Bruce Bodine
President & Chief Executive Officer at Mosaic
Good morning. Thank you for joining our call. In addition to reviewing Mosaic's performance for the quarter, there are three key topics we'll discuss today. First, the transaction we announced with Ma'aden highlights our commitment to unlocking shareholder value. Exchanging our 25% stake in the MWSPC joint venture for an approximately $1.5 billion position in Ma'aden provides a clear indication of value and greater capital flexibility in the future. Second, we are making good progress on several high-return, low-capital intensity initiatives that will improve results across the commodity cycle. And third, fertilizer market fundamentals remain constructive, and the phosphate supply and demand picture is particularly compelling. As the North America spring planting season winds down and fertilizer prices have moderated, fertilizer demand strength is now emerging in other key agricultural geographies, which will bode well for pricing in the second half of the year.
Before I dive deeper into these areas, let me summarize our first quarter results. Mosaic generated adjusted EBITDA of $576 million on revenues of $2.7 billion. The phosphate segment generated adjusted EBITDA of $277 million on sales volumes of 1.6 million tons. Solid North American demand and limited supply pushed phosphate prices higher in the first quarter, and our realized stripping margins remained substantially above historical levels. Our results in the segment included a higher mix of sales sourced from third parties to mitigate the impact of the heavy turnaround schedule we discussed last quarter.
The potash segment generated adjusted EBITDA of $281 million on sales of 2.2 million tons, reflecting the benefits of strong spring seasonal demand in North America. Global prices have stabilized, including in Brazil where we're seeing prices move higher as we head toward the Safrinha season. For the first quarter, Mosaic Fertilizantes generated adjusted EBITDA of $83 million from sales of 1.7 million tons. The continued divergence of our performance from many others in the Brazil ag industry is resulting from the decisions we've made to prioritize risk management and margin over volume. Last year we quickly worked through high-cost inventory, and this year we are navigating the challenging credit and liquidity environment by prioritizing sales to lower credit risk customers, demanding prepayments and insisting on contract performance.
Our distribution margin improved in the second half of last year and first quarter results were significantly better than expected. We also had very strong coproduct volume and margin performance during the quarter. Our results this quarter show that we are successfully working through challenging environments to drive strong results. At the same time, we are focused on creating shareholder value in additional ways. A great example of this is our transaction with Ma'aden, which will exchange our 25% position in the MWSPC joint venture for an approximately $1.5 billion position in Ma'aden shares. This new structure allows our successful long-term partnership with Ma'aden to continue, while also providing increased investment transparency and flexibility for capital redeployment over time. I should note that we believe that neither this transaction nor any potential future transactions involving the Ma'aden shares will result in any material tax friction.
We have several other ongoing initiatives to drive improved returns. Our $150 million cost reduction plan is on track in delivering early results. Potash production cash cost per ton declined about $10 in the first quarter compared with the same period in the prior year. We are rightsizing our workforce and have identified opportunities to reduce our third-party contractors over the next 18 months, which will result in $20 million to $30 million in annual cost savings when complete. We are making progress on our SG&A expense management with our first quarter SG&A expenses down by $21 million or 16% compared with a year ago.
We are also focused on improving and optimizing our operations. In phosphate, we're making good progress on our volume improvement plans through the execution of extensive maintenance turnarounds, including activities at the Riverview and New Wales plants in the first and second quarters, and a turnaround at the Louisiana plant in the second quarter. In potash, our Esterhazy hydrofloat project, which will give us an additional 400,000 tons of capacity, will be in service by mid next year. We are expanding our market access with the construction of a 1 million ton blending plant at Palmeirante in the fast-growing northern agricultural region of Brazil. The project is well underway. We are currently building the warehouse structure, support buildings and electrical infrastructure, and expect to complete the project early next year.
We have recently completed the MicroEssentials conversion at our Riverview facility. Once it is fully ramped up, over half of our U.S. phosphate production will be higher margin, value-added products. We are also on track to reduce our capital expenditures by $200 million in this year versus last year. These initiatives all have one thing in common, they improve returns across the cycle.
With that, let's take a closer look at agriculture and fertilizer markets. While corn and soybean prices have softened recently, farmers remain profitable. Even a small lift in these commodity prices would return farm profitability to quite healthy levels. Moreover, the prices for many other ag commodities such as palm oil and rice remain at very attractive levels. In addition, weather is shifting rapidly from a strong El Nino to La Nina, which should prove positive for Southeast Asia, India and Brazil. Favorable conditions in Southeast Asia are particularly important as we expect the region will be responsible for about two-thirds of global potash shipment growth this year. In fact, in January and February, potash imports to Malaysia and Indonesia were up about 35% versus a year ago due to depleted channel inventories and a very constructive potash to palm oil price ratio.
Phosphate markets remain tight. We are seeing the expected post spring seasonal slowdown in North America, but Brazilian demand for the Safrinha season is emerging. Strong demand and limited supply pushed SSP prices in Brazil up by $30 per ton in April. The recent seasonal uptick in Chinese phosphate export availability has exerted downward pressure on prices in India, but India demand for phosphate this year is expected to be solid on the back of an above-average monsoon season. India's demand will surely exceed China's ability to supply the nation. We expect the Indian Government to increase the maximum retail price to allow importer economics to work in the current global pricing environment, and thus incentivize producers to send tons there.
Longer term, the outlook for phosphate continues to be very positive. Demand is growing to produce more grains and oilseeds for food and biofuels, and for increasing industrial uses, including battery production. At the same time, limited new supply is coming to market, and Chinese exports are down about 25% from historical norms. The structural changes in phosphate supply and demand point to strong fundamentals in the years ahead. The global potash supply and demand picture is balanced. The same seasonal dynamic is occurring in potash. North America is slowing, but Brazil is picking up, resulting in a $30 increase in MOP prices in Brazil in recent weeks, an indication of positive market sentiment and constructive supply and demand dynamics. With Southeast Asia demand returning, we continue to expect near record global potash shipments this year.
Now, moving on to our outlook. For phosphate, we expect second quarter sales volumes of 1.6 million to 1.8 million tons and average FOB prices at the plant of $530 to $580 per ton. The fire at our Riverview facility caused damage to pipes, pumps and a phosphogypsum transfer station. Our team engineered a temporary solution that enabled us to restore some phosphoric acid production in just two weeks, and we are now back at full capacity. We expect some reduction in the second and third quarter sales volumes, but overall, the impact was minimized.
Our second quarter guidance reflects the impacts of the fire, the ongoing turnaround activity and the seasonal softening in the U.S., partially offset by improvements in Brazil. For potash, we expect second quarter sales volumes of 2.2 million to 2.4 million tons and average FOB price at the mine of $210 to $250 per ton.
For Mosaic Fertilizantes, we expect second quarter sales volumes and profitability to improve from the first quarter, reflecting seasonality and our differentiated approach to tackling Brazil's operating environment. We expect planned turnaround activities to weigh on production margins in the second quarter. As you recall, we completed the high-priced inventory destocking in the first half of last year. Going forward, we expect distribution margin to be at normal annualized level of $30 to $40 per ton, but it may vary from quarter to quarter.
To conclude, despite the seasonal reset of the market as we transition out of North America planting season, our outlook for the year is positive. We are taking near-term actions and executing long-term initiatives. As our agreement with Ma'aden demonstrates to continue to strengthen our business and maximize shareholder value. Now we'll move on to Q&A.
