Analysis of Debt
Total Debt (Carrying Amount)
Mosaic Co., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The total debt carrying amount exhibits a gradual overall decline from US$ 5,613.9 million in 2017 to US$ 5,025.3 million in 2021. While the aggregate debt level remained relatively stable throughout the period, there is a pronounced shift in the composition of liabilities, characterized by a systemic reduction in long-term obligations and a simultaneous increase in short-term and current liabilities.
- Long-Term Debt Trends
- A consistent downward trend is observed in long-term debt, less current maturities, which decreased from US$ 4,878.1 million in 2017 to US$ 3,382.2 million in 2021. This represents a significant reduction in the long-term borrowing profile of the entity over the five-year span.
- Short-Term and Current Liabilities
- Short-term debt remained relatively low through 2020 but experienced a substantial spike to US$ 302.8 million in 2021. Concurrently, current maturities of long-term debt rose sharply from a low of US$ 26.0 million in 2018 to US$ 596.6 million in 2021. This indicates an increasing concentration of debt obligations maturing within the short term, which may place higher demands on immediate liquidity.
- Structured Accounts Payable Arrangements
- Structured accounts payable arrangements grew from US$ 386.2 million in 2017 to US$ 743.7 million in 2021. This upward trajectory suggests an increased utilization of structured financing for accounts payable to manage working capital.
- Aggregate Debt Composition Analysis
- The stability of the total debt figure masks a significant migration of debt from long-term instruments to short-term obligations and structured payables. The decrease in total carrying amount is primarily driven by the reduction in long-term debt, which offset the increases observed in short-term debt and current maturities.
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Total Debt (Fair Value)
| Dec 31, 2021 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Structured accounts payable arrangements | 743,700) |
| Short-term debt | 302,800) |
| Long-term debt, including current portion | 4,516,100) |
| Total total debt (fair value) | 5,562,600) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.11 |
Based on: 10-K (reporting date: 2021-12-31).
Weighted-average Interest Rate on Debt
Weighted-average effective interest rate on debt: 5.08%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 5.18% | 3,543,400) | 183,548) | |
| 7.19% | 147,800) | 10,627) | |
| 2.39% | 213,000) | 5,091) | |
| 4.08% | 74,600) | 3,044) | |
| Total | 3,978,800) | 202,309) | |
| 5.08% | |||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 202,309 ÷ 3,978,800 = 5.08%
Interest Costs Incurred
Mosaic Co., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
Total interest costs incurred experienced a period of growth between 2017 and 2020, followed by a moderate decline in 2021. The aggregate cost ascended from 195.2 million USD in 2017 to a peak of 247.4 million USD in 2020, representing an increase of approximately 26.7% over that period before receding to 224.4 million USD in 2021.
- Interest Expense Trends
- Interest expense recognized in the income statement serves as the primary driver of total interest costs. A significant increase was observed between 2017 and 2018, with expenses rising from 171.3 million USD to 215.8 million USD. This figure remained relatively stable from 2018 through 2020, fluctuating marginally around the 215 million USD mark, before decreasing to 194.3 million USD in 2021.
- Capitalized Interest Analysis
- Interest costs capitalized for major construction projects showed a general upward trajectory from 2018 to 2020. After a slight decrease to 22.1 million USD in 2018, capitalized interest rose steadily, peaking at 33.3 million USD in 2020. This pattern suggests an increase in investment activities or the scaling of major construction projects during this window, followed by a slight reduction to 30.1 million USD in 2021.
- Overall Debt Cost Patterns
- The synchronization of the peak in both expensed and capitalized interest in 2020 indicates a maximum point of interest burden during the analyzed period. The decline observed in 2021 across both metrics suggests a reduction in the total interest-bearing liability or a favorable shift in interest rate environments, leading to a overall reduction in the cost of debt servicing.
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Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense
= 2,426,900 ÷ 194,300 = 12.49
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 2,426,900 ÷ 224,400 = 10.82
The interest coverage metrics exhibit significant volatility over the analyzed five-year period, characterized by a severe contraction in 2019 followed by a robust recovery peaking in 2021.
- Adjusted Interest Coverage Ratio Trends
- The adjusted interest coverage ratio, which accounts for capitalized interest, began at 2.88 in 2017 and rose slightly to 3.21 in 2018. A sharp decline occurred in 2019, where the ratio fell to -4.50, indicating that earnings were insufficient to cover interest expenses. A recovery phase followed, with the ratio rising to 1.22 in 2020 and surging to 10.82 by December 31, 2021, reflecting a substantial improvement in debt-servicing capacity.
- Comparative Analysis of Coverage Metrics
- A consistent variance is observed between the interest coverage ratio without capitalized interest and the adjusted ratio. The non-adjusted ratio remained higher in every period, suggesting that the inclusion of capitalized interest increases the total interest burden and consequently lowers the coverage ratio. Despite this variance, both metrics moved in perfect correlation, highlighting the same period of financial distress in 2019 and the subsequent rapid recovery.
- Debt Servicing Stability
- The transition from a negative coverage ratio in 2019 to a ratio of 10.82 in 2021 demonstrates a significant shift in the company's financial risk profile. The 2020 value of 1.22 indicated a marginal ability to meet interest obligations, whereas the 2021 figures suggest a highly secure position with ample earnings to cover interest costs.
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