Mosaic (MOS) Q2 2026 earnings review
Raw Material Crisis Forces Curtailments and Drives Operating Losses
Mosaic remains in a defensive, survival-oriented posture as geopolitical shocks send sulfur and ammonia prices soaring. Q2 Revenue fell 6% YoY, but the real damage was on the bottom line: Adjusted EBITDA dropped 28% YoY to $407 million, and the company posted a $273 million net loss driven by $351 million in notable charges and collapsing Phosphate and Brazil margins. With marginal production costs rendering operations unprofitable, management completely idled Faustina and cut Bartow to 40% capacity. While the Potash segment provides crucial stability, the near-term outlook for the rest of the business hinges entirely on when the global raw material squeeze abates.
🐂 Bull Case
The Potash division remains insulated from the raw material crisis, generating $278M in Adjusted EBITDA (flat YoY) with strong volumes and an expected 9.0 million tonnes of production in FY26.
Management is aggressively pulling defensive levers, lowering FY26 CapEx to $1.2B, idling unprofitable assets, and initiating cost-saving workforce reductions to protect the balance sheet.
🐻 Bear Case
Sulfur and ammonia prices are obliterating stripping margins. Q2 sulfur costs averaged $522/long ton (up 150% YoY), and Q3 contracts settled even higher at $705/long ton.
The company is drastically under-absorbing fixed costs. Faustina is idled, Bartow is running at 40%, and Brazil commodity fertilizers are curtailed, driving $121M in combined unabsorbed Q2 fixed costs.
⚖️ Verdict: 🔴
Bearish. While long-term agricultural fundamentals remain intact, Mosaic is caught in a severe, externally driven margin squeeze. The timeline for a raw material price normalization is highly uncertain, making near-term profitability highly vulnerable.
Key Themes
Phosphate Margin Collapse Driven by Sulfur Shock
Geopolitical disruptions in the Middle East and Black Sea have created a severe raw material shock. Q2 realized sulfur costs spiked to $522/long ton, and ammonia hit $621/tonne. Worse, Q3 sulfur contracts settled at $705/long ton. This erased Phosphate segment gross margins (dropping from $67/tonne in 25Q2 to -$4/tonne in 26Q2), generating a $104M operating loss for the segment.
Crippling Unabsorbed Fixed Costs from Curtailments
Because marginal production costs exceed market prices, Mosaic implemented heavy curtailments. Faustina is fully idled, and Bartow is operating at 40%. In Brazil, commodity production is in the process of being idled entirely. This resulted in a combined $121 million in idle, turnaround, and unabsorbed fixed costs hitting COGS across Phosphate ($60M) and Fertilizantes ($61M). Management expects this drag to continue into Q3.
Potash Segment Provides Crucial Stability
In stark contrast to Phosphate and Brazil, Potash fundamentals remain balanced and highly profitable. The segment delivered $195M in Operating Earnings and $278M in Adjusted EBITDA, matching the prior year despite the recent sale of the Carlsbad mine. The completion of the Esterhazy turnaround positions the segment to execute on its 9.0M tonne full-year production target.
Aggressive Capital Restructuring and Preservation
Management is pulling every available lever to protect cash. They reduced FY26 CapEx guidance to $1.2B (from $1.25B), secured a $1 billion term loan to refinance commercial paper, completed the sale of the Carlsbad asset, and are actively pursuing strategic alternatives for Araxa and Patrocinio in Brazil. This restructuring drove a substantial portion of the $351M in notable Q2 charges.
Working Capital and Free Cash Flow Pressures
Free Cash Flow flipped to negative $153M in Q2 (down from +$305M a year ago). Elevated raw material costs severely inflated the value of inventory held on the balance sheet, offsetting the natural working capital release that typically occurs during production curtailments. Management still expects a working capital release in H2, primarily from Brazil, but execution risk is high.
Biosciences Platform Scaling Rapidly
The Mosaic Biosciences unit remains a bright spot for high-margin growth. The segment reported $25M in Q2 net sales, launched five new products in H1 2026, and plans to introduce 3-5 more in H2. Management expects FY26 sales to double the $68M achieved in FY25, offering a counter-cyclical growth vector to the struggling commodity fertilizer business.
Other KPIs
Earnings were severely distorted by one-time items, primarily a $162 million mark-to-market loss on Mosaic's holding of Ma'aden shares, $69 million in non-cash project write-offs in the Phosphate segment, and a $49 million foreign currency transaction loss.
Decelerating efficiency. Unit costs rose from $126/tonne in 25Q2 and $124/tonne in 26Q1. This metric is virtually guaranteed to worsen in Q3 due to the aggressive curtailments at Bartow and Faustina severely impacting fixed-cost absorption.
Improving. Down from $167 million in 25Q2, reflecting lower bad debt expenses and the initial realization of management's cost-saving initiatives, which include a recent $50 million annualized workforce reduction.
Guidance
Decelerating. Management reduced the target from the previous expectation of $1.25 billion as a direct cash preservation mechanism amid the margin squeeze.
Decelerating. The midpoint (1.25M) represents a sequential step down from the 1.4 million tonnes sold in Q2, explicitly reflecting the partial production curtailments implemented in July.
Accelerating. Higher than the $773/tonne realized in Q2. While this indicates strong demand and tight global supply (aided by Chinese export restrictions), this price increase is insufficient to cover the escalating sulfur costs.
Stable. Consistent with Q2 volumes (2.0M), indicating robust North American resilient demand and strong Chinese imports setting a first-half record.
Decelerating. Management explicitly guided that Q3 segment EBITDA will fall below the weak Q2 result ($60M), citing challenging producer economics and the full-quarter impact of Brazilian production curtailments.
Key Questions
Margin Breakeven Point
Given Q3 sulfur contracts settled at $705/long ton, at what specific DAP FOB price does it become economically viable to restart the idled capacity at Bartow and Faustina?
Working Capital Release Viability
You expect free cash flow to improve via a working capital release in H2. How much of this target is at risk due to the inflated valuation of raw material inventory currently trapped on the balance sheet?
Strategic Alternatives Timeline
With the idling of Araxa and Patrocinio complete, what is the realistic timeline for executing a divestiture or partnership, and how much trailing ARO liability is attached to these assets?