Stone Wall is "flaking" - how to fix?

Hello, I hope someone can help me out here.

At my parents house, their wall on the outside is starting to "flake"
and we are not sure how to repair it.
It is a stone-like brick wall.

Here is a picture of their wall, and You can see the stone-type

Now there is one stone that on the right side is starting to flake.
I touched it and it was actually soft and puffy.
Like if a piece of cardboard got wet, it gets soft and puffs up.

Here are some pictures of it:

you can see it flaking in the upper-middle of the picture. On the
bottom of the picture you can see flakes that fell off.

This is a closer picture of it:

and another angle:

So what is the best treatment for this?

They told me they got a 80lb bag of sand/cement mix from a friend.
They want to mix up a little of it this weekend and just apply it over
the right side of the stone.

Is that the best way?

What else could we do to fix this?

How could stone get like this? What caused it?