Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — The Mosaic Company — Q3 2016 Earnings Presentation
29 slides from Mosaic Company (the)'s earnings presentation, Nov 1, 2016
Slide 1: Earnings Conference Call – Third Quarter 2016
The Mosaic Company Earnings Conference Call – Third Quarter 2016 November 1, 2016 Joc O’Rourke, President and Chief Executive Officer Rich Mack, Executive Vice President and Chief Financial Officer Dr. Mike Rahm, Vice President Market and Strategic Analysis Laura Gagnon, Vice President Investor Rela
Slide 2: Safe Harbor Statement
Safe Harbor Statement This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Wa’ad Al Shamal Phosphate Company (also known as MWSPC) and other proposed or pend
Slide 3: Meaningful Steps to Create Long Term Value
Meaningful Steps to Create Long Term Value • Anticipated H2 Improvement starting to materialize. • Actions taken allowed to Brazil capitalize on improvement. • Brazil centered growth strategy paying off. 3
Slide 4: Market Update
Market Update
Slide 5: Positive Potash Developments
Positive Potash Developments Potash Prices $ Tonne 425 Solid on-farm demand 400 375 350 325 Destocking of channel inventories 300 275 250 225 Optimization of operations 200 Source: Argus FMB 175 Jan-14 Jul-14 Dec-14 Jul-15 Dec-15 Jun-16 fob NOLA c&f Brazil 5
Slide 6: Lower Projected NA Producer Inventories
Lower Projected NA Producer Inventories Producer stocks projected to drop from highest June 30 level on record . . . . . . to a level near the Mil Tons bottom end of the KCl North American MOP Stocks seven year range 4.5 Source: IPNI and Mosaic 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Jul Aug Sep Oct Nov
Slide 7: Expect Rebound in Global Shipments in 2017
Expect Rebound in Global Shipments in 2017 Million Brazil MOP Shipments Tonnes KCl 10.0 Source: Company Reports, CRU and Mosaic 9.0 8.0 7.0 6.0 Global Potash Shipments 5.0 Mil Tonnes KCl 4.0 65 61-63 3.0 Source: Company Reports, CRU and Mosaic 60 2.0 1.0 55 0.0 00 01 02 03 04 05 06 07 08 09 10 11 12
Slide 8: DAP Margins Turn Up in Q3
DAP Margins Turn Up in Q3 DAP/MAP Prices $ Tonne Published Weekly Spot Prices 550 525 Source: Argus FMB 500 475 DAP Benchmark Stripping Margin 450 $ Tonne Calculated from Published Weekly Spot Prices 425 350 400 Source: Argus FMB 375 350 325 325 300 300 Jan-14 Jul-14 Dec-14 Jul-15 Dec-15 Jun-16 DAP
Slide 9: Positive Demand Outlook
Positive Demand Outlook Million Tonnes Latin America less Brazil 4.0 DAP/MAP/NPS/TSP Shipments Source: CRU and Mosaic 3.5 3.0 2.5 MMT Product Global Phosphate Shipments 2.0 DAP/MAP/NPS/TSP 1.5 70 66-68 1.0 Source: CRU and Mosaic 65 0.5 0.0 60 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16E17F DA
Slide 10: Expected China Capacity Rationalization
Expected China Capacity Rationalization Mil Tonnes China DAP/MAP/TSP Exports 14.0 Source: Fertecon, China Customs, Mosaic “The country’s phosphate fertilizer capacity will be 12.0 controlled at 22 million tpy (P2O5) by 2020, and some 10.0 outdated plants will be phased out in the 2016-2020 period, e
Slide 11: Financial Results Review
Financial Results Review
Slide 12: Visible H2 Improvement
Visible H2 Improvement $0.80 $0.73 $0.70 $0.60 $0.50 $0.41 $0.40 $0.30 $0.20 $0.14 $0.11 $0.10 $0.06 $(0.03) $0.00 Q1'16 Q2'16 Q3'16 ‐$0.10 Earnings Per Share Adjusted Earnings Per Share *Additional discussion of adjusted earnings per share, including reconciliations to earnings per share for the pe
Slide 13: Controlling Operating Expenses
Controlling Operating Expenses $ Millions $450 SG&A $400 $350 $330 Guidance range $300 $315 $394 $382 $361 $250 $230 YTD $200 2013 2014 2015 2016F Q3 SG&A: lowest in 9 years, despite adding CF phosphates and ADM Distribution 13
Slide 14: And Capital Spending
And Capital Spending $ Millions $1,800 $1,600 Down ~50% $1,400 From Peak $1,200 $1,000 $800 $600 $900 $400 $800 $800 $200 $‐ 2013 2014 2015 2016F 2017E 2018E 2019E Sustaining Capex Growth Capex Total Capex Investment in Ma'aden 14
Slide 15: Potash Guidance
Potash Guidance Potash 2016 Q4 Sales Volumes 1.9 to 2.1 million tonnes Q4 MOP Selling Price $160 to $175 per tonne Q4 Gross Margin Rate Mid-teens Q4 Operating Rate Around 75 percent Full Year Sales Volumes 7.7 to 7.9 million tonnes Global Shipments 59 to 60 million tonnes 15
Slide 16: Phosphates Guidance
Phosphates Guidance Phosphates 2016 Q4 Sales Volumes 2.1 to 2.4 million tonnes Q4 DAP Selling Price $300 to $330 per tonne Q4 Gross Margin Rate Upper single digits Q4 Operating Rate Around 85 percent Full Year Sales Volumes 9.3 to 9.6 million tonnes Global Shipments 65 to 66 million tonnes 16
Slide 17: International Distribution Guidance
International Distribution Guidance Narrower range: sold out position in 4th quarter International Distribution 2016 Q4 Sales Volumes 1.7 to 1.9 million tonnes Q4 Gross Margin per Tonne Around $20 per tonne Full Year Sales Volumes 6.6 to 6.8 million tonnes 17
Slide 18: Full-Year Guidance Summary
Full-Year Guidance Summary Consolidated Full-Year 2016 Total SG&A $315 to $330 million Capital Expenditures and Equity Investments $1.0 to $1.1 billion Effective Tax Rate Approximately zero percent Potash 2016 Full-Year Canadian Resources Taxes (CRT) $95 to $110 million Full-Year Brine Management Co
Slide 19: Closing Commentary
Closing Commentary
Slide 20: Appendix
Appendix
Slide 21: Phosphates Segment Highlights
Phosphates Segment Highlights $ In millions, except DAP price Q3 2016 Q2 2016 Q3 2015 OPERATING EARNINGS BRIDGE $ IN MILLIONS Net sales $930 $976 $1,032 350 Gross margin $101 $100 $199 300 Percent of net sales 11% 10% 19% 250 Operating earnings $10 $12 $157 200 150 Sales volumes 2.5 2.4 2.1 100 Prod
Slide 22: Potash Segment Highlights
Potash Segment Highlights $ In millions, except MOP price Q3 2016 Q2 2016 Q3 2015 OPERATING EARNINGS BRIDGE $ IN MILLIONS Net sales $428 $457 $492 250 Gross margin $40 $53 $97 200 Percent of net sales 9% 12% 20% 150 Canadian resource taxes (CRT) $14 $38 $59 100 Gross margin (excluding CRT)* $54 $91
Slide 23: International Distribution Segment Highlights
International Distribution Segment Highlights $ In millions, except Blends price Q3 2016 Q2 2016 Q3 2015 OPERATING EARNINGS BRIDGE $ IN MILLIONS Net sales $849 $534 $825 Gross margin 71 $5 $61 100 Percent of net sales 8% 1% 7% Operating earnings (loss) $50 $(11) $44 40 Sales volumes 2.2 1.4 2.0 Marg
Slide 24: Raw Material Cost Detail
Raw Material Cost Detail Q3 2016 Percent Ammonia ($/tonnes) Realized in COGS $287 Average Purchase Price $274 Sulfur ($/ton) Realized in COGS $93 Average Purchase Price $87 Phosphate rock (realized in COGS) ('000 tonnes) U.S. mined rock 4,145 93% Purchased Miski Mayo Rock 331 7% Other Purchased Rock
Slide 25: Earnings Sensitivity to Key Drivers
Earnings Sensitivity to Key Drivers(a) 2016 Q3 % Impact on 2016 Q3 Pre-Tax Change Margin % Segment EPS Impact Actual Impact Actual Margin Marketing MOP Price ($/tonne)(b) $160 $50 9% 26% $110 $0.33 Potash Volume (thousand tonnes) 2,208 500 9% 8% $33 $0.10 DAP Price ($/tonne) $326 $50 11% 14% $126 $0
Slide 26: Phosphate Raw Material Trends
Phosphate Raw Material Trends Ammonia Sulfur ($/tonne) ($/tonne) 700 175 600 150 500 125 400 100 300 75 200 50 100 25 0 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2015 2015 2015 2016 2016 2016 2016F 2014 2015 2015 2015 2015 2016 2016 2016 2016F 1 2 Realized Costs Market Prices
Slide 27: Definition of Adjusted Net Debt/Adjusted EBITDA
Definition of Adjusted Net Debt/Adjusted EBITDA The company targets adjusted net debt to adjusted EBITDA as a proxy for how the rating agencies assess leverage metrics: Adjusted net debt is defined as long‐term debt plus short‐term debt less cash and cash equivalents, all from the balance sheet. N
Slide 28: Global Potash Shipment Forecasts by Region (November 1, 2016)
Global Potash Shipment Forecasts by Region (November 1, 2016) Nov Nov Nov Nov Source: CRU and Mosaic. Muriate of Potash Low High Low High Numbers may not sum to total due to rounding. Million Tonnes (KCl) 2015 2016F 2016F 2017F 2017F Comments While still projecting a sharp drop in shipments this yea
Slide 29: Global Phosphate Shipment Forecasts by Region (November 1, 2016)
Global Phosphate Shipment Forecasts by Region (November 1, 2016) Source: CRU and Mosaic. Source: Nov Nov Nov Nov Numbers may maynot notsum sum to to total total due due to to rounding. rounding. Numbers Million Tonnes Low High Low High DAP/MAP/NPS*/TSP 2015 2016F 2016F 2017F 2017F Comments We have s