03:06 PM EDT, 08/12/2024 (MT Newswires) -- Mosaic (MOS) is benefiting from the elevated phosphate prices due to a tight supply resulting from restrictions in China, production issues in Saudi Arabia and North America, and controlled production increases in Morocco, RBC Capital Markets said in a note emailed Monday.

Phosphate prices are expected to remain higher than historical levels but are also anticipated to see softness into next year, according to the note.

RBC said that H2 will be crucial for Mosaic to demonstrate the effectiveness of operational improvements as it targets nearly 8 million tons annualized run-rate and cost reductions of $20 to $30 per ton by the end of 2024.

"We see affordability as a potential demand headwind, evidenced in lower imports (Brazil, India) and switching to lower value products," the firm added.

Mosaic's Fertilizantes distribution margins are strong, but H1 volumes were down compared with last year due to demand in Brazil being pressured by lower crop prices and affordability concerns, RBC said.

RBC expects Mosaic to generate free cash flow of around $830 million in 2025 and $750 million in 2026, supported by reduced capital expenditures and cost savings.

RBC reiterated its sector perform rating on Mosaic's stock and kept the price target at $30.

Price: 27.39, Change: +0.34, Percent Change: +1.26