Mosaic Company (The)

Good morning, ladies and gentlemen, and welcome to the Mosaic Company's second quarter 2020 earnings fireside chat. At this time, all participants have been placed in a listen-only mode. After the companies complete their prepared remarks, the lines will be open to take your questions. Your host for today's call is Laura Gannon, Vice President, Investors Relations of the Mosaic Company. Ms. Gannon, you may begin.

Thank you. And welcome to our second quarter and 2020 earnings call. Presenting today will be Jack O'Rourke, President and Chief Executive Officer, Clint Freeland, Senior Vice President and Chief Financial Officer, and Rick McClellan, Senior Vice President Commercial. We will host a prepared question and answer session addressing the questions received last night, followed by a short live Q&A session, time permitting. All of our earnings materials released yesterday after market close are available on our website at mosaicco.com. We will be making forward-looking statements during this conference call. The statements include but are not limited to statements about future financial and operating results. They are based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results. factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release issued yesterday and in our reports filed with the Securities and Exchange Commission. We will also be presenting certain non-GAAP financial measures. Our second quarter press release and performance data attached as exhibits to yesterday's Form 8-K filing, as well as our commentary on the quarter posted to our website, also contain information important on these non-GAAP measures. Now I'd like to turn the call over to Jack.

Good morning. Thank you for joining us today. I'll start with very brief comments, then we'll get straight on to your questions. This was a very good quarter for Mosaic, and our momentum is increasing. The key points about our performance are our cash flow generation this quarter is the result of the past five years of work by our team to transform our cost structure and strengthen our franchise. We're succeeding even earlier than we expected. We've already achieved five of our seven 2021 cost targets. Even with realized potash prices down $20 per ton from the first quarter and realized phosphate prices up just $13 per ton in the quarter, we generated over $800 million in cash from operations. We delivered adjusted EBITDA 25% higher than consensus expectations even before our adjusted EBITDA definition change. We paid down $500 million in short-term debt and structured payables in the quarter, while retaining cash on the balance sheet above $1 billion. In potash, we continued to invest in the accelerated K3 project, hitting a major milestone of connecting the K3 shafts to the K1 mill. We continued to reduce our brine management costs, and we achieved the lowest cash cost per ton of production in over a decade. Mosaic Fertilizante had an excellent quarter, hitting both Rial-based cost targets and achieving further cost benefits from the weakening Rial, as well as realizing over 80% of our targeted full-year transformation benefits. Phosphates drove the cash costs of rock below the target and lower than last year, despite increasing distances from mining to beneficiation. And with all of these efforts, we've reaffirmed our commitment to you, to our shareholders, our employees, our customers, and our communities to act responsibly. We announce new, aggressive, broad-based environmental, social, and governance targets, and we will use these targets to drive performance across the business. We are continuing to transform. The quarters, accelerating earnings, and cash flow clearly reflect our efforts today, and we are driving additional future savings. We expect to deliver another $700 million in savings above the 2019 base as we continue to execute our strategy. Mosaic is more competitive than ever before, and with fertilizer markets improving, we have significant earnings leverage to the future. Now, we'll take your questions.