Bruce Bodine: Yes. To confirm, the Department of Commerce did as part of their process due to their preliminary ruling from an annual review standpoint, this would be on 2022 duties, so going back in time. And what were their interpretations of subsidies or things that were done in those jurisdictions, namely Morocco and PhosAgro in Russia. And yes, the preliminary numbers went up on one that went down on the other. The other complication in this process is there’s appeals that are still outstanding waiting for rulings on. And then the annual review and new duties for what was just announced don’t get finalized until November of this year. So I think to your point, there is a lot of volatility, uncertainty around where some of these duties lie.
Our customers, I think, have gotten used to that in North America. We’re here and our heavy focus is on supplying North America first with our production and market share over 50% where we like to be and continue to be here for our domestic customers. But we’re also saying no hesitation to bring in more imports from a more diverse set of importers. And I think at the end, what that means is a healthier industry for U.S. fertilizer but also healthier competition for the U.S. farmer. So I think the duties from our perspective, have worked as intended. They are leveling the playing field and eliminating unfair subsidies that were quite honestly and proven again with the International Trade Commission earlier this year, we’re causing injury to the industry.
So we’re supportive of the process. We know that, obviously, it’s got some uncertainty around it. But I do believe the U.S. farmers have adapted to that and it’s just modifying trade flows and bringing more competition and a more diverse slate of importers here in North America.
Operator: Our next question comes from Andrew Wong from RBC Capital Markets. Please go ahead with your question.
Andrew Wong: Thank you for taking my question. So just going back to Ma’aden, it’s been mentioned a few times now that the deal was done in part to bring more transparency on the value of your investment. So I’m just kind of curious how you feel about the valuation now. Like I understand it’s a market value. But the valuation also seems kind of high relative to some of their peers like yourselves and the ability to realize that value and maybe depends on liquidity. So how should we — and how do you view that $1.5 billion valuation today?
Bruce Bodine: Andrew, good question. Something we’ve been talking about, obviously, a lot as we entered into this deal. And I’m just going to turn it over to Clint because he’s — he’s got some good thoughts around this topic.
Clint Freeland: Yes. Thanks, Bruce, and thanks, Andrew, for the question. A couple of different thoughts on this. One is — as we looked at the value of our JV interest, we look at it as you traditionally would through DCF means and other means and feel like the call it, $1.5 billion valuation is a very fair valuation that we found attractive and obviously agreed at that kind of level with our counterparty. I think as we look at the shares themselves, as we took a look at the consideration that we were receiving, given that, I think we would expect this transaction to close by the end of this year, 2024. And as we look at consensus estimates and Ma’aden is a pretty well-covered company, as we look at consensus estimates for 2025 and ’26, and we look at what does that translate into from a multiple standpoint.
What we see is that, that implied multiple is very consistent with how they’ve traded historically, and I think maybe quite a bit down from a multiple standpoint from maybe what was noted in 2023. So as we look at forward into the time of our ownership, ’25, ’26 we see a multiple being applied to valuation, very consistent with past history over several years. As you also noted, I think they have historically traded at a premium multiple to peers. I think there are a number of different reasons for that. But again, as we did our assessment looking forward into our period of ownership, that relative multiple compared to peers, again, very consistent with history. And so — and didn’t seem elevated relative to history. So I think as we look at the valuation itself, for our share of the joint venture.
Obviously, we noted that it’s 2x our initial investment. And again, we feel like it’s a very appropriate and fair valuation. And then as we look at taking stock back in Ma’aden and again, look at some of the associated valuation metrics, again, they seem very much in line as we look into ’25 and ’26, very much in line with how they’ve traded in the past. So I think given those factors, that’s how we got to a comfort level with the type of structure that we’ve agreed to.
Operator: Our next question comes from Josh Spector from UBS. Please go ahead with your question.
Josh Spector: Hi. Thanks. Just another quick one on Ma’aden. Just I was trying to think about the cost side of things. So as you convert to an equity holder versus an operator share in a JV, what’s the impact on free cash flow and EBITDA over the last 12 months and talked about some off-take agreements. Does any of that change and that you’re paying market versus costs, so just the moving parts there, please?
Bruce Bodine: Yes. Thanks, Josh. As far as the supply agreement, I think it’s just — we have the option to look at that if we needed for key markets so addressing your latter part of your question. And those things would be to be negotiated, but we have that optionality. As far as the first part of your question, maybe I’ll turn it back over to Clint and give your thoughts around the EBITDA.
Clint Freeland: Yes. Thanks for the question, Josh. I schedule for Mosaic, I think it will have very minimal impact on EBITDA and free cash flow. Historically, we have only included cash dividends in our EBITDA numbers. We obviously have equity earnings that are included on our financial statements. I think in 2023, those equity earnings pretax were $57 million. I think the cash distributions. Last year, we received $25 million, I believe, in the first quarter of this year, we received $15 million. And so that’s what would be included in our EBITDA and free cash flow. So I think as we look forward, I think there really is minimal, if any, longer-term impact or consequences to our EBITDA and free cash flow.
Operator: And our next question comes from Charles Neivert from Piper Sandler. Please go ahead with your question.
