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SEC filingQ1 results showed revenue growth from higher prices amid global demand, but profitability collapsed due to sharply higher raw material costs, lower production volumes from idled facilities, and increased water and freight expenses.
Revenue increased 14.4% to $3.0 billion from $2.6 billion in the prior-year quarter, primarily reflecting higher average selling prices across products. This growth was partially offset by lower sales volumes of finished goods, stemming from reduced production after idling the Araxa and Fospar facilities in Brazil. The company noted that favorable sales prices and increased sales volumes in certain markets like China and India reflected stronger global demand and better starting inventories, enabling export fulfillment despite these operational constraints.
Gross profit declined sharply 51.8% to $235.6 million from $488.4 million, compressing the gross margin to 7.9%. This deterioration was driven by significantly higher raw material costs, primarily sulfur and ammonia, which negatively impacted margins. The decrease in sales volumes further reduced gross margin, while additional pressures came from higher water treatment costs and elevated freight expenses. These cost increases more than offset the benefits from improved pricing and selective volume gains tied to global demand recovery.
Net income resulted in a $257.6 million loss, or -$0.81 diluted EPS, versus $238.1 million profit or $0.75 EPS in Q1 2025. This outcome highlights how the cost surge and volume reductions overwhelmed revenue gains, leading to negative earnings in a volatile fertilizer market.
Cash flow from operations strengthened to $104 million from $43 million, aided by non-cash adjustments despite the net loss. However, capital expenditures of $357 million produced negative free cash flow of -$252.6 million. The decrease in accounts payable and accrued liabilities tied to timing of employee incentives and lower customer prepayments in Brazil contributed to working capital dynamics.
Looking forward, Mosaic is closely monitoring markets and reviewing U.S. phosphate production plans amid commodity volatility. The company employs financial instruments like forward contracts and collars to hedge exposures to the Canadian dollar and Brazilian real, aiming to stabilize cash flows in these currencies.