Mosaic Projects Production Growth for 2026, but Cost and Cash Flow Concerns Linger

What happened

Mosaic reported Q4 2025 phosphate production of 1.7 million tonnes and issued 2026 guidance for at least 7 million tonnes of phosphate and around 9 million tonnes of potash, highlighting strategic growth amid market challenges. However, the DeepValue master report cautions that Mosaic's recent earnings are inflated by ~$700 million in non-operating FX and Ma’aden gains, masking underlying operational weaknesses. The core investment thesis hinges on Mosaic achieving phosphate cash costs below $100 per tonne and generating a free cash flow inflection in 2026, which the news article does not address. Without evidence of cost improvements, the production guidance may simply reflect volume scaling rather than sustainable profitability enhancement. Investors should look beyond this optimistic portrayal and demand concrete data on cost reductions and cash flow trends to assess true progress.

Implication

The production targets for 2026 suggest operational execution on volume, but they do not confirm whether Mosaic is on track to reduce phosphate cash costs to the critical sub-$100 per tonne level needed for margin expansion. If costs remain elevated, increased production could strain profitability rather than boost it, especially given high capex and environmental obligations. The DeepValue report emphasizes that Mosaic's margin of safety is limited until free cash flow inflects positively, which requires working capital normalization and sustained operational reliability. Upcoming earnings releases must provide detailed phosphate cost metrics and free cash flow guidance to validate the strategic growth narrative. Until such evidence emerges, maintaining a 'WAIT' stance is prudent, with potential entry points better aligned with $23 or clear signs of durable financial improvement.

Thesis delta

The news does not shift the investment thesis, as production guidance aligns with Mosaic's growth plans but fails to address the key risks of cost overruns and weak free cash flow highlighted in the DeepValue report. The thesis remains that capital should be reserved for lower prices or clearer proof of operational improvement, with no change to the 'WAIT' rating and conviction level.