Mosaic: CEO Change Will Likely See Company Maintain Strategy

On Aug. 29, Mosaic MOS announced current CEO Joc O’Rourke plans to step down at the end of 2023. Beginning in 2024, Mosaic’s new CEO will be Bruce Bodine, who is currently senior vice president of North America. Despite the planned leadership change, we see no reason to change our outlook for Mosaic. Accordingly, we maintain our $40 per share fair value estimate for the company. Our no-moat rating and standard capital allocation rating are also unchanged. At current prices, we view Mosaic shares as fairly valued with the stock trading just below our fair value estimate and in 3-star territory. As such, we recommend investors wait for shares to offer a greater margin of safety below our fair value estimate before considering the stock.

Bodine has worked at Mosaic for over two decades, previously leading the potash business then the phosphates operation. Under Bodine’s leadership, we expect Mosaic will continue to focus on growing long-term potash and phosphate volumes, in line with market demand, while reducing the company’s unit production costs.

Under O’Rourke’s leadership, Mosaic greatly expanded its potash and phosphate production capacity and Brazilian distribution operations through the acquisition of Vale Fertilizantes. While we think the company paid a reasonable price for the acquisition, we don’t think the business is worthy of a moat, as acquired capacity generally has a higher unit production cost. However, we like the investment to build the new K3 mine as Esterhazy as the older K1 and K2 mines had a higher unit production cost due to mine flooding. Once K3 is fully ramped up, it should see unit production costs in line with other low-cost Canadian mines.