Mosaic Co. (NYSE:MOS)

The financial performance from 2017 to 2021 is characterized by consistent negative economic profit, indicating that the returns generated from operations were insufficient to cover the cost of the capital employed. While the company experienced a period of value destruction throughout the five-year window, a notable trend of recovery emerged toward the end of the period.

Net Operating Profit After Taxes (NOPAT)

Operational profitability exhibited significant volatility. NOPAT declined from 610,470 thousand USD in 2017 to a deficit of 1,197,855 thousand USD in 2019. However, a strong recovery followed, with profitability rising to 136,357 thousand USD in 2020 and surging to 1,881,191 thousand USD by 2021, marking a substantial improvement in operational earnings.

Cost of Capital

The cost of capital remained elevated throughout the period, fluctuating between a low of 16.48% in 2019 and a peak of 21.16% in 2021. The general upward trajectory in the final two years increased the threshold required for the company to achieve a positive economic profit.

Invested Capital

Invested capital remained relatively stable, hovering around the 15 billion USD mark. After a slight contraction to 14,653,500 thousand USD in 2020, the capital base increased to 15,843,300 thousand USD in 2021, suggesting a steady level of asset investment despite fluctuating operational results.

Economic Profit Trends

Economic profit remained negative for the entire duration, with the deepest loss occurring in 2019 at 3,685,210 thousand USD. Despite the rising cost of capital in 2021, the sharp increase in NOPAT significantly mitigated the economic loss, reducing it to 1,471,420 thousand USD. This indicates that while the company has not yet achieved economic value creation, the gap between operational returns and the cost of capital is narrowing.

The financial performance displayed over the reported periods reveals significant volatility in key profitability measures.

Net Earnings (Loss) Attributable to Mosaic

The net earnings figures exhibit substantial fluctuations across the five-year span. In 2017, the company recorded a net loss of approximately $107.2 million. This shifted positively in 2018, showing a net profit of $470 million. However, this trend reversed sharply in 2019, with net losses deepening to roughly $1.067 billion. The year 2020 marked a recovery with net earnings rising to $666.1 million, followed by further strong gains in 2021, reaching about $1.63 billion. This pattern indicates a high degree of instability in profitability, with pronounced losses in 2017 and 2019 contrasted by substantial profits in 2018, 2020, and 2021.

Net Operating Profit After Taxes (NOPAT)

The NOPAT values similarly demonstrate marked variability. In 2017, NOPAT was approximately $610.5 million, followed by a decline to $515.1 million in 2018. The most notable change occurred in 2019, with NOPAT plunging to a negative $1.198 billion, signaling operational challenges. In 2020, NOPAT rebounded to $136.4 million, and then grew significantly to about $1.88 billion in 2021. The results suggest a recovery in operational efficiency beginning in 2020 after a considerable downturn in 2019, with 2021 marking the highest operational profitability within the period.

Overall, the data demonstrates a pattern of extreme fluctuations in both net earnings and operating profitability. The year 2019 represents a significant downturn in both measures, followed by a phased recovery in the subsequent years. The company’s financial results reflect considerable volatility possibly driven by external market conditions or internal operational factors that affected profitability during the reviewed timeframe.

Provision for (benefit from) income taxes

The provision for income taxes exhibited considerable volatility over the five-year period. In 2017, the provision was a positive amount close to $495 million, indicating a tax expense. This sharply declined in 2018 to approximately $77 million, followed by a notable shift into a tax benefit in 2019 and 2020, with negative amounts of roughly $225 million and $579 million respectively. However, in 2021, the provision reverted to a tax expense of around $598 million. This fluctuation suggests significant changes in taxable income or tax-related adjustments during these years.

Cash operating taxes

Cash operating taxes demonstrated an increasing trend with some fluctuations. In 2017, a negative value near -$69 million indicates a tax benefit or refund during that year. From 2018 onwards, cash operating taxes were positive and generally growing, rising from about $211 million in 2018 to over $526 million in 2021. This progressive increase in cash taxes paid corresponds with a return to a positive tax provision in 2021, reflecting higher tax payments aligning with increased taxable earnings or changes in tax liabilities.

Total reported debt & leases

The total reported debt and leases exhibit a general declining trend over the period analyzed. Starting at approximately 5.88 billion USD at the end of 2017, the liabilities decreased to about 5.15 billion USD by the end of 2021. This represents a consistent reduction in debt levels during the timeframe, with the most notable year-on-year decrease occurring between 2019 and 2021, indicating potential efforts to deleverage or optimize debt management.

Total Mosaic stockholders’ equity

Stockholders’ equity showed fluctuations but overall an increasing trend. It grew from roughly 9.62 billion USD at the end of 2017 to about 10.60 billion USD by the end of 2021. After peaking above 10.39 billion USD in 2018, equity declined somewhat in 2019 but rebounded in the following years, suggesting periods of both capital accretion and consolidation. The equity levels at the end of the period are the highest reported and indicate strengthening shareholders' financial interest in the company.

Invested capital

Invested capital remained relatively stable with minor fluctuations, beginning at approximately 15.02 billion USD in 2017 and ending at about 15.84 billion USD in 2021. The values show a slight increase overall but include periods of decline, notably between 2018 and 2020. The general stability of invested capital indicates consistent asset or business investments relative to the company's size, without extreme expansions or contractions.

Summary of trends and insights

The data reflect a company progressively reducing its total debt and lease obligations over the five-year span, positively impacting financial leverage and possibly credit risk. Concurrently, the rise in stockholders’ equity suggests that the company has successfully maintained or increased its capital base, which may result from retained earnings or additional equity infusion. The sturdiness of invested capital further reinforces a stable investment footing. Taken together, these patterns imply a strategic emphasis on strengthening the balance sheet and maintaining capital adequacy while potentially streamlining debt exposure.

Between 2017 and 2021, a persistent state of negative economic profit was observed, indicating that the returns generated on invested capital did not exceed the company's cost of capital. While the period was characterized by value destruction, a notable recovery trend emerged following a peak deficit in 2019.

Economic Profit Trends

Economic profit remained negative throughout the five-year period. A deterioration in performance occurred between 2017 and 2019, with losses widening from -2.15 billion US$ to a maximum deficit of -3.69 billion US$. This downward trend reversed starting in 2020, with losses narrowing to -2.65 billion US$ and further improving to -1.47 billion US$ by the end of 2021.

Invested Capital Stability

Invested capital demonstrated relative stability, oscillating between 14.65 billion US$ and 15.84 billion US$. Following a peak in 2018, there was a gradual decline through 2020, followed by an increase to the period's highest level of 15.84 billion US$ in 2021.

Economic Spread Ratio Analysis

The economic spread ratio remained negative, confirming that the cost of capital consistently outweighed the return on invested capital. The ratio deteriorated from -14.28% in 2017 to a low of -24.42% in 2019, aligning with the peak in economic losses. A significant recovery was recorded in the final two years, with the ratio improving to -18.07% in 2020 and reaching -9.29% in 2021, signaling a reduction in the spread between the cost of capital and the actual return.

An analysis of economic performance from 2017 to 2021 reveals a consistent failure to achieve positive economic value added, although a distinct recovery trend emerged in the final two years of the period.

Economic Profit Trends

Economic profit remained negative throughout the entire five-year duration. The deficit widened from -2.15 billion US$ in 2017 to a peak loss of -3.69 billion US$ in 2019. Following this trough, a recovery phase was initiated, with the economic loss narrowing to -2.65 billion US$ in 2020 and further improving to -1.47 billion US$ by the end of 2021.

Net Sales Performance

Net sales exhibited volatility between 2017 and 2020, rising from 7.41 billion US$ to 9.59 billion US$ in 2018 before experiencing a moderate decline. A significant surge occurred in 2021, with sales reaching 12.36 billion US$, representing the highest revenue level recorded in the analyzed timeframe.

Economic Profit Margin Analysis

The economic profit margin reflected the underlying volatility of both profit and sales. After a slight improvement to -26.26% in 2018, the margin deteriorated sharply to -41.38% in 2019. A subsequent recovery trend was observed, with the margin moving to -30.49% in 2020 and reaching -11.91% in 2021. This indicates a substantial reduction in the economic loss generated per dollar of net sales.

The correlation between the sharp increase in net sales and the significant narrowing of the economic profit margin in 2021 suggests an improvement in operational efficiency and a reduction in the gap between returns and the cost of capital.