美盛公司 (MOS) 2015 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to The Mosaic Company's first-quarter 2015 earnings conference call.

(Operator Instructions)

Your host for today's call is Laura Gagnon, Vice President Investor Relations at The Mosaic Company. Ms. Gagnon, you may begin.

Thank you and welcome to our first-quarter 2015 earnings call. Presenting today will be Jim Prokopanko, President and Chief Executive Officer; and Rich Mack, Executive Vice President and Chief Financial Officer. We also have members of the senior leadership team available to answer your questions after our prepared remarks.

After my introductory comments Jim will review Mosaic's accomplishments for the quarter and our views on current and future market conditions. Rich will share his insights into the results and our future expectations. The presentation slides we are using during the call are available on our website at mosaicco.com.

We will be making forward-looking statements during this conference call. The statements include but are not limited to statements about future financial and operating results. They are based on management's beliefs and expectations as of today's date, and are subject to significant risks and uncertainties. Actual results may differ materially from projected results. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release issued this morning and in our reports filed with the Securities and Exchange Commission.

Now I'd like to turn it over to Jim. Jim?

Good morning. Welcome to our first-quarter earnings discussion. Our results this quarter clearly demonstrate progress on our strategic priorities. Compared to last year the timely acquisition of CF Industries' phosphates business added $0.06 to our quarterly earnings per share.

Expense initiatives and asset optimization drove lower potash cost per ton, adding $0.07 per share in the quarter despite a negative $0.15 per share impact of the change in Canadian resource taxes and royalties. Finally, repurchases of 62 million shares added another $0.07 in EPS this quarter. And this is just the beginning of the benefit we will generate from those moves.

Nothing about our bullish long-term outlook for Mosaic's future has changed since our analyst day so we won't repeat the full story on today's call. Instead our prepared comments will be brief with a focus on the market conditions we expect for the second quarter and second half of 2015.

I'll begin with a review of our solid first-quarter results which were well ahead of last year. Then Rich Mack will discuss segment results, our capital position and our guidance. And finally I'll conclude with a view of the evolving global phosphate and potash market dynamics.

Our message to you today is simple. Mosaic is delivering solid performance and we expect 2015 to be a good year. For the quarter Mosaic generated $295 million in net earnings or $0.80 per share, almost a 50% increase over the weaker first quarter of 2014.

Our adjusted earnings were $0.70 per share with foreign currency transaction gains accounting for most of the difference. I want to emphasize that we continue to generate significant cash with $656 million in cash flow from operations during the first quarter.

Our results were within our guidance ranges, save for the phosphate operating rate which missed the low end of the range by 1 percentage point as a result of an accelerated plant turnaround. In potash, volumes came in at the low end of our expectations, primarily due to lower North American shipments. The late arriving spring, compounded by increased imports sitting in the Gulf of Mexico, has impacted demand and pricing in much of North America.

The new potash contract with China not only provided price transparency for customers elsewhere in the world, but volumes also demonstrated the pent-up demand we have been anticipating. If our expectations for the second half of 2015 hold our challenge will be to produce enough tonnes to deliver contracted volumes.

Historically, timing of North America demand and shipments during this time of year is uncertain. This year delayed North American crop progress and changes in dealer inventories make it even harder to predict. But the uncertainty is surround shipments not necessarily actual application rates.

Spring arrives and farmers plant their crops. This year is no different. In fact, we've increased our estimates for global potash shipments to the high end of our previous range. We now estimate 2015 global potash shipments to be in the 59 million tonnes to 60 million tonnes range.

Potash elasticity of demand appears higher than we previously believed. And we may continue to see strong demand growth if prices of our products remain as affordable as they are now. We continue to expect a good second half of 2015, though our medium-term outlook still needs to be informed by US crop developments and grain and oilseed prices.

With that I'll turn the call over to Rich and then I'll conclude with our views of the diverging markets around the world.

Thank you, Jim. And good morning to everyone. I'll begin today with some detail on our three operating segments.

In the phosphates segment, the primary contributor of our improving profitability is higher selling prices for our products, with the average DAP price $45 higher than a year ago, as well as volumes from the CF phosphate acquisition. In addition, we also continue to capture stronger margins from our premium MicroEssentials product.

Raw material prices were higher this quarter compared to a year ago but the sequential quarter trend was in our favor. Sulfur prices have declined over $30 per tonne in recent months. And we believe the following market prices for urea foretell lower ammonia prices going forward.

All told the cost of sulfur and ammonia in one tonne of DAP dropped about $45 since last November. We believe that Mosaic's leadership position and our previous decision to operate at lower rates contributed to these trends.

In the potash segment, our strong margins and significantly improved year-over-year earnings were driven primarily by our operating efficiency. Our cost-reduction efforts, including our decision to stop MOP production at Carlsbad, and decommission and sell the Hersey mine are delivering meaningful value to the bottom line, and, importantly, shifting us to the left on the global cost curve.

In fact, first-quarter MOP cash cost per tonne were $86, including $17 of brine management expenses. This is a $5 per tonne improvement over our impressive fourth-quarter numbers. These costs are significantly better than what you saw from Mosaic in prior years.

This is the first full quarter with ADM's fertilizer business under our belt, with integration progressing as planned. In the international distribution segment our $21 per tonne gross margin came in slightly under our expectations because of higher prices for raw materials that were passed through to us from ADM.

We have now fully integrated the newly acquired business into our ERP system and expect to have better visibility into our costs going forward. Volumes for international distribution were higher than expected. And we believe sales volumes and margins will improve through the remainder of 2015.

Moving on to our balance sheet and capital, as Jim noted earlier, we provided substantial insight on our capital plans at our analyst day at the end of March so I won't go through all that detail again today. I would, however, like to mention a few key points.

First, our balance sheet remains strong and we are within our stated targeted leverage ratio range. We have approximately $2.5 billion in cash and cash equivalents and currently have approximately $700 million of excess cash. As you know, Mosaic has been a very strong generator of free cash flow and we expect that to continue as we reap the benefits of our recent growth investments.

In the first quarter, we distributed $215 million to shareholders through dividends and share repurchases. At current prices for Mosaic stock, we plan to continue to work down the existing share repurchase authorization. As we noted at our analyst day, we will discuss additional repurchase authority with our Board as we reach the end of our current authorization.

To reiterate our stance on shareholder returns, we have been an active distributor of excess cash to shareholders and are committed to returning excess capital to shareholders in the future. We expect to generate ample free cash flow that will fund future shareholder distributions.

Now let's move on to our guidance for the second quarter. Note that we have slightly widened our volume guidance ranges given the uncertainty Jim mentioned earlier.

In phosphates we expect gross margins to be around 20%, primarily as a result of lower raw material costs. We expect operating rates in phosphates to be in the range of 80% to 85%.

Sales volumes are expected to range from 2.3 million tonnes to 2.7 million tonnes for the second quarter compared with actual sales of 2.6 million tonnes in the second quarter of 2014. DAP prices are expected to be in the range of $425 to $450 per tonne.

International distribution sales volumes are expected to be in the range of 1.4 million tonnes to 1.7 million tonnes with a gross margin of $18 to $25 per tonne. This wider range of gross margin reflects the current volatility of the Brazilian real.

We ended the first quarter with an exchange rate of 3.2 real to the dollar and touched 2.9 just this week. Our full-year volume expectations are unchanged.

In potash we anticipate that our mines will continue to operate at high rates to meet global demand with operating rates expected to be in the 85% to 90% range. We expect potash sales volumes to be in the range of 2 million tonnes to 2.4 million tonnes during the quarter compared with actual sales of 2.5 million tonnes in the second quarter of 2014. We remain committed to our full-year volume forecast.

Average realized potash prices are expected to be in the range of $265 to $290 per tonne, with a gross margin rate in the upper 30% range. We raised Canadian resource tax guidance as a result of both the new tax rules in Saskatchewan and higher expected Canadian dollar gross margins due primarily to the recent Canadian dollar devaluation. We now expect Canadian resource taxes and royalties to be in the range of $325 million to $375 million for 2015.

Our guidance for full-year brine management expenses remains at $180 million to $200 million. Our expectation for full-year SG&A costs also remains unchanged at $360 million to $380 million.

We continue to make good progress on our cost savings initiatives across the Company. And we are ahead of schedule as we work toward our goal of achieving $500 million in savings by 2018.

Our tax rate guidance has changed for 2015. We now expect the full-year effective tax rate to be in the high teens excluding discrete items. The offsetting impact of the higher Canadian resource taxes on Canadian federal income taxes, combined with other items related to our global footprint and business mix, is the primary driver of a lower tax liability this year. In 2016 the effective tax rate is expected to return to the low 20% range.

The other elements of our guidance -- capital expenditures in annual sales volumes for phosphates, potash and international distribution -- are unchanged from last quarter. Specifically, we expect robust second-half shipments given the delayed shipments to India, China and Brazil.

In short, Mosaic is making measurable progress in our efficiency and operating performance. We continue to be focused on our cost reduction initiatives and look forward to a strong 2015.

With that, I will turn the call back to Jim.

Thank you, Rich. Before we take your questions, I'd like to provide some insight into the current and near-term market dynamics for potash and phosphates. While we have seen a slower start this year in some regions, our 2015 global demand expectations for both potash and phosphates are unchanged. Our products remain affordable and provide good value for farmers.

Trends in different regions of the world are diverging, so let's take a quick turn around the globe. In North America, spring planting got off to a late start in the South but farmers are quickly making progress.

With the season just entering full swing we've heard anecdotal reports about cutbacks in application rates. So, we asked. Feedback from our largest customers indicate that their P&K sales are in line with levels of the last few years, and most of the farmer customers are applying P&K at normal or near normal rates.

North American shipments in the first half of 2015 are expected to be below average but that is mainly due to higher beginning levels of dealer inventories. Given the uncertainties about the crop prices, we expect that North American distributors will clean out channel inventories the spring and begin to refill bins for fall application only when the outlook becomes a bit clearer. That, however, may be about the same time as peak second-half shipments to Brazil and India, which could make it challenging for producers to meet strong demand in the second half of 2015.

In China demand is underpinned by high crop prices, with nearby corn and wheat futures trading at more than $10 and $11 per bushel. Implied MOP shipments climbed to a record last year and are expected to be higher in 2015. It appears that at the current price demand is accelerating.

The new Canpotex potash contract is a clear indicator of strong demand, with minimum volume commitments significantly above last year's levels. This volume also reflects our new multiple customer approach in China. While some market observers were disappointed with the contract price, we are satisfied with the netbacks we are receiving from China. More tonnes sold at respectable netbacks is good news for Mosaic and its investors.

We're off to a good start this year in India. Industry potash sales in India are up almost 20% in the first quarter of 2015 despite uncertainty about the government subsidy. This uncertainty will remain until the Indian government publishes its final budget.

The rupee has been fairly stable. And current phosphate and potash prices continue to make complicated import economics work for importers. Retailers' phosphate and potash inventories are at extremely low levels in India, and more imports are needed to restock.

In fact, we have sold over 200,000 tonnes of phosphates to India during the delayed North American spring application season, a tactical move to balance different market dynamics. This is yet another example of our market leadership role in phosphates. In potash, early indications lead us to believe a Canpotex contract will be signed before June.

Also, while we are not counting on an imminent change in the nutrient subsidy system, lower energy prices are clearly providing a tailwind to the Indian budget. As we mentioned at our analyst day, we are optimistic about demand growth in India.

In the first quarter Brazil imports were lower than last year as a result of inventory destocking and currency volatility driving growers to wait to purchase fertilizer until the last minute. We do not see it as an indicator of a decline in demand. Most Brazilian soil requires potash and phosphates, so as farmers plant, they must fertilize.

So, while in the first quarter of this year imports of P and K were down 37%, between now and the rest of the year we expect Brazil to import 11.5 million tonnes of potash and phosphates. The agriculture situation continues to look promising in Brazil, with farmers to sell their products in US dollar-denominated transactions actually benefiting from the weakened real.

So, market dynamics are quite different from region to region. Overall demand for our products from growers is strong. Changes in pipeline and producer inventories certainly don't always make this fact obvious in the short term.

Mosaic's boots on the ground presence in all these critical markets gives us a competitive advantage. We have first-hand knowledge of in-country market dynamics and the ability to adapt quickly to meet shifting customer needs. We are closely watching the 2015 crop progress and the implications for grain and oilseed pricing, which will influence second-half 2015 and 2016 demand expectations.

With that said, a bullish second-half scenario is likely. We wouldn't be surprised to see an earlier summer fill in North America. Brazil is likely to import more tonnes of P&K in the second half of 2015 than in 2014.

China is expected to import about 1 million tonnes more of potash this year on top of very strong volume growth last year. And India's appetite for phosphates is ahead of our expectations.

We feel very positive about Mosaic's ability to succeed in the current environments and across the business cycle. Our investments for growth are generating strong incremental value.

We have secure global market access and a significant advantage in North America. And we are demonstrating that Mosaic can and will be one of the lowest-cost operators in the industry. In short, we have put Mosaic on a path to growing prosperity and that bodes well for our stakeholders.

Now, we will be happy to take your questions.

(Operator Instructions)

Ben Isaacson from Scotiabank.

My question is about non-Canadian potash imports into North America. Can you just run through how that's tracking? And then more specifically can you focus on Belarus? We've heard from Congress that they're trying to block Belarusian potash coming in and we don't even know if it's actually being accepted by farmers. Can you talk a little bit about that, too?

Good morning, Ben. Jim Prokopanko here. Good to have you on the call. Yes, this year imports of non-Canadian potash has been higher than we've seen in past years.

What the Eastern Europeans are figuring out is that North America is a higher netback market. So, we're seeing those tonnes come to North America. But an important thing to remember is those tonnes that are coming to North America are not going to Brazil, India and China, so there's a net balance and we'll see, if not shortages, tighter supplies going to other parts of the world.

I'm going to have Mike Rahm speak about the volumes and what kind of increase we're seeing from, whether it's the Belarusians or Uralkali. And them I may just wrap up with a comment about the issues on the allowance of those products to come into the country. Mike?

Thanks, Jim. And hi, Ben. If I recall the numbers correctly, I think in the period from July-December imports from offshore sources were up about between 550,000 tonnes and 600,000 tonnes. That was part of the increase in the stocking of the pipeline during the first semester of the fertilizer year.

Ben, just on the matter of the permissibility or legality of Belarusian imports, that matter isn't entirely clear. We've largely stayed out of it. Belarusian product was prohibited from coming into the US until recently, and there's a belief that it is now permitted. But we've not weighed into that and we just are standing back from an opinion on that. It's a hard one to really give a firm or get a firm answer from authorities about the permissibility of it.

Andrew Wong from RBC Capital Markets.

We've seen potash costs come down quite nicely over the last few quarters. Could you just maybe go through some of the more details around that and how sustainable that will be going forward?

Good day, Andrew. It's a good question. I'm glad you made that observation. We have, along with expense reduction initiatives in both SG&A and our phosphate business, which are showing results, we're seeing very good and probably ahead of plan results on our potash. I'm going to turn it over to Joc O'Rourke, our Operations leader, to speak to that. But has been something we've applied our efforts to over the last 12 months, seeing good results.

What we're doing, simply, is stabilizing our production levels. We've always maintained the capacity to produce at higher rates than what experience has been for the demand. And now we've said -- we're not going to build a church for Easter Sunday, we're going to have a preset production level. We may have more capacity but we're going to staff and man to a level that is going to be more predictable and that is going to result in lower costs.

The result is we might not be there to take advantage of a sudden fly up but we're going to be running our facilities at lower predictable rates. Now I'm going to have Joc just speak to some of the specific things we've done to reduce potash production costs.

Andrew, I think Jim's probably summarized it quite well. Of course, there's a little bit of Canadian dollar tailwind but the big things is, first of all, the asset optimization. So, shutting down Percy or selling Hersey and shutting down the potash at Carlsbad was the first big step. Those were our two highest cost producers. We felt we could deliver cheaper from Canada than we could run those plants so we've now done that.

The next piece was, as Jim said, was rightsizing the operation. We had a lot of people to allow for those run ups and we've now made sure we optimize that. And then, finally, a lot of work on just reducing waste, whether that be the number of miners we have running underground or the amount of stuff we had going on around our plants. So, it's pretty simple blocking and tackling type stuff. Really, that's how we ended up doing it.

Jeff Zekauskas from JPMorgan.

I was wondering if you could comment on year-over-year change in crop nutrient tonnes in potash in North America in the first quarter. Last year you were at something like 1.1 million tonnes and now you're at 572,000 tonnes. And when you look at your competitors' results I think they were down a little less than 200,000 tonnes and you're down 500,000 tonnes. So, does this point to a very strong second-quarter tonnage result in North America or why the unusual change?

Good morning, Jeff Zekauskas. It's a good question and we're ready for it. I'm going to have Rick McClellan, our Commercial leader, speak to where those differences are. Rick?

Good morning, Jeff. We expected that we would get a question on this. It really is a function of our beginning inventory and what we had in FPDs carried through from 2013. So, in 2013 we through FPDs that were inventory in place but became sales.

This year those FPDs got sold in December and our inventories were low going into 2014. So, the big change there is strictly around timing of our FPD programs.

PJ Juvekar from Citi.

This is Dan Jester on for PJ. If we can go back to the slide in your presentation where you talk about first-half calendar year shipments of potash and phosphates relative to the second half for the US, it looks like you see second-half potash deliveries about in line with the long-term average, but phosphate shipments well above average later this year. So, could you just talk about for the second half why you're seeing two different outcomes for these nutrients? Thanks.

Hello, Dan. I'm going to turn this question over about where the split between first- and second-half phosphate sales are to Mike or Rick. Are you prepared to take that question, Mike?

Sure, Jim, I can address that. Let me just say to at the beginning that the estimates for the second half are very preliminary. It will depend a lot on where crop prices go, how many acres of soybean and corn get planted, and so forth. But making assumptions about those, I think if you just look at where the seven-year Olympic averages are I think that explains most of it.

We expect that phosphate shipments will be a little bit above the seven-year average. And we also expect potash shipments will be a little bit above the seven-year average, as well. The main difference I think just relates to seasonality.

Joel Jackson from BMO Capital Markets.

I had a couple questions. The first question is, you've raised your outlook for global potash shipments this year but kept your own shipment numbers the same. Your largest Canpotex partner has done the exact same thing this morning. And we have an ICL strike, of course. I wanted to know, who do you think is gaining this extra volume?

And then my second question is talking more about Belarusian imports. Is your desire or position here to stand back, is that because you're a proponent of free trade or is that because you no longer have US potash production so your lobbying abilities are diminished? Or maybe there's something else there you could speak to.

Joel, good at getting a couple questions in, and welcome to the call. The first question about the demand, I and Joc commented that we are running our potash operations at ratable capacity. And we took a couple of high-cost facilities out. We are running the Canadian facilities at optimal rates in terms of expenses, and we plan to continue to do so.

In this first half we've seen, following 2014, where the pipeline was fairly well filled with potash. We are now drawing that potash down. I think I made it clear in my comments, with a strong second half, to refill and to meet the growing demand we're seeing in India and China, we think we're going to go into a tight potash market in the second half. And there could be some constraints in terms of supply relative to what we anticipate to be higher demand. So, absolutely the market's going to tighten up, and with that, with a tighter market, you could potentially see -- and we expect to see -- higher potash prices.

On the second question about Belrusia, yes, we are absolutely a believer in free trade. We don't begrudge anyone that. We believe for the ag markets to work we have to have free and open trade. Getting into the nuances that go with geopolitics on who's allowed to come into what countries, we're standing aside on that for this matter in belief of free trade.

And as I said earlier, if Belarusian or Russian additional product comes into North America, that is product that is not going into India, China or Brazil and we'll see the market -- the balance won't change. There'll be some tightening of supply going into some of these other markets, so a push here, it pops out there. So we're not too exercised about the Belarusian product, not at all.

Our estimate is there's only about three vessels of Belarusian product that came here. If we have a customer in North America that wants to buy Eastern European potash, Chinese phosphate, Iranian nitrogen, that's the trifecta of unsecured suppliers, so let them buy it. You've got Canadian secure producers of potash. I think that's the right choice for any producers anywhere in the world to buy from.

Sandy Klugman from Vertical Research.

Thank you. Good morning. You mentioned that P&K application rates in the US are in line with prior years but you also noted that potash demand is more elastic than you had thought. How do you think about demand elasticity for phosphates? And has the consolidation that we've seen in the domestic phosphate market over the past year impacted this, in your view?

Good day, Sandy. Welcome to the call. Rick, I'm going to just have you comment on what you're seeing in terms of farmer demand of the phosphates.

Yes, Sandy, good morning. I think what we saw in potash, and with lower prices, is we saw real on-the-grand demand grow in India, in China, as a reflection of that lower price. When we think about phosphates, right now pricing is in such a way that it makes sense for farmers to use phosphates. And we think with moderating ammonia prices we'll see decent margins for our phosphate business going through the rest of the year.

Rick, I might add that if you look on the demand side, global phosphate shipments have increased I think now for five or six years in a row. And I think just from an agronomic point of view, when you calculate the amount of P&K that had been removed from the soils by these monstrous crops the last couple of years, it really helps to explain why there is a really solid outlook in foundation for P&K demand.

I'm going to add onto that, Sandy. There's been a lot of talk and noise about how farmers are going to cut back, they have to economize. Let's just put this into some perspective.

If we see a 10% cut, if a typical farmer reduces P&K by 10%, that's going to save the farmer about $5 an acre. Now, just to extend that, let's take an average yield, a mid average yield of 160 bushels per acre, net price to a farmer for corn is $3.50 a bushel, that's $560 an acre revenue a farmer's going to see.

Now, do you think a farmer's going to risk cutting P&K applications by 10% to save $5 or 1.5 bushels of corn? I really think that would be a poor economic and business choice by any farmer to do that.

We're not too exercised by this. And we think farmers are going to make smart economic, informed choices. And we just do not see this big cutback or much of a cutback, if any, at all.

Don Carson from Susquehanna.

Jim, a question on potash pricing. In offshore markets we've seen the China settlement that gives a nice base load volume for producers around the world. But we haven't seen an Indian contract yet. Prices seem to still be slipping in Brazil. So, I wonder if you can just comment on the offshore outlook.

And then, just domestically, would you anticipate a summer fill discount this year, a return to normal practices? Is that really what dealers are waiting to see before they restock for the second half?

Hey, Don, good to hear from you. I'm going to take that first question about India potash and what we expect, and I'm going to have Rick speak to the Brazil outlook, him having recently been there, and the summer fill market.

We're still waiting for the India settlement. Hard to say when that's going to happen but we can work back with what we know about just the logistics. The Indians are going to need this product in country sometime in July to have it available to farmers sometime in July.

They've got very low inventories, from all reports we hear from the industry and from our people in the country. So, they've got to get shipping product to their ports soon.

From Vancouver it's just over 35 days shipping from Vancouver to the Indian port, and then you got to get it in country add another 10 days if it moves promptly. So, we're talking about 40 days, a month and half away, to have it there in time for July. So, if you need it there in mid July, let's say, you're going to have to have this product on a vessel, a vessel at the port, ready to go, before the end of May.

So, I'm anticipating that the Indians will be booking a contract sometime early in May or sometime in May. The price we've heard they're negotiating, what's reported in the trade press, with the Russians, looking for $20 a tonne over last year's value. We'll see what the final realization is but I think the China deal is a good model and we will see India book shortly. Rick?

Good morning, Don. I'll talk about the two things. In Brazil we've seen prices since the Chinese contract stabilize. The issue in Brazil is still about farmer demand. And farmer demand is being impacted by volatility in the currency.

Longer term, mid term, weaker Brazilian real is good for agriculture. I think we talked earlier about our expectations of a very strong second half. So, if you think about what the drivers will be in Brazil, there is only so much logistics capacity to get product into the country and through to the farm. And that's going to be challenged the longer the farmer waits. With the currency situations we see them waiting, but we have seen potash prices stabilize.

As far as the summer fill discount, today I would say we're a little too early to talk about how markets will work out for the summer. We'll have to take a look and see just how much demand is going to come from the rest of the world before we discuss what we're going to do with prices.

Yonah Weisz from HSBC.

Good morning. I'd like to ask a question on sales mix and regional trends in phosphates. In the US we have a subdued pricing and demand compared to the higher-priced international markets like India and Brazil. I'm wondering how that's influencing your marketing decisions. I don't think you'd abandon the US entirely but is your sales mix in phosphates making a significant shift to foreign markets? And if you are shifting abroad has there been any secondary secular impacts on how US purchasers are seeing domestic availability of DAP? Thank you.

Hello, Yonah, thanks for that question And Rick McLellan, our Commercial leader, has a ready answer.

Good morning, Yonah. The prices in North America we're, I would say, for a while trending below international prices, which caused us to take a look and say we need to pull tonnes out of North America. We had existing markets we could go to in India. We did that. Since that happened the North American market has popped back up.

Frankly, one of the things that we need to do is look at where we need pressure relief points as a market leader. And that's the point that we want to make, is that we're doing those things so that we can balance the markets. And since we did that, made that move two weeks ago, and announced it, we've seen the North American prices rise, as well as some of the futures swaps markets reflect those changes.

Chris Parkinson from Credit Suisse.

Perfect, thank you. Just circling back to phosphates, you hit the high end of your phosphate guide in 1Q despite a lot of activity from the Chinese, Russians, et cetera, being active in 1Q. But prices moderated a little more than many of us expected. Can you just comment on your expectations on price trends as we head into the back half of 2Q and into 3Q, particularly as one of your Russian competitors was fairly bullish on a pickup in India? When should we expect that to flow into DAP prices?

Rick, why don't you continue with that on the phosphates.

Yes. We did see prices come down in Q1, reflecting just a later and delayed start to North American demand. I think the one thing to keep in mind is we've seen decreased raw materials. Sometimes people get excited about the volatility of the price in phosphates. But what we focus on is looking at what our stripping margin is, which is looking at what the margin is going to be. So, as we drive through, we see as we go into Q3 there is some opportunities for our stripping margins or our gross margins to increase.

Vincent Andrews from Morgan Stanley.

Good morning. This is Neel Kumar calling in for Vincent Andrews. We were wondering, given the strength in the USD, do you see any change in international M&A opportunities?

Hello, Neel. Sorry -- your question is with the US dollar change are we seeing changes to demand. In phosphate it's having an impact but as the US dollar gets stronger we're seeing the price of grains and oilseeds realized, in the case of Brazil, to Brazilian farmers, they're getting more revenue for it. That's a positive.

But relative to our competitors on the dollar it's a bit of a headwind. On potash we have a bit of a tailwind. The Russians have a bigger tailwind but it's helped our business and marketing, as well. I'm going to have Rich Mack add to that.

Neel, on M&A I would say not really. If an opportunity came up, obviously we would look at the impact that foreign currency fluctuations would have on that, but it's not something that we're particularly focused on.

Kevin McCarthy with Bank of America.

Good morning. A few related questions on share repurchases. First, would you advise the amount that you repurchased in the quarter, as well as the remainder on your authorization?

And then, more broadly, can you discuss your latest thoughts on capacity to recapitalize? I think you mentioned you have $700 million in excess cash. If we look at your net debt it seems to be running about half of a turn of EBITDA, roughly. So, it would seem that you have dry powder, so to speak, of more than that. I was wondering if you could address that in the context of the correction in the share price. Thank you.

Good morning, Kevin, and welcome. Good topical question and our CFO Rich Mack is going to address that for you. Rich?

Thanks, Jim. And good morning, Kevin. Nothing has changed materially, I think, from the extensive information that we provided at analyst day at the end of March. Your question how much did we buy in the quarter, it's about $125 million of stock we repurchased in the first quarter of 2015.

Some of the things that I would share with you, just from a color commentary perspective, is Mosaic's strong cash flow generation, $650 million in the first quarter, which is very positive. And as you noted, we have about $700 million currently of excess cash. So, we have under $150 million left under our current share repurchase authorization. And we expect that we will exhaust that remaining authorization.

As I noted in the analyst day event, we will be reviewing the issue of capital, capital management and additional share authorizations with our Board. We have our annual meeting, just to note, in the mid-May time horizon. So, we will certainly provide additional updates when we have more information.

We agree with you, at current prices Mosaic share price is very attractive. I would note that we have been extraordinarily active in the last 14 months. We have repurchased 60 million shares of Mosaic stock.

And with respect to our balance sheet targets, I think I indicated in Florida that our mix on our liquidity buffer, our $2.5 billion, that is something that we will continue to review. And the mix between cash and revolver capacity is something that could change over time.

With respect to our leverage target, we're comfortable but it's something that we continue to look at. We look at this not on a net debt basis, we look on it as a rating agency would look at it -- so, on an adjusted debt to adjusted EBITDA basis. And if you do it that way we're currently at the high end of the range. But we'll work our way down to the low end of the range just with our EBITDA incremental generation here in the next few years.

The main objective that we have would be practical on capital, a good balance with growth investments and shareholder distributions, and to maintain our solid investment grade credit ratings.

Thanks, Rich. I'm just going to, Kevin reinforce something Rich said, and that is we've repurchased $2.8 billion of our stocks since the beginning of 2014. So, there's little doubt that we know how to do a buyback. And I think you all know to do another buyback we need Board authorization. And Rich was right to say we have an AGM coming up, a Board meeting coming up, and this will be top-of-the-screen topics for our Board to consider. So, just stay tuned. Thanks.

Michael Piken from Cleveland Research.

Good morning. I just wanted to go through the cadence of your costs for both phosphate and potash over the remainder of the year. Specifically on phosphate, how quickly could we start to see some of these lower sulfur and ammonia costs roll through to your P&L?

And then on potash, I know historically you've taken more cutbacks in the third quarter, but it sounds like now you're going to be running at more stable operating rates, so would it be fair to use the class profile we saw in the first quarter and run that through the rest of the year? Thank you so much.

Hello, Michael. Thanks for the question. I'm going to turn this over to Joc O'Rourke, our Operations leader, to address your question.

Thanks, Michael. Let's hit the phosphate question first. In the next couple quarters we're seeing probably a downward trend on ammonia pricing likely to hit us, and probably a flat, when we look at the world markets, probably a flat sulfur pricing in the next couple of quarters.

In terms of timing, the way that hits us is, with moving it through to cost of goods sold, it's probably a lag period of somewhere between 1.5 and 3 months for that really to show up. So, there's always a little bit of a time lag there. So, what we would see is the more recent ammonia pricing, we'll really start seeing that about a quarter away. So, next quarter we should start seeing the impact of that.

In terms of the potash business, generally our shutdowns, our plant turnarounds, are done in the summer months because of weather and availability. So, we wouldn't see ourselves running at high operating rates in the months of July, August and September. Those would traditionally be our lower operating rate months and so our costs will reflect that in those months.

I'm going to add to that Michael. Our operating costs and raw material costs are important strategic levers that we have a good bit of control over -- not entire control over but we could influence those costs. And we've been working hard to do that.

Back in 2014, we took some curtailments because we believed that ammonia and sulfur were getting out of line with the pricing of the finished product. And that had the desired impact. We've also made investments in a sulfur melter that will be operational towards the end of this year. And that is going to give us some optionality in sourcing sulfur from non-traditional North American markets.

We have the anhydrous ammonia supply agreement with CF Industries that's going to give us preferred pricing on ammonia. And we're also looking at debottlenecking our Louisiana ammonia facility again, to provide us with some lower-cost ammonia.

So, you're right on to ask that question, to follow that component. It's so important in phosphate that what really is the principal financial item to look at is the stripping margin or the gross margin, not so much the price when we run that business. So cost, a big deal for has here at Mosaic, and we are really focused on that and doing what we can to keep us in the bottom end of the cost curve.

With that, I'm going to wrap up the call. Michael's was the last question. I want to, first of all, thank everybody for being on this call today. I know this is a busy earnings day with you and some other people in our space reporting so I know you have your hands full.

I just want to conclude with some of our key messages I hope you already heard but will reinforce. First, Mosaic delivered very good performance for the quarter. And certainly compared to the prior year we're really pleased with where the quarter ended. We're well ahead of last year largely because the growth investments that we've made and the cost-cutting programs are really starting to show a pay off.

Second, we expect 2015 to be a good year for both potash and phosphate shipments, with strong growing global demand for both our products. And, finally, Mosaic is very well situated -- ideally situated, I'd say -- to benefit from the positive secular trends we're seeing in the ag space, and to deliver strong returns to our shareholders.

With that, thanks everybody for joining us, and have a safe day.

This concludes today's conference call. You may now disconnect.