Bruce Bodine
President & Chief Executive Officer at Mosaic
Good morning. Thank you for joining our call.
I would like to start by acknowledging the great work done by so many of Mosaic's people to help us prepare for and recover from Hurricanes Francine, Helene, and Milton. I'm especially pleased that we made it through the storms with no safety incidents, no significant environmental events and no material physical damage. Even as most of our people in Louisiana and Central Florida were dealing with storm impacts at home, they came together to ensure we could get back up and running as quickly as possible after the storms. Because of their dedication, our Florida operations were back at full operating rates just two weeks after Milton with some locations returning to normal within days. I'm extremely grateful to the team.
Before we get into our results, I also want to address our announcement this morning that Clint Freeland plans to retire as Mosaic's Executive Vice President and Chief Financial Officer at the end of this year. During his time with Mosaic, Clint has been an outstanding CFO for the company. Mosaic's financial profile and capital allocation program are much stronger than they were when Clint arrived six years ago. I want to extend my sincere thanks for his leadership, and we wish him all the best in his retirement. As part of this planned transition, Luciano Siani Pires will join the company as CFO designate on November 18th. Luciano was previously the CFO at Vale and later served as the company's EVP of Strategy and Business Transformation. Luciano also served on Mosaic's Board of Directors following the Vale Fertilizantes acquisition in 2018, so we know him quite well. We look forward to welcoming him to Mosaic, and we're confident that he'll be a worthy successor. Luciano assumes the role of CFO on January 1st, 2025, and Clint will remain as Senior Advisor until July 1 of 2025.
On to our third quarter results. The storms were part of a challenging third quarter for us. We also faced electrical issues at our Esterhazy and Colonsay potash mines that affected our production levels. All those challenges are now behind us. For the third quarter, Mosaic generated $2.8 billion of revenue, resulting in net income of $122 million and adjusted EBITDA of $448 million. The lower adjusted EBITDA was driven by the aforementioned challenges, lower potash prices, and a delayed agriculture recovery in Brazil, partially offset by ongoing strength in phosphate stripping margin. That said, we have continued to focus and execute on the things that are within our control. And these actions and initiatives are positioning us to benefit from the improving ag and fertilizer markets.
We expect to achieve our targeted annualized phosphate production run rate of 7.8 million tonnes to 8.2 million tonnes by year-end once the ongoing turnaround activities are completed later this month. We are making good progress on our cost management front and on track to achieve our $150 million annual run rate cost savings target by the end of 2025. We are on track to achieve our targeted $200 million reduction in capex this year. Mosaic Biosciences growth is accelerating. In fact, our biological products are now being used on 9 million acres in key markets around the world this year. Due to our extensive market access and the strength of our brand, the Biosciences operating model is highly leverageable and positioned for long-term growth, which is powered by new product launches using our internal R&D capabilities, as well as leveraging external partnerships.
Mosaic Biosciences is largely self-funding and does not require significant new capital to fuel its growth. Capital allocation remains a key focus for us. We are continuing to invest in our strengths. This year, we completed the compaction project at our low-cost Esterhazy mine and the MicroEssentials conversion project at Riverview. And next year, we will complete the Hydrofloat project at Esterhazy and the Palmeirante Blend plant in Brazil. We're also focused on capital reallocation for other assets in our portfolio, such as the conversion of our MWSPC joint venture into Ma'aden shares, which are worth $1.5 billion to $1.6 billion at today's share price, and the strategic review of our Carlsbad, New Mexico potash mine. During the first nine months of the year, we returned $415 million to shareholders, including $210 million of share repurchases.
Now let's spend a few moments to discuss the state of the market and outlook. Corn and soybean prices have improved from their August lows, while other commodity crops, including palm oil, sugar and coffee are quite strong. In North America, farmers are enjoying solid yields that offset the impact of strained commodity prices and an early harvest allowing more opportunity to complete fall fieldwork, which is good news for the near-term fertilizer demand outlook. In Brazil, barter ratios are healthy for corn and soybeans. In fact, the corn barter ratio is improving, an increasingly constructive setup for the safrinha crop in the coming months. We have also seen a continued uptick in Brazilian corn used for ethanol production, which has provided further corn price support there.
Over the longer term, biofuels remain an attractive driver for grain and oilseed demand far beyond current levels, supporting a highly constructive picture of long-term ag fundamentals. The government in Indonesia reiterated that it would be moving forward with a B40 biodiesel program starting in January. In India, the latest ethanol mandate could lead to India becoming a net importer of corn. In Brazil, the approval of the new biofuel policy calls for a gradual increase in the mixture of soybean biodiesel and diesel fuel and changes in the ethanol content in gasoline and sustainable aviation fuel for airplanes. Fertilizer demand is running high around the world this year, as nutrients remain affordable and growers are catching up after recent years of under-application. Large crops and solid yields in many regions this year are drawing nutrients from the soil with removal particularly pronounced in North America with an additional 4% to 5% compared to last year. So we expect demand will remain solid in 2025 as nutrients are replenished.
The potash market remains relatively balanced. We think potash prices have hit bottom as we've seen resistance to low offers in key markets and prices have begun to trend higher. We continue to expect near-record global shipments for 2024 and record-breaking shipments in 2025, driven by broad-based demand recovery, particularly in Southeast Asia where palm oil economics are solid. For the phosphate market, stripping margins are expected to remain elevated. Prices remain strong, driven by persisting global supply constraints and solid demand for fertilizer, fuel and industrial uses.
China has continued to restrict phosphate exports, and we expect total Chinese exports to be around 7 million tonnes for 2024, down from 7.9 million tonnes last year and about 11 million tonnes at their recent peak. Domestic phosphoric acid production is increasingly consumed by industrial uses, resulting in reduced availability for production of phosphate fertilizers. This trend will likely continue well into the future. In addition, because of an unfavorable government subsidy environment, Indian phosphate demand is going unmet, leaving farmers short of a critical nutrient and setting up strong demand for 2025, assuming an improvement in importer economics.
Now, I'll move on to our segment results. The potash segment generated adjusted EBITDA of $180 million for the quarter compared with $267 million a year ago, driven by lower prices and approximately 250,000 tonnes of lost production due to the electrical issues at Esterhazy and Colonsay and were further impacted by the broad Canadian rail strike. These issues are now fully resolved. For the fourth quarter, we expect potash sales volumes in the range of 2.2 million tonnes to 2.4 million tonnes and prices in the range of $200 per tonne to $220 per tonne. Note that this outlook includes limited impact from the labor issues at the ports of Vancouver and Montreal. Canpotex has contingency plans to mitigate the impacts from the strike as much as possible by diverting product flows via other ports. However, the longer the strike goes on, the higher the potential for volume impacts given the significance of the terminal to the Canpotex network.
Our phosphate segment generated adjusted EBITDA of $265 million for the quarter compared with $201 million a year ago. The improved results are due to a combination of solid pre-hurricane production levels and strong stripping margin. Our sales volume came in at 1.5 million tonnes in the third quarter, driven by lower production volumes and shipping delays caused by weather events and related port closures. Our realized stripping margins remained strong, in part because of our advantageous ammonia economics. We produce about a third of what we consume and we have a reliable supply of ammonia and sulfur from our partners. We have executed two new ammonia supply offtake agreements with an additional one nearing completion to meet our needs in 2025 and beyond.
Our balanced raw material sourcing approach reduces our risk exposure in varying market conditions and sustains our strategic advantage. Our phosphate conversion cash cost per tonne was largely unchanged from the second quarter. As we continue to ramp up production to the target run rate, we expect to achieve a $20 per tonne to $30 per tonne reduction in conversion cost from the high watermark at the end of 2023. Hurricane Milton resulted in a production loss of about 250,000 tonnes, which will be reflected in our fourth quarter volumes. For the fourth quarter, we expect phosphate sales volumes in the range of 1.6 million tonnes to 1.8 million tonnes and prices in the range of $570 per tonne to $590 per tonne.
Mosaic Fertilizantes generated $83 million in adjusted EBITDA compared with $147 million a year ago. EBITDA was lower due to $32 million in bad debt reserves we booked in SG&A and $20 million of legal reserves. The bad debt reserve was a result of the Brazilian customers' bankruptcy filing. We expect to recover the majority of this amount through an insurance claim, which will be recorded in the quarter it is received.
All in all, we are back on track. Our operations are restored to full capacity in all geographies and we are optimistic as we look ahead to 2025. We expect constructive agriculture and fertilizer market fundamentals and we believe that we will produce at levels that will allow us to meet robust demand from our customers around the world and generate good financial performance. Our strategy of refining our portfolio, while pursuing exciting opportunities in Mosaic Biosciences will deliver meaningful shareholder value.
