The Mosaic Company Price & Performance (MOS)

Good morning and thanks for joining our call. I'd like to start by welcoming Luciano to his first call as Mosaic's CFO. We've known him for a long time. Through his service on Mosaic's Board, and we're thrilled to have him on our team. We're taking a different approach this quarter During this first part of our call, I'll cover our high level business performance and strategic progress, and Jenny Wong will give you an update on the markets, followed by Luciano providing more context on our financial performance and capital allocation strategy. After that, we'll take your questions. I'll start with our key messages for today. First, agriculture markets have improved. And we expect constructive ag and fertilizer fundamentals in 2025. Second, at Mosaic, we are making operational and strategic progress and the business is positioned well to benefit from good markets this year. And finally, our work to shed non core assets and reallocate capital is taking shape. To cover the numbers, fourth quarter net income was $169,000,000 and adjusted EBITDA came in at $594,000,000 We saw strong phosphate prices and stripping margins solid potash performance despite low prices and excellent underlying business performance in Brazil. Let's talk about the segments first.

In potash, the 100% operating rate and record production in 2024. We resolved the electrical issues we experienced in the third quarter and we are operating at full milling and hoisting capacity now. Which will let us continue to drive costs down. It clearly benefits us to produce every ton we can at Esterhazy, and we're investing to do just that. Last year, we finished The project to increase our compaction capacity by 500,000 tons. And this year, we expect to complete hydrofloat project to provide an additional 400,000 tons of capacity per year. We expect potash demand to remain strong given affordability and the trends in crop prices combined with supply reductions caused by recent news coming out of Laos, China, Belarus and Russia. There's a lot going on in geopolitics that could impact potash markets. There is quite a bit of uncertainty around Canadian tariffs and we're watching that situation closely. Even accounting for the impact of tariffs, potash prices will remain affordable Therefore, we expect no major demand destruction. The potential resolution of the war in Ukraine would have very little impact to the global potash supply. The same goes for Belarus The. Very little impact on supply.

Jenny will give you more detail about these dynamics in a few minutes. In phosphate, supply remains tight, and demand remains very strong. Which has led to prices and stripping margins remaining significantly above historic levels I should note that we have secured our long term ammonia supply. We signed the last of three supply contracts late last year so we have locked up reliable supply at competitive rates. Restoring our U. S. Phosphate production to historical levels remains a top priority. Fourth quarter production was lower than expected because of a challenging recovery from hurricanes Helene and Milton. Most of our storm related downtime was in the fourth quarter. We've often said the pathway to higher levels is not straight up. Early this year, we have turnarounds at Bartow and New Wales. We have more work to do to improve asset reliability in Florida and Louisiana. To this end, we are accelerating capital spending to address these issues and expect that work to be finished by the middle of the year. Overall, we expect our production volumes to improve throughout the year and reach 7,200,000 to 7,600,000 tons for the year. Our business in Brazil is performing very well even with the market credit headwinds.

Our fourth quarter adjusted EBITDA for the Mosaic for La Zanche segment of $82,000,000 shows strong underlying business performance. Our margins in Brazil are healthy. Our distribution margin was at the high end of the annual normalized range and our production cost per ton trended down in the fourth quarter. With the constructive market dynamics we see ahead in 2025, we feel good about Mosaic's business in Brazil. Our solid operating performance is supported by good cost discipline, We're making good progress toward our cost reduction targets but I'll leave the details to Luciana. Now I'll talk about our strategic progress. We've told you before that we're analyzing our facilities on the basis of their returns on capital. The outcomes of that work are allowing us to find better owners of underperforming assets and redeploy capital for better returns. We've already announced several deals, including the pending sale of our Patos Dominguez site in Brazil and the conclusion of the modern transaction. That deal gave us a transparent value for our investment. Which is about $1,500,000,000 as of today. As well as a $522,000,000 gain in a long term capital redeployment possibility. We have other moves in the works including our pursuit of strategic alternatives for our potash mine in Carlsbad, New Mexico.

We're not just focused on making our portfolio stronger, we're also investing in our strengths, and growing in our core business in new areas. In addition to the Compassion and Hydroflow project I mentioned earlier, our new 1,000,000 ton blending plant in Pomerachi, Brazil is almost finished. Our newest growth engine, Mosaic Biosciences, is accelerating We doubled revenues and acreage on which our products were applied in 2024 and we expect a similar growth rate 2025. We will have a lot more to say on Mosaic Biosciences at our Analyst Day in New York on March 18. I hope you'll join us [indiscernible] Now, I'll ask Jenny to give you her thoughts on agriculture and fertilizer markets. [indiscernible] Thank you, Bruce. We expect 2025 to be a good year for agriculture commodity Let's start with crops. Fundamentals are strong for most crops around the world. Strong global corn demand in 2024 is leading to expectations of a much lower stock to use ratio. Which in turn has led to rising corn prices since last September. So the bean prices have also moved off their lows The last year.

Animal protein market remained very strong and are expected to continue. To drive robust demand for grain and oil seeds product in feed regions.

In addition, palm oil prices have stayed in high range for some time now. All in all, the world's farmer has strong financial incentive to maximize yield in 2025. Of course, that bodes well for phosphate First, with phosphate, higher crop prices mean phosphate will be more affordable and we believe demand will remain very strong. And remember, phosphate fertilizer demand is driven by a combination of factors. Including rising oilseeds production with the increase in global biofuel demand, At the same time, rising use of phosphate for battery production has created another pool on phosphate. With limited new phosphate production coming into the market over the next few years, and with ongoing Chinese export restrictions, we expect supply to remain tight and prices and stripping margins to remain elevated by historical standards. Regarding stripping margins in the near term, we anticipate that they will remain attractive. Even with sulfur prices increasing. As ammonia prices are expected to come to ease, and as a matter of fact, March spot ammonia price was concluded at $40 below from the last month. In potash, as Bruce mentioned, global demand has been strong and we expect that to continue. Palm oil prices are supporting another strong year for potash application in Malaysia and Indonesia.

While Chinese demand is expected to remain solid, after two consecutive record shipment years in 2023 and 2024, with volume topping 37,000,000 tons [indiscernible] Bear in mind, that shipment averaged just 15,000,000 tons in the preceding five years. In China.

In addition, Brazil has walked through much of its inventories through the second corn crop and we have seen very strong demand for potash in the soybean season. As a result, we expect 2025 shipments to set another record Supply is likely to be more constrained this year than last, due to the two largest producers in China guiding to lower output in 2025, and The [indiscernible] that they would produce fewer tons. Additionally, there is significant uncertainty as to how much additional production will be available from Laos, Given continued issues with mine inflows and sinkholes. As a result, we believe potash market are improving The very constructive. Now I will pass the call over to Luciano for insight into our financial performance. Well, thank you, Jenny.

And thanks to you, Bruce, for your warm welcome. So I've been CFO of Mosaic now for two months, responsible for finance strategy, IT, Coming in, I think, Mosaic is mature. Has a clear strategic direction. Strong financial foundation, I can give you several examples. The balance sheet is a good place.

BBB where it's most efficient to be We have lots of funding options in place. Share count has been reduced by almost 20% over the past years. Something that maybe the market doesn't fully appreciate And yes, after a few years of cost inflation, I believe there's good momentum in the cost control initiatives. And $150,000,000 target, I'm confident we will reach it and we'll discuss this in a moment. Capital expenditures are also under control. Mosaic delivered on its commitment to reduce CapEx by about $200,000,000 last year. This year, we have flat CapEx to address some reliability challenges. But we will continue to reduce CapEx in future years. I'm privileged to step with so much already accomplished. I'll give you some detailed comments and color on some of the most meaningful numbers on our financial statements and performance. This is a little new but my goal is for you to be able to understand the drivers of our and to model it [indiscernible] So I'll start my comments with net income. Obviously, it's complicated, lots of non recurring events. First one, we exchanged our stake in the MW SPC joint venture. For the shares of The and you see a $522,000,000 gain on this one.

And this is a difference between the market value of the shares on the date of the closing to the book value of our former stake on the joint venture. But then you have another gain of $28,000,000 and this is now the increase in the market price of the stock between the closing date and December 31. And going forward, you will see the mark to market of the value of those shares reflected in our financials. So this is going to be recurring. Net income was also impacted by this large balance sheet $390,000,000 for exchange loss in the fourth quarter, which is in the Notables table in our press release. That comes from the end of company loans from The U. S. To Brazil and from The U. S. To Canada, They're both denominated in U. S. Dollars. And the issue is that the Brazilian real weakened a lot during the fourth quarter by 14% worst performing currency in the world.

And so the local Brazilian balance sheet [indiscernible] also increased by a similar amount. And the Canadian dollar also weakened by 6%, so the Canadian balance sheet also faced a loss So these negative effects were huge in the quarter and they go up into the consolidated financial statements of Mosaic as a whole. Well, but this foreign exchange story also goes into the adjusted EBITDA performance of our businesses. And again, and most importantly into Mosaic's Artisanes in Brazil. The Brazilian distribution business buys and sells finished product in any given time open payables in dollars. The payables now in Brazilian reais are more expensive. And as we pay the obligations, we recognize a loss in EBITDA in the local income statement.

The difference between the payables in U. S. Dollar, the current exchange rate, which more expensive and the older one. This goes into EBITDA. There are other smaller losses in FX hedging. And all in all, that reduced the adjusted EBITDA for Brazil by $35,000,000 in this quarter.

And may continue to have around 20,000,000 impact in the first quarter of twenty twenty five just because we still have and working through the old tables. And why am I saying all of The? Because I want to call you to the fact that our adjusted EBITDA for Brazil in the fourth quarter was $82,000,000 The that was after all these charges. So to see our underlying performance, you need to add back this $35,000,000 loss. So instead of $82,000,000 of adjusted EBITDA, we are in the $120,000,000 territory.

And once these payable things is gone. That's the number you're going to see printed from the second quarter of twenty twenty five onwards.

So it's actually going to be even higher given the cost improvements ongoing. So why we're now into this $120,000,000 plus territory for EBITDA? For two factors. First, cost performance is really now strong. As part of the $150,000,000 cost reduction dollars dollars recurring savings only in Brazil. Just to give you some color, one initiative, for example, we changed our mining plans, we increased rock production, and we The importing faucet rock is much more expensive. That only change reduces our operating and about $15,000,000 was already captured in 2024. The other factor is now that the FX rate provides a tailwind in costs.

So altogether, if you compare fourth quarter of twenty twenty four with fourth quarter of twenty twenty three, you can see this in our performance data sheet, which is in the website.

Fossil rock costs are down 15% and phosphate conversion costs are down 23%. That period. So very confident about Virtusa's interest going forward.

So one The highlight is SG and A. $497,000,000 in 2024 is largely flat you compare to $5.00 $1,000,000 in 2023.

But 2024 includes a $30,000,000 loss on receivables. You remember a significant Brazilian retailer got defaulted. Without this loss, SG and A would have been like instead of $4,000,000 The, would have been $34,000,000 less.

Or a 6% year over year reduction. And considering other nonrecurring noncash factors, we can say that $42,000,000 have already been saved on intrinsic SG and A as part of the $150,000,000 in cost savings. And by the way, we've got insurance on this $30,000,000 debt. So at some point, we expect to revert the majority of this loss in bad debt. How about potash and phosphates? In potash, MOP costs have been largely flat $65 to $75 a tonne in the past The quarters.

But it should edge down as we produce more tons from Esterhazy, which is our most efficient mine, And with the hydroflood project, coming online later this year. The margins will also improve as we make more granular products which in average earn about $20 to $30 more than standard products.

In phosphates, the cost actually increased in Q4 due to the plants being idle following the hurricanes we discussed, But the recovery in volumes will in '25 we'll dilute the cost per ton. And we're already looking for more than €150,000,000 in cost reductions. So we have this digital acceleration program that should bring about $70,000,000 in benefit Another $50,000,000 is coming from a better mine plan and mass recovery at our Patrocino And Arashat Complex in Brazil. And we will discuss all of this in detail and we'll have additional news for you on our Analyst Day upcoming on March 18, which I invite all of you to attend. I'm sure we're going to be discussing capital allocation in the Q and A. And I was very lucky to come in right in the middle of the conclusion of the $1,500,000,000 deal with ModernShares The. And I actually got my hands and worked in the $125,000,000 Patos deal I'm fully committed with the program to reallocate capital to the benefits of shareholders. And one final note, we've decided to discontinue our monthly price and volume releases. We've received some feedback from you that these releases were not particularly helpful.

More noise than signal, so we're discontinuing. So with that, want to turn the call back to you, Bruce.

Thank you, Luciano. To summarize, Mosaic delivered a solid year despite considerable market weather and operational [indiscernible] Our outlook for 2025 is positive. With our improving operational performance, lower cost profiles and excellent financial foundation, Mosaic is well positioned to benefit from the strong market conditions we see ahead. Now, operator, we would like to take questions from the audience. And your first question today will come from Chris Parkinson with Wolfe Research. Please go ahead.

Great. Thank you so much. Your press release, you mentioned it's your belief that 700,000 tons were sacrificed in 2024. Your process phosphate and you mentioned some of this in your prepared remarks. So that would leave you about 7.1 at the midpoint for 25. So at the midpoint for '25 guidance, it's about 300,000 The Wouldn't just the fast acid turnarounds get you said number anyway? Or what's the best way to think about that And if you could throw in some half on half comments, that would be very helpful. Thank you so much. Thanks, Chris.

Yes, about 700,000 tons due to kind of those extraordinary events due to weather and some other things that we had to deal with in 2024.

Get you to that kind of 7.7%, 7.1% The you said.

It's the fast acid turnarounds, it really is a sulfuric turnarounds that we've focused on for the last several years coming out of the pandemic The really got up [indiscernible] And we've been talking about that and the catch up work and I think that might be where you're going Chris, if I understand right.

So yes, so FERC is back as we've said kind of on those three year turnaround cycles, But what we found as we went into December and actually if you were to add in kind of the hurricane impacts or just December production, would have had one of the best production years or quarters in maybe the last two years. So we had a chance to kind of put the accelerator down given that some of our sulfuric issues are largely behind us.

And we did find a couple of bottlenecks in FOSS acid particularly at new wells that we need to address. And part of the reason that our CapEx is staying flat this year is we're putting a little more money in the first half of the year to deal with some of these lingering effects on downstream of sulfuric in some of our facilities here in Central Florida and Louisiana. [indiscernible] that is maybe the half over half difference that you're talking about Chris and what to look for. So as we announced quarter one was always going to be kind of a challenge quarter given The Bartow turnaround, which should be wrapping up next week.

And then we've got some other turnaround work that was in our normal [indiscernible] but now we're accelerating forward some additional reliability work in phosphore cast The the new wells that's going to suck up a little bit more capital this year. In order so that the second half of the year is at that max capacity run rate. So will see a difference between first half, second half. Given that pull forward of some work that we're doing to really address those lingering reliability issues in phosphoric acid. And your next question today will come from Andrew Wong with RBC Capital Markets. Hey, good morning. Thanks for taking my questions. So Mosaic, I'll just have them in very interesting monetization of assets with modern and Matos Minas. Just wondering what other assets might be considered? You mentioned Carlsbad. Is there anything else that might be notable that we should be thinking about? And then just regarding the modern transaction, are there ways to Yes, Andrew. No, thanks.

I think we've been pretty consistent and I'm going to turn over to Luciano in a minute to talk about some of the details because he kind of highlighted that on the prerecorded section. As we're looking at every asset within our portfolio to see if it generates returns that are acceptable, Some examples, as you mentioned, the modern transaction was The kind of tip of the iceberg of that this as we close 2024, even you go back to Streamsong in 2023, that was another example of looking at our portfolio The pathos demean us mine, which is an idled mine, had an opportunity to sell that for something that contributes very positively And as you said, Andrew, we do have a process ongoing and optimistic that we may have some news in the upcoming weeks to announce at Carlsbad. So every asset is being looked at. And if we've got opportunities to think differently about that, opportunities maybe even consider divesting of that. Those are things that we're going to continue to look at. And we'll be talking a lot more about that in detail in our Analyst Day on March 18. But Luciano, I'll turn it over to you.

No, Bruce, we said it all. We asked for patients from you on The street because it's there's a lot of studies ongoing No stone is going to be left unturned. There will be specifics being given at the The Investor Day. And as Bruce pointed out, we're very optimistic with the Carlsbad, the way The things are going. So we should expect some some news important news for you maybe as early as Q2. And as regards The modern shares, yes, there are ways to monetize it. [indiscernible] We are looking into it. But you shouldn't expect Something I would say on the size of the entire shareholding because simply because there are constraints liquidity constraints to do it like third parties to do it.

Lots of ideas Is that something that we're looking upon very, very carefully [indiscernible] again, as news comes out, we're going to let you know as soon as we have decisions Your next question today will come from Steve Byrne with Bank of America. Please go ahead. Steve, your line may be muted. Yes, sorry about that. I'm struggling to understand your your outlook for global phosphate shipments. It's the chart you have in Slide 20 you look at that and you look at the ten year period before 2022, and you would project something much greater than the low end of your forecast for '25. So what has happened in these last few years, it's not like these growers use of phosphate is discretionary if it's being removed with the crops, is this a case where there has just been excess material in most soil as there have been greater application rates than needed. Why isn't there a yield drag from this and one more by extension is there potential for this curve to really flatten longer term from your Biopass and PowerCode products, which can can release the immobilized phosphate in soil. Steve, thanks for the question. I'm going to end up I'll kick it off and say a couple of opening remarks and then give it over to Jenny.

To kind of get into the specifics on the yield and application in phosphate and then the complement of your question on biosciences But I think what we see is that it's actually a supply side limitation on demand growth for phosphates. There just is limited supply in the marketplace which is why stripping margins have stayed so constructive for so long.

We're seeing that kind of six thirty to six fifty price point and north of $400 stripping margins realized stripping margins for Mosaic even above that by $20 to $40 a ton given our advantages.

So it really is the constructiveness and the tightness of the market largely driven by the export constraints and the discipline on exports coming out of China. So we don't see that changing much, Steve. And actually, competition for phosphate molecules outside of just pure play agriculture are going to continue with our LFP And this is probably where biosciences actually are complementary to that supply constraint to actually allow farmers to continue to get good yield improvements even with the supply constraint on phosphates until such time that there is significant new greenfield capacity announced. Which just isn't the case. So a one to one point pound compound annual growth rate in phosphates I think is what we would expect going forward through the decade. But Jenny, turn it over to you. Sure.

Thanks Bruce.

Steve, I think you raised a very good question. We actually projected The demand growth for phosphate globally should stay at a trend line between 1% to 2% but you're exactly right.

Didn't happen over the last couple of years. As Bruce mentioned, it's really constrained by supply. As a result of its quite supportive to the stripping margins and prices. I would like to also to mention to answer your questions related to the phosphate application rate and how that might impact the yield. As many people know, our probably don't know, phosphorus is one of the least efficient applied nutrients. Meaning in general, only 50% of the phosphorous applied on the ground uptaken or used by plant or crops. So meaning The is a big amount of phosphate being applied and stayed in the soil. With reduced application rate over the last couple of years.

We may see some of the underlying impacts to the yield. Some of the biological products like you mentioned and thank you for cutting out the two The brands that we have Power Coat and Bow Pass. These are two good examples that The materials actually could help to generate organic asset which help to make the phosphorous tied to the soil to be more available for the crops to use. Which in turn to make the phosphate use efficiency much higher, which helped yield increases. So more to come apart from these two flagship brands that we have, and we actually have even more advanced product in the pipeline. And stay tuned, we're going to talk more on our Analyst Day on March 18. [indiscernible] Your next question today will come from Joel Jackson with BMO Capital Markets.

Good morning. This is Anthony on for Joel. Maybe just a question on potash. What could maximum potash production look like compared to the guidance range you provided as global demand surprises to the upside this year? Thanks, Anthony.

I think there's probably limited upside on maximum production at least from from us. And I think even on the Canadian producers, I mean, you have to talk to Nutrien about what they think. And I think it probably happened on prior call last week, but We're running at kind of full rate at Esterhazy, full rate at [indiscernible] We use Calance as our swing facility. It will be running and is running right now. We will always continue to analyze The. But if there was upside, I think it gets down to can The supply chain getting out of Canada actually take significant more tons. For sure, there's more incremental on the fringes and that's probably on the high side. Not probably it is on the high side of our range. But there is a limit just given rail fluidity capacity at the ports, to get significantly more capacity out of Canada. So I think that becomes the limiting constraint. And that would as I said, the high side of our guidance really assumes that supply chain works very well and demand is on the higher end of the [indiscernible] Jenny, anything to add to that?

Think you covered, Bruce. I guess, apart from Canadian producers, we do not really see any major spare capacities in the rest of the world. As we mentioned on our earlier commentary, the major producers, the two largest producers in China announced their production cut this year due to very low inventories that they had last year on [indiscernible] And then we also have seen the announcement out of FSU on their reduction of the production due to this long needed turnaround. And lastly, the addition of the supply out of Laos it's just very uncertain how much more they can push out of the country. Due to the issues around the sinkhole and water inflow. So all in all, we do not see really any meaningful extra capacity really for potash to be able to get out And your next question today will come from Vincent Andrews with Morgan Stanley.

Please go ahead.

Thank you and good morning everyone. I can just ask on CapEx and working capital. You've been in the seat for a couple of months. Can you talk about sort of how you view the CapEx level now? Obviously, it's down versus versus the last few years, but do you think this is the right level Are you comfortable for our maintenance CapEx? [indiscernible] and do you think CapEx will stay flat at these levels over the next few years? And then if I could just ask on working capital, whether you think there are any opportunities there? And in particular, maybe you could talk about much working capital to fertilize Dante's business consumes?

So, Vincent, thank you. Starting by CapEx, we're not happy with the level of CapEx where it is. And we do have a target to reduce specialty sustaining CapEx throughout the years. We can shave probably over the next few years maybe $200,000,000 to $300,000,000 of the level that we are today.

As Bruce said, we are spending perhaps $100,000,000 more this year to fix the reliability issues. And that reduction will mostly come over the next few years on maintenance CapEx. That's what we are targeting. We would like to continue to have about maybe $100,000,000 $150,000,000 every year, put forward into very accretive opportunity projects The the ones which were already discussed The the hydrofloats, compaction, micro essentials, But maintenance CapEx is where we need to do some work As for working capital, There will be a buildup in working capital this year, especially in the second The, just because the business is resuming its growth.

So The larger volumes in phosphates and in potash, will point in that direction.

And same thing in Brazil with Prominentio coming in, and the second half we have our target for sales this year is much greater than last year, Brazil will continue to grow. So all in all, it will be a consumer of working capital. So And actually The plays out in our outlook for cash flow this year. We should expect, I would say, given the same levels of production, stronger cash flows in 2026 even more strong than the second half of twenty twenty five just because of this working capital buildup. That's an intrinsic would say part of the business It is well financed, so we have access to a lot of short term options to fund it. So that's the way it is. Like we build up in the first half, we generate cash in the second half, The year, despite the cash flow generation in the second half, there's still a little bit more of a buildup because of the growth, which is a good thing.

Your next question today will come from Richard Garticarena with Wells Fargo.

Please go ahead.

All right. Thanks. Good morning.

Solid progress on the cost savings and structure The for Lazantes, obviously, you've seen $35,000,000 or the $150,000,000 The from that in 2024.

Just wondering, for 2025, the remaining cost savings from $150 how much of that is going to be coming from Fertilizantes Is the rest going to be from SG and A? And then just on the Brazil market in general, maybe if you could give some color in terms of what your what you've been doing to ensure that credit issues that you saw in 2024 won't continue? Anything that you've done that maybe protects you from potential further downsize that'd be great. Thank you. Richard, thanks. Just on the appreciate the recognition on the cost reduction As we said, half of that's already been delivered from a run rate standpoint. The remainder of that is going to come from a number of different areas. As you said, SG and A still got some cost savings to capture. Going to see some fixed cost absorption benefits as that we get that extra 1,000,000 tons of production and then growing to 1.5 tons of production in phosphates in North America the improvements in production volume and reliability in South America The going to start to bring fixed cost absorption benefits as well.

And then there's The hard savings that Luciano has talked about.

But I think Luciano is going to turn it over to him to talk more. But we're really looking at doubling down on even more cost reductions and turning more stones over in all corners of the business. So more that we'll talk about there and I'll turn it over to him. But and then maybe over to Jenny if Luciano doesn't answer it first on the credit issues in Brazil. [indiscernible] Well, thank you, Bruce. [indiscernible] $150,000,000 it's going to be pretty much in the bag just by cost dilution in phosphates and in potash and in fact anything else in the fertiluzentas side will probably be on top of that. And so we are already crafting what can we achieve in addition to the 150? And you will put some aggressive numbers coming soon. We also appreciate The I think The performance of Fertilizantes was a little clouded because of The FX effects. So pardon me if I spend too much time discussing it at the initially. But I've got to reemphasize that we are really, really confident in the performance of this business going forward. Precisely because of the cost performance. And I'm going to go back one of the things which I mentioned in the briefing for example, we have this mine at Arashah and Patro Sino.

The mine life is up to 02/1962 So by changing the mine plan, for example, and yes, shortening my life by maybe ten years from '62 to '52 We're accessing much better high grade areas The improvement in mass recovery is substantial So only at this particular site, we're going to get another US50 million run rate starting in January at '24. So there's a lot to extract from the first year of Zantac's business. I encourage you to watch out for the performance of this line of business going forward. And your next question today will come from Lucas Beymont with UBS.

Good morning, everyone. It's Chris Prell on for Lucas.

Following up The potash commentary, prices were up in the first quarter. There's a pop ahead of potential tariffs.

Could you just expand a bit on what you think potential tariffs on Canadian potash would have on pricing and demand and trade flows and with the price up in the first quarter, do you realize that benefit in 1Q or 2Q?

Lucas, I'm going to I got your question down. I'm going to answer because we had a mic issue here didn't get to answer the second half of Richard's question. On credit in Brazil. So let's do that first and then we'll hit your tariffs, demand and trade flows issue. Jenny, you want to talk about credit in Brazil? Yes. Thank you, Bruce. Richard, to your question on the credit risk issues in Brazil, we've been very diligent in managing our business in Brazil or made some tough choices between volume and margin and the credit risk. As a result of it, we have we've been really focusing on our margin, focusing on lower risk customers. And we have shifted our business away from traditional retailers in Brazil and more towards to a end users, mega farmers, b, traders, the green traders The have very good batter businesses with the farmers. Lastly, on the co ops. So The is a very solid The customers with solid credit have give us a lot of insurance and assurance on the business quality and we will continue to do so in this year.

So Lucas on the tariff question, obviously that's topic du jour in many corners of the globe.

It's a dynamic situation, one that we're watching very closely.

I know even as of yesterday, reconfirm these March 25% tariffs, but We have numerous teams across our organization and all functions in facets working on this and paying attention to it. But listen, at the end of the day, if tariffs are imposed, or when, We see that it's going to be borne by downstream customers of Mosaic. So That's unfortunate. But it is the reality of that situation. With 80% to 85% the potash demand in The U. S. Coming from Canada, it's just hard to replace that. And so again, the downstream customers going to bear the brunt of that cost. The good news, if you want to look at good news or silver lining, is that given the affordability of potash today and the increase in corn prices and wheat prices in the general affordability of commodity on the ag side in general affordability is not that significant of an issue for potash even with a 20%, 25% tariff on top of it.

The other advantage is that spring tons spring season demand is pretty much already baked. And in place. In space in The U. S. So don't see any immediate impacts for spring. On the downstream side. And And just to reinforce that, Jenny and I were with one of our large customers out of Ohio a cooperative and we asked and had a lot of discussion around the tariff impact and sentiment of farmers and to be honest, They're not even concerned.

The additional cost is not something that they're worried about. And again, it gets down to the affordability. Be honest surprised me a little bit. But it just goes to show the confidence in The market The the farm gate on the pricing and affordability and that that transfer of cost per acre basis at the farm is not that significant in the big scheme of things.

So don't see the tariffs having a huge impact. On demand. And anything to do with profitability for Mosaic. Now in the marketplace, to your point prior to any tariffs, we have seen good price. Appreciation greater than $40 a ton up in The U. S. And Brazil on potash December of twenty twenty four, or the turn of the year, and even higher than that you look at domestic prices in China. So So there is good price momentum around the globe and some of the first good price momentum we've seen of this magnitude in The of years.

So where we'll realize The, I'll turn that over to Jenny from a rev rec standpoint.

Sure. Lucas, so I believe the price momentum Bruce mentioned, some of them will be reflected in Q1 and much more will be reflected in Q2. It is just because of the The starting cycle between Capitec and our self in domestic market are very different. So you should see from our guidance that we're guiding a higher price in Q1 and more to come in Q2.

Your next question today will come from Jeff Zekauskas with JPMorgan.

Thanks very much.

Your cash flows in the fourth quarter and for the year in 2024 were quite low.

In that your EBITDA was almost $600,000,000 and you generated roughly $220,000,000 in cash. You weren't able to cover your dividend and your CapEx this year from operating cash flow. Was there something in the large currency events that pushed cash flow down [indiscernible] do you expect to cover CapEx and dividends next year with operating cash flow? Yes, Jeff, good question and something we've had a lot of [indiscernible] to get into the details [indiscernible] Indeed, the shortfalls in volumes and production volumes and sales generated a shortfall in cash flows, especially in the second The.

Which was not in the forecast.

So yes, it's true that the cash flows didn't cover the dividend and the CapEx. You can estimate the shortfalls perhaps around 300,000,000 Just by multiplying the shortfalls in production by the margins and with the additional costs involved. So give an example, just in AROs, like we spent another $20,000,000 in the fourth quarter just to remove the water brought by the hurricanes and you see an uptick in ARO in The quarter as well. But for this year, the situation is different. Yes, we do expect to cover the minimum dividend, the CapEx, and even have some some excess cash in order to either distribute to shareholders or roll back some of the working capital funding additional that we did.

And your next question today will come from Edlain Rodriguez with Mizuho. Thank you. Good morning, everyone. I mean, first of all, just a clarification. In terms of the model and assumptions you provided, you gave production volumes for polyethylene phosphate like what do you expect sales volume to be from OZYICO? Is it The same number that we should think of? But for my real question, so again in the polish The, talk about farmers, I mean, potash will remain affordable and everything else despite the tariffs. If that's the case, if farmers can and are willing to pay more for potash, But why didn't producers push through those price increases say, prices and if you look at the December corn 25, it's almost the same level as it is now. So if the corn prices are not attractive, so what inputs us push for higher price prices if farmers were willing to pay for it essentially?

Yes, Elaine, thanks for the question. Good nuance catch on our guidance and we don't provide sales guidance and aren't providing sales guidance for the full year. We did decide to give production guidance as something for you all to have better clarity on where we are. But I'll leave it at The. The the time being. On the pricing thing, a couple of things change. I mean, one is the price of corn as well as some of the other grain commodities But the other one was the late announcement since December of significant production supply side constraints. And that has tightened the market So As much as you'd say why didn't prices get pushed, it really was a global supply and demand phenomenon that changed from where it was going into September, October, November and what changed December to now is about 1,500,000 tons or more have come out from the supply side, particularly in our forecast, with the announcements in China on domestic production going down with the announcement and issues with the sinkholes in Laos The what could be the effects of that. With the announcements from Eurocaly and Belarus The on their significant maintenance outages.

So it really comes back down to fundamentals on S and D on why we've seen that price in appreciation over the last several weeks.

Your next question today will come from Ben Thoyer with Barclays. Please go ahead.

Yes, good morning and thanks for taking my question. I just wanted to follow-up Luciano on some of the items you flagged for Fertilis Santos down in Brazil. I was just wondering about the cost you've talked about that you've taken out and obviously you expect some of it to come back from the losses in the third quarter with The Galaxy. But as we think about 2025 and the modeling go forward, just that SG and A run rate, how much right now of that low level that we saw in 4Q was really just FX related? And what would be call it a more normalized level if we expect something in the 5.5 to six The not maybe beyond six as we've seen it in fourth quarter. And then to the timing of these insurance reclaims, if you can comment anything on like you think to gain back those $30,000,000 Thank you.

Okay. Thanks for the question. I would say if you look at our performance sheet data, we do provide unaudited non GAAP costs mining costs and phosphate conversion costs and even potash costs in Brazilian real.

So whatever exchange rate you want to model, just think at those as I would say [indiscernible] ceiling levels going forward So you have a parameter here. But as I said before, we're trying to reduce those even in Brazilian reais. So that's for one. As for AgroGALAXY, I pretty confident that we will recover it this year. Cannot be precise about the quarter, but for sure these types of processes, they don't take as long. So we're confident that we're going to get the cash flows back this year.

And Your next question today will come from Christian Owen with Oppenheimer. Please go ahead.

Hi, good morning. Thank you for taking the question. Sort of a follow-up to the Fertilizantes question here. A little bit more granular. The $120,000,000 quarterly run rate that you outlined as sort of the underlying performance of that business. Can you give us a little bit of color first half, second half? And then from an underlying demand perspective, how you're thinking about recovery in the back half of the year given some of The the distribution challenges and your shift toward the larger customers or direct to co ops, Is there an opportunity to refill the channel or should we just think about sort of a gradual increase in the back half of the year? Thank you.

Kristen, thanks for the question. Let's unpack that one a little bit on two sides. One, Jenny, maybe a timing of how things shape on cash flows and then I'll turn over to Luciano on anything on The The underlying financial performance effects.

Sure. Thanks. To your question on the customer selection or move between different segments, Chris, that has happened. So we actually over the last year, we've made that move And we think we are in a good place this year. Towards The other customers that we're going to do business with, with much more solid credit profile. So I don't necessarily see a major volume change from Q1 to from first half to the second half, I would say, the volume growth this year, it's pretty much going to depend on, A, if the market is going to grow as what we forecast and we anticipate, or the market is going to hit a new record from shipment point of view, from demand point of view, B, from customers' credit profile point of view, we feel comfortable as where we are today. And so just just to summarize, we don't see major change from first half to the second half. And on the cost side, The, you're right. That's exactly the message we want to convey that the one twenty run rate is for the performance of Fertilizantes going forward.

And again, I just gave an example in the prior question about something that is not in that $120,000,000 So you should expect Aside from there, And we're positive that we'll start showing those results from Q2 onwards.

This concludes our question and answer session.

Would like to turn the conference back over to Bruce Bodine for any closing remarks. Well, thank you, operator. And I'll close the call by reiterating a few of our key messages. First, the market backdrop is promising. Global agriculture fundamentals have improved, providing plenty of incentive for farmers to maximize yields Second, at Mosaic, we're making meaningful strategic progress Our work to restore phosphate production to historic levels is proceeding well. And we've completed low cost, high return projects to enhance our production and distribution in all segments of the business. And third, our efforts to reallocate capital in pursuit of better returns is coming to fruition. And we're excited about that. We've announced or completed several transactions and we expect to have more news in the near future. All in all, we have a strongly positive outlook for 2025 and a well defined path to benefit from good market conditions. So thank you all for your joint call and have a great and safe day. You may now disconnect.