-product sales is likely the sale of gypsum, but there is a number of co-products whether they be produced from some of our wastewater streams or whatever. But we sold last year, I think, over $400 million of co-products with pretty healthy margin because the cost of these, of course, is very low. So we feel that’s a pretty attractive place. And of course, when you sell gypsum, that’s chips actually you don’t have to make in the future. So again, a big piece of the long-term business improvement will be those sales of co-products and particularly the sale of gypsum. In terms of moving this business forward, you’re right, there is a number of opportunities. I think there is a number of new opportunities for co-products and particularly when you look at titanium, niobium and whatnot that is naturally in our ore and is made by our neighbors, at least our neighbors at Catalao. The other area is distribution. And distribution, particularly as you go to the Northwest part of the country, so Northwest part of Montegrosso and heading into what we call the Montapito states, which are the northern states south of the Amazon but in the western side of the country. We believe the distribution opportunity there is high. We are looking very seriously about how we can get a bigger piece of that, how we can participate more in that. So distribution, one area; co-products, new products. And of course, if we can debottleneck or improve our existing operations, that’s another great area for taking advantage of what is a great market.

Your next question comes from the line of Vincent Andrews from Morgan Stanley. Your line is now open.

Thank you and good morning, everyone. Joc, I was wondering if you could talk a bit about regional phosphate prices and just the gap that exists between India and the rest of the world basically and how you envision that evolving through the course of the year, whether – how it will converge or if it will converge. Thank you. Joc O’Rourke: Yes. Okay. Thanks, Vincent. I’m going to start off, but I’m going to hand it over to Jenny. But I think what you’d be fair to say is when the demand started really picking up this year, India was the first to respond. And in the typical winter lull, North American prices probably lagged, but those are quickly catching up as we get closer to the North American spring. But let me let Jenny talk a little bit about price disparity around the world and what that means.

Sure, Joc. Yes, you mentioned due to the very low input in India last year, we saw the pent-up demand. And for sure, that was realized in the first two months of the year. And the Indians basically paid DAP price up to $920. Vincent I think probably you referred to the gap between India and the rest of the world. And with the crop prices rallied in Brazil, over the last few weeks, we saw the Brazilian buyers also stepped into the market. After yesterday, the gap between Brazil in phosphate to India are very close. So, we saw the price of MAP in Brazil already reached over to $900 per ton. And similarly to NOLA, we saw some seasonal price lows. And over the last two weeks, that price has rebounded, and we saw the shrinking of price gap between NOLA in India as well. Overall, we see a pretty much strong demand supported by the farmer economics and also pent-up demand in India and in the case of China as well. We see the fundamental of the phosphate market is going to continue to be tight, and the price level is going to stay at an elevated level.

And let me just highlight in North America, we don’t participate in those fluctuations of price that occur when the traders start trading at the Gulf. We kept our price list constant through that. And very quickly, once the pricing windows ended, prices came up to our price list.

Your next question comes from the line of Michael Piken from Cleveland Research. Your line is now open.

Yes. Good morning. Just wanted to get a sense in terms of your longer term expectations for India’s ability to continue to afford fertilizer, I know that they have raised their subsidies, but it seems like prices are going up at a pretty fast rate. How do you sort of see India’s demand evolving over the next several years, not just in 2022 where they need to restock? Thanks. Joc O’Rourke: Yes. Thanks, Michael. Look, I think India – this becomes more than a simple problem for a country like India with 700 people living in basic poverty and relying on the agricultural economy. The Modi government needs to be responsive to those people. So, they have a tight balance to keep food security and food affordability for their population and also keep their farmers able to be profitable so that they keep farming. So, our expectation is that India will continue to tread that – or walk that tight rope as best they can. So, they will have to respond to global pricing. They will have to make sure they get the fertilizer they need. And we are seeing that right now. I mean with the fast settlement of their potash and the – at $590, they were the first to settle with Canpotex quite early, and I think that reflects the pent-up demand that they need to make sure it gets out to their farmers. And then we just talked about their willingness to pay $930 or $920 for phosphates. So, we are seeing the buyer response. We know the government will have to either help with food subsidies or with fertilizer subsidies to keep that balance. And I know when it comes down to food securities, they are going to do what they have to do to make sure that works. And that’s long-term and short-term.

Your next question comes from the line of Andrew Wong from RBC Capital Markets.

Okay. Good morning. Just a couple of questions here. First one, Fertilizantes. Can you just talk about why the phosphate rock and conversion costs continue to move up through the year? Is that mostly due to local inflation? And what’s the expected run rate of the current FX rates for this year and going forward? And then maybe a second question, probably more for Clint. Mosaic is a very complicated business. It’s across multiple geographies and product lines. And I mean it can be difficult sometimes to model out some of the variabilities around the quarters and even maybe for the year. Is there any thought on providing some more specific guidance, such as maybe including Fertilizantes in the kind of quarterly outlook guidance or maybe even cutting to like a specific EBITDA line? Thanks. Joc O’Rourke: Okay. Thanks, Andrew. And I will leave the tougher guidance question to Clint because that’s only fair. Let me start with Fertilizantes and the cost structure of Fertilizantes. There is a lot of factors, I think that are impacting Fertilizantes right now. I mean the first of it, as you mentioned, is inflation. And if you look at U.S. dollars, it’s probably easier to see where that’s been not as severe as what it might look like. But Brazil is probably seeing in industrial inflation, somewhere in that 15% to 20% this year. And that’s having a real day-to-day impact on cost structures. The other thing that has hurt Brazil in the last while, of course, is COVID. It has made it a lot more difficult to do mechanical or maintenance turnarounds. It’s made getting supply chain people in place, etcetera, etcetera. So, there is maintenance that takes longer, just a lot of little niggle things that come with the people problems and the COVID problems. And then there is of course, supply chain issues, getting materials and when you get materials are more expensive. So, all of those things are impacting. We think that long-term U.S. dollar and U.S. dollar to Brazilian reais will be offset with the inflation rates. So, in other words, if the inflation keeps higher than U.S., it will probably be equalized by exchange rates. And the other issues should go away with COVID and whatnot as things sort of return to more normal.

Your next question comes from the line of... Joc O’Rourke: Sorry. Operator, we still have the second part of that question.

Yes. Hi Andrew, this is Clint. And thanks for your question on guidance. I think as we have spoken about before, one of the challenging things about providing specific earnings guidance is just how quickly and materially prices can change, and that can obviously change our expectations and outlook for the year. But what we have tried to do is to provide a framework, provide areas of our cost structure, of our spend and so forth, that can be helpful in modeling the company. I know that Paul and I have been speaking particularly about Fertilizantes. And is there some more information and detail we can provide around that business to help investors understand and model that business better. So, I think that is an ongoing conversation internally. I would expect us to put a little bit more focus on that as time goes on. And if there are other areas that you would find particularly helpful in understanding some of the complexity, certainly, we are open to those discussions and a good feedback on that. Joc O’Rourke: Thanks. Operator, can we move to the next?

Thank you. Your next question comes from the line of Adrien Tamagno from Berenberg. Your line is now open.

Good morning. I have one question on [Technical Difficulty]. You seem to suggest that you would be able to reach a normal level of volumes for the full year ‘22. I was just curious if there are some moving specific actions to counter the impact of supply chain bottlenecks or if you assume that the market will normalize at some point and – yes. It could be easier to move to the pro forma. Thank you. Joc O’Rourke: I am sorry, I have got such a static line here. I only – I didn’t catch most of that. Can you try repeating that, Adrien?

Yes. Sure. This question is the full year volume guidance for phosphate, you have been guiding that just the normalization of the market in terms of supply chain or is it company-specific actions to your co-product? Joc O’Rourke: I sort of got phosphate in market, but that’s about all I really got. Okay. Maybe Adrien, maybe we can let Paul talk to you after this. I am sorry, we – the connection was so bad. We really didn’t hear that well at all. So maybe, Paul – you can contact Paul and we can talk. Thank you. Sorry.

Your last question comes from the line of Jeff Zekauskas from JPMorgan. Your line is now open.

Thanks very much. Do you expect the global phosphate market to tighten in 2023 or to loosen or you can’t tell? Joc O’Rourke: Yes. Thanks, Jeff. I am going to let Jenny talk a little bit about this, but let me start off by saying as we look at this over the next, let’s say, 3 years to 5 years and even short-term, short-term, we expect China’s exports to be lower, which should lead to a tightness in the next little while. And as we look forward from that, assuming the market continues to grow at the normal rates, we don’t have any big projects coming forward that we think are going to fill that gap. So, we see it tight this year. And assuming our Chinese estimates are correct, continuing tight for the next 4 years or 5 years even. And then as we look at the evolution of industrial uses for phosphates, and we talked about lithium iron phosphate, batteries in particular. But as we move into those other uses for phosphates, particularly in China, we do expect long-term that the Chinese exports will continue to decline and that new projects that are – haven’t been called yet and take 4 years or 5 years will have to fill that gap. Jenny, anything else? Okay. So Jenny is fine. Okay. Look, with that, I will conclude our call here by reiterating some of our key messages. Mosaic delivered excellent financial performance in 2021 driven by very strong agricultural and fertilizer markets. And by leveraging the value we have created through major investments and cost restructuring. We look forward to returning much of that value that we created to our shareholders through the accelerated share repurchase, our new repurchase authorization and an increased dividend target. And with continued high levels of global fertilizer demand and ongoing tight supplies in both potash and phosphates, we expect another year of very strong value creation in 2022. Thank you for your call – for the call, and have a great day.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.