Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Merrill Lynch Leveraged Finance Conference 2007
54 slides from Mosaic Company (the)'s conference presentation, Nov 13, 2007
Slide 1: Mosaic and Groundbreaking Opportunity: A Compelling Alignment
Exhibit 99 Mosaic and Groundbreaking Opportunity: A Compelling Alignment Merrill Lynch Leveraged Finance Conference, Las Vegas November 13, 2007
Slide 2: Introductory remarks
Thank you for inviting Mosaic to present at this conference. Everyone in this room today is aware of the extraordinary environment that agricultural markets have been experiencing over the past 12 months. I hope my remarks today impart two key messages - First, we believe this opportunity is a susta
Slide 3: Safe Harbor Statement
Safe Harbor Statement Certain statements contained herein constitute “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. Although we believe the assumptions made in connection with the forward-looking statements are reasonable, they do inv
Slide 4: Forward-looking statements reminder
Before going any further, I want to remind you that this presentation contains forward-looking statements. The remarks we make are based on information and understandings we believe to be accurate as of today’s date -- 11/13/2007. Actual results are likely to differ from those set forth in the forwa
Slide 5: Mosaic: Who We Are
Mosaic: Who We Are Global producer of crop nutrients • #1 Phosphate producer in the world • #2 Potash producer in the world • North American nitrogen position Vertically integrated • Mining, production, distribution Formed in 2004 • New company with veteran industry experience
Slide 6: About The Mosaic Company
Let me share a few details with you about The Mosaic Company. We produce more phosphate than anyone else in the world - about 9.4 million tonnes annually, which exceeds the combined production of the next three largest producers. Our potash position is similarly strong, currently the second largest
Slide 7: Groundbreaking Opportunity
Groundbreaking Opportunity Fundamental Global Sustainable
Slide 8: Agricultural renaissance: fundamental, global, sustainable
We describe the current industry environment as an agricultural renaissance with demand and pricing trends that have not been seen in a generation. The factors converging to create these market conditions have the potential to produce an entirely new era of productivity for agriculture. Our view of
Slide 9: Driven by Fundamental Demand
Groundbreaking Opportunity: Driven by Fundamental Demand World GDP Growth Rate 6.0% 5.0% 4.0% Food, 3.0% Feed, 2.0% Fiber… 1.0% 0.0% 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Source: Global Insight
Slide 10: Fundamental demand drivers
Let’s start with a look at the fundamental drivers. Biofuels have gotten all the ink in recent months, but agriculture is still first and foremost about feeding people. However, there are more people than ever to feed and more people than ever who can afford to eat well. World GDP is projected incre
Slide 11: Plus a New Demand Driver: Fuel
Groundbreaking Opportunity: Plus a New Demand Driver and Fuel
Slide 12: Biofuels accelerate grain demand
Biofuels have accelerated already strong demand for grain and oilseeds and turned a positive environment into an extraordinary one. The USDA estimates that US ethanol producers used 550 million bushels more of corn for the 2007 crop year than the previous year -- that’s a 34% increase year over year
Slide 13: The Fundamentals are Global
Groundbreaking Opportunity: The Fundamentals are Global Widespread demographic and economic factors Fuel Economic Food
Slide 14: Global demand across regions
The net effect is that possibly for the first time ever, demand fundamentals are strong in both the developed and developing regions so that the opportunity is truly a global one. In Asia, we have large populations plus a new protein-craving middle class. In Latin America, economies are growing agai
Slide 15: The Fundamentals are Sustainable
Groundbreaking Opportunity: The Fundamentals are Sustainable World Less China Grain and Oilseed Use Million Tonnes % of Use 450.0 30.0% 400.0 25.0% 350.0 300.0 20.0% Food 250.0 15.0% stocks at 200.0 150.0 10.0% historic 100.0 lows 5.0% 50.0 0.0 0.0% 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91
Slide 16: Demand-driven rally, falling grain stocks
This rally is fundamentally different from past periods of price increases because it is being driven by demand, not by supply shortages. In fact, global grain and oilseed stocks will decline again in 2007/2008 despite the large increase in planted area this year. Production was forecast to increase
Slide 17: The World Will Not Get Less Hungry
Groundbreaking Opportunity: The World Will Not Get “Less” Hungry… World Nutrient Demand Through 2010 Million Tonnes 180 160 140 120 Developing 100 nations are 80 60 driving 90% 40 of demand 20 0 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Slide 18: Developing nations drive nutrient demand
This situation is not likely to change soon. Developing nations have accounted for all of the growth in world nutrient demand since 1995 - demand fueled by traditional population and income drivers. The latest forecasts from the International Fertilizer Industry Association show that developing nati
Slide 19: Nor Less Energy Dependent
Groundbreaking Opportunity: Nor Less Energy Dependent U.S. Corn Used for Ethanol Production Billion Bushels % of Corn Crop 6.0 50% 5.0 40% 4.0 30% Ethanol 3.0 is here 2.0 20% to stay 10% 1.0 0.0 0% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Actual Forecast % of Corn Crop
Slide 20: Ethanol corn demand outlook
This biofuels situation that is not likely to change. Corn used for ethanol production is forecast to increase at least another 700 million bushels to more than 4.1 billion bushels of the 2008/2009 crop. By 2014, biofuels are expected to consume as much as 40% of the U.S. corn crop. Currently, there
Slide 21: The Mosaic Opportunity
The Mosaic Opportunity Fundamental Global Sustainable
Slide 22: Mosaic aligned with industry opportunity
As I mentioned earlier, Mosaic’s attributes are well aligned with those of the industry opportunity. These same words describe how Mosaic is capitalizing on this opportunity. Fundamental execution is driving our business today. Our unique global position is a competitive strength. And, our growth is
Slide 23: Driven by Fundamental Execution
The Mosaic Opportunity Driven by Fundamental Execution Customer’s supplier of choice • Market share gains Supply chain management • “Plan, promise & deliver” Cost-containment • Economies of scale
Slide 24: Executing on the fundamentals
The opportunity that I’ve described in the last few minutes is only relevant if you can execute on the fundamentals. We’ve spent the past three years integrating Mosaic’s operations in order to build a stable and solid foundation that is really paying off for us now. We have made customer relationsh
Slide 25: Delivering Fundamental Performance
The Mosaic Opportunity Delivering Fundamental Performance Quarterly EBITDA In Millions $625 $500 $375 Momentum $250 in all fundamental $125 metrics $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 -$125 06 07 08
Slide 26: Record results and cash generation
Our operational excellence is translating into solid financial results including record results in our latest quarter. You can see the dramatic turnaround in cash generation in just the past three quarters. It is worth noting that this momentum applies to every measure of performance - from the top
Slide 27: Capitalizing on Our Global Reach
The Mosaic Opportunity Capitalizing on Our Global Reach Offshore assets aligned with global demand Canada 4 Mines United States 7 Mines China 4 Phosphate Plants 2 Warehouse & Blender 2 Production/Warehouse Thailand India 1 Warehouse & 1 Warehouse Blender Argentina 1 Warehouse & Blender 1 Production/
Slide 28: Global footprint as differentiator
Our global footprint is another key competitive differentiator for Mosaic and one that is exceptionally well-aligned with key growth markets. In addition to our North American mines and plants, we have a significant on-the- ground presence in Asia and Latin America. Mosaic own plants, warehouses and
Slide 29: Potash is Key to Sustainability
The Mosaic Opportunity: Potash is Key to Sustainability A “KO” Business: Only 12 exporting nations • China, India, Brazil import dependent Greenfield projects are expensive • No new mines on-stream through 2011 Historic under-utilization in developing world
Slide 30: Potash market dynamics
We’ve talked a lot today the sustainability of market demand drivers. But there’s another dimension to the sustainability of Mosaic’s performance o- ne that is often under-appreciated- and it can be summarized in one word - potash. Simply put, its a great business. Potash is exported from only 12 co
Slide 31: Our K Position Today is Excellent
The Mosaic Opportunity Our K Position Today is Excellent Mosaic Potash Capacity by Mine 2008 (Million tonnes per year) Annual Capacity(a) Canada: Belle Plaine 2.8 Colonsay 1.8 One of the Esterhazy 5.3 largest United States: Carlsbad 1.7 players in Hersey(b) 0.1 the world Total 11.7 Total (excluding
Slide 32: Potash segment performance
With these dynamics, its not surprising that the Potash business segment is a strong performer for Mosaic. It accounts for approximately one-fifth of net sales, and for fiscal 2007, Potash accounted for about 60% of operating earnings. Current net capacity is about 10.4 million tonnes annually from
Slide 33: Our K Position Tomorrow Is Even Better
The Mosaic Opportunity Our K Position Tomorrow Is Even Better Mosaic Mine Expansions Total Estimated Capacity Increase Mine Completion Cost Status (000 tonnes KCI) US ($) Millions Esterhazy Toll 1,240 Soon to Expire 0 Agreement Expiration Colonsay 225 2010 25 Underway Belle Plaine 115 2010 15 Underw
Slide 34: Potash expansion plan
This plan calls for approximately three million tonne, or 30% increase, in total potash capacity by 2015. The next phase comes on-line as early as 2010. Our potash expansion not only means that we will be able to meet growing demand, but also the economics of our expansion are a tremendous competiti
Slide 35: Phosphates: Controlling Our Own Destiny
The Mosaic Opportunity Phosphates: Controlling Our Own Destiny In a League of Our Own: • Unique cost synergies • Maximum asset leverage • Leadership
Slide 36: Phosphate scale advantages
Mosaic’s phosphate business possesses its own very attractive attributes due to its sheer size. With an approximate 16% global market share, our breadth and depth of phosphate operations provides us with many significant advantages. Our scale of operations produces significant cost efficiencies. Ver
Slide 37: A Strengthening Balance Sheet Supports Expansion
The Mosaic Opportunity: A Strengthening Balance Sheet Supports Expansion $2 billion refinancing $850 million debt 32.8% Debt-To-Capital prepayment Nearly 10% decrease in 8/31/07 debt-to-capital ratio Investment grade goal
Slide 38: Debt reduction and investment grade goal
Whether expanding capacity in our potash business or funding other capital investments elsewhere, our means to do so have improved dramatically over the past year as our balance sheet has strengthened. Investment grade status has been one of our major strategic goals since the formation of Mosaic th
Slide 39: Current Debt Maturity Structure
The Mosaic Opportunity: Current Debt Maturity Structure As of August 31, 2007, adjusted to include subsequent Senior Secured term loan prepayments of $450 million In Millions $600 Remaining term $500 loans of about $200 $400 million 7.625% $300 7.375% No significant debt $200 due for seven years, fi
Slide 40: Debt prepayment flexibility
As you can see from this graph, the tan colored bars represent the remaining term loans we can prepay with no penalty, currently approximately $200 million. The only significant near term debt outstanding is the two Senior Secured bonds, with the first call date in 3 years, but we are not required t
Slide 41: Current Credit Ratings of The Mosaic Company
The Mosaic Opportunity: Current Credit Ratings of The Mosaic Company Issue Moody's S&P Fitch Corporate Family Ba1 BB BB+ Senior Unsecured Ba1 BB- BB+ Outlook Stable Positive Positive Date of last rating action Oct 5, 07 Jan 23, 07 Nov 2, 07 We are committed to attain investment grade ratings
Slide 42: Path to investment grade ratings
Recently, both Moody’s and Fitch raised our corporate family rating two notches to one step below investment grade, with Fitch even putting us on positive outlook. However, there are a few items that are obstacles to attaining an investment grade rating. These include first of all, additional debt p
Slide 43: Current Phosphate Trends
Current Phosphate Trends DAP Prices (fob Tampa) $ MT 500 450 • Tight market 400 continues 350 • North American 300 inventories at lowest 250 level in more than 200 15 years 150 • Recent $20 per short 100 Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja Ja ton price increases 90 91 92 93 94 95 96 9
Slide 44: Short-term outlook
I have focused my remarks today intentionally on the mid-to-long term in order to demonstrate the sustainability of current trends. Before closing, here’s a brief update on the short-term outlook. Demand prospects remain strong as we continue to enjoy strong rebounds in Brazil and India. High wheat
Slide 45: Current Potash Trends
Current Potash Trends Granular Potash Price (fob U.S. Midwest Warehouse) $ ST 330 • Tight market and 300 high prices 270 240 • K imports to Brazil 210 10/07 = $185 10/08 = $355 180 150 • Recent price 120 increase in 90 Ja 90 Ja 91 Ja 92 Ja 93Ja 94Ja 95Ja 96Ja 97Ja 98Ja 99Ja 00Ja 01Ja 02Ja 03Ja 04Ja
Slide 46: Potash price increases
Market dynamics are similar for potash. As an example, take a look at the delivered price of potash to Brazil a year ago - $185 per tonne. The most recent potash price increase will take that to $355 per tonne – double the price within 12 months. In North America, prices also are on the rise. We imp
Slide 47: Price Increase Sensitivities
Price Increase Sensitivities Pre-Tax Earnings Change ($ in millions) EPS Marketing MOP Price ($/tonne) $0.10 $78.1 $0.12 Potash Volume (000 tonnes) 500 $39.6 $0.06 DAP Price ($/tonne) $0.10 $89.0 $0.14 Phosphate Volume (000 tonnes) 500 $63.7 $0.10 Raw Materials Sulfur ($/lt) $0.05 $20.1 $0.03 Ammoni
Slide 48: Price sensitivity impact on EPS
This chart gives you some idea of how price increases impact our bottom line. For example, a $10 per tonne increase in our potash realized price has about a $.12 impact on our earnings per shares. A $10 per tonne price increase in our DAP realized price has about a $0.14 EPS impact. 24
Slide 49: Fiscal 2008 Financial Guidance
Fiscal 2008: Financial Guidance Phosphate 8.6 - 9.1 Million Tonnes Sales Volume Potash 8.5 - 9.0 Million Tonnes Sales Volume Equity Earnings $50 - $75 Million Capital Spending $360 - $400 Million SG&A $280 - $300 Million Tax Rate Low 30s%
Slide 50: Fiscal 2008 guidance discussion
Turning to guidance for fiscal 2008 - Phosphate sales volume is expected to be within close range of last years 8.9 million tonnes, while we expect potash volume to grow anywhere from 7% to 14% over last years 7.9 million tonnes. Equity earnings from non-consolidated subsidiaries remain on track in
Slide 51: Crop Nutrients Have Never Looked So Good
In Conclusion… Crop Nutrients Have Never Looked So Good • Competing end-uses • Growing fundamental demand • Diverse global customer base • Limited number of global suppliers • Greenfield projects are expensive
Slide 52: Attractive crop nutrient fundamentals
In closing today, it is worth pointing out that the crop nutrient business as a whole has an extremely attractive set of fundamental attributes. Competing end-uses and growing demand for food, feed, fiber and, now, fuel translate into a critical need for crop nutrients that can optimize crop yields.
Slide 53: It's Fundamental, Global, Sustainable
Mosaic & Groundbreaking Opportunity: A Compelling Alignment It’s Fundamental Market Drivers & MOS Execution It’s Global Market Demand & MOS Presence It’s Sustainable Market Growth & MOS Capacity
Slide 54: Closing remarks and questions
When you apply these attributes to the opportunity that the industry and Mosaic are looking at - it creates a very compelling scenario. It’s an opportunity with excellent fundamental demand drivers and one that Mosaic will capitalize on by executing its own fundamentals well. It’s a global opportuni
Mosaic — Merrill Lynch Leveraged Finance Conference 2007 on 6ix