Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — The Mosaic Company — Investor Day (March 2015)
33 slides from Mosaic Company (the)'s investor day presentation, Mar 31, 2015
Slide 1: The Market Outlook
The Market Outlook Dr. Mike Rahm Vice President Market and Strategic Analysis
Slide 2: Safe Harbor
Safe Harbor 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 the Ma’aden joint venture), the acquisition
Slide 3: Objectives
Objectives • Explain Why We Like The Phosphate Business • Explain Why We Are Not As Worried As Some Of You About Potash
Slide 4: Methodology
Methodology Present our long term P&K outlook Benchmark our views with third-party forecasts Address head-on your market questions and concerns
Slide 5: Why We Like the Phosphate Business
Why We Like the Phosphate Business
Slide 6: Why We Like the Phosphate Business
Why We Like the Phosphate Business 1. A positive long term demand outlook 2. Constructive supply developments 3. China has stopped building phosphate plants 4. Few projects in the pipeline behind Ma’aden and OCP 5. Current industry structure 6. Our cost position and innovation lead 7. Tighter supply
Slide 7: 1. A Positive Long-term Demand Outlook
1. A Positive Long-term Demand Outlook Recent developments MMT DAP/ MAP/ MES/TSP Global Phosphate Shipments 80 – Global shipments have increased 6.5 mmt since 2010 • Led by China and Brazil but help from other regions 70 • But India a major demand drag since 2011 60 2015 forecast 50 – MOS: 64.5-
Slide 8: 1. A Positive Demand Outlook
Change in Phosphate Shipments 2014 vs. 2007 1. A Positive Demand Outlook China Brazil 5.0% 12.9% Europe/FSU 6.9% Forecasts by region North America 2.4% Pakistan, Australia, Vietnam 3.4% – India: worst to first Other Asia + Oceania 2.8% – China: more growth Other Latin Am 2.5% Other 0.4% • Slower o
Slide 9: 1. A Positive Demand Outlook
1. A Positive Demand Outlook Underpinned by the food story – Not in vogue today but still solidly intact 2015/16 Grain and Oilseed Scenario Assumptions Low Medium High – The trend is our friend Harvested Area Change ‐0.25% 0.00% 0.25% Yield Deviation from Trend * Largest Negative At Trend Largest
Slide 10: 1. A Positive Demand Outlook
India NPK Farm Prices INR / MT 1. A Positive Demand Outlook 30 ,0 00 25 ,0 00 Source: FAI, Mosaic Banking on India 20 ,0 00 – Gross nutrient use imbalance and unsustainable 15 ,0 00 practices following 2010/11 subsidy changes 10 ,0 00 – Wide recognition of problem but political constraints 5,00 0
Slide 11: 2. Constructive Supply Developments
2. Constructive Supply Developments Significant supply reductions during the last few years – Permanent closures • Mainly non-integrated operations (outside India) • Rock/acid suppliers upgrading raw materials into finished product • Others on the brink? – Several temporary shut-downs or reduced o
Slide 12: 3. China Has Stopped Building Phosphate Plants
3. China Has Stopped Building Phosphate Plants – The massive 8-3-6 based expansion program has come to an end – China has accounted for all of the net increase in global phosphate capacity this century – China has transitioned from the largest phosphate importer to the largest exporter MMT Global Ph
Slide 13: 3. China Has Stopped Building Phosphate Plants
3. China Has Stopped Building Phosphate Plants 2006 Further re-structuring of the Chinese phosphate industry is expected – New high analysis supplies to: 34% 66% • Meet further growth in overall phosphate demand • Continue to substitute for low analysis products (e.g. FMP, SSP, pan-granulated NPKs
Slide 14: 4. Few Projects Behind OCP And Ma'aden
4. Few Projects Behind OCP And Ma’aden Few viable projects in the pipeline behind the large OCP and Ma’aden projects MMT Global Phosphoric Acid Capacity Key CRU assumptions P2O5 60 – Includes project categories “firm” and “probable” 59 1.0 1.9 58 – Four Jorf Phosphate Hubs (JPH) by 2019 57 1.5 –
Slide 15: 5. Current Industry Structure
5. Current Industry Structure – Steep cost curve mainly due to non-integrated production (no phosphate rock production) • Why non-integrated production? – Economic: access to extremely low-cost other raw materials (i.e. sulphur or ammonia) – Strategic: diversify sources of phosphate imports (e.g. In
Slide 16: 5. Current Industry Structure (NA phosphoric acid industry)
5. Current Industry Structure (NA phosphoric acid industry) Firms: 18 12 4 Facilities: 21 20 12 Capacity (mmt P2O5): 10.9 12.3 8.8 Capacity (mmt P2O5) Percent NA Capacity 5.4 61% 1.9 22% 0.8 9% 0.7 8%
Slide 17: 5. Current Industry Structure
5. Current Industry Structure – Top five countries/companies account for more than 80% of total exports today – Smaller share but still large and stable U.S. exports going forward • Mainly serving more freight-competitive destinations in the Americas • Increasingly supplying larger percentage of pre
Slide 18: 6. Our Cost Position and Innovation Lead
6. Our Cost Position and Innovation Lead More details from Jim, Joc, Rick and Rich tomorrow Our sustainable competitive advantage Lower Absolute and Relative Raw Materials Costs – Natural as well as human resources Based on the recent Fertecon 2017 Tampa ammonia price forecast and the NYMEX Henr
Slide 19: 7. Tighter S/D Balances and Rising Operating Rates
7. Tighter S/D Balances and Rising Operating Rates – CRU forecasts • Relatively small capacity increases during the next five years • Moderate demand growth • Rising operating rates during the forecast period – Mosaic forecast differences • More rapid demand growth • China production and exports sti
Slide 20: What To Watch
What To Watch Agricultural commodity prices and impact on phosphate demand Indian demand growth OCP and Ma’aden – timing of new capacity start-ups China – always a wild card − Phosphate demand growth − Production and exports − Export policies − Pace of phosphate sector re‐structuring
Slide 21: Why We Are Not as Worried As Some of You About Potash
Why We Are Not as Worried As Some of You About Potash
Slide 22: Our Perspective
Our Perspective 1. Positive demand prospects 2. Less current operational capacity than most estimates 3. Overly optimistic capacity forecasts and ramp-up timelines 4. Optimization mode by leading producers – Mosaic example 5. Overblown concerns about North America 6. Stable supply/demand balance and
Slide 23: 1. Positive Demand Prospects
1. Positive Demand Prospects MMT MOP Global Potash Shipments Recent developments 80 Source: Mosaic, CRU Outlook February 2015 and Fertecon Outlook September 2014. 70 – Global shipments have increased 7.6 mmt since 2010 60 • But all of the growth in 2014 • Led by China and Brazil but help from othe
Slide 24: 1. Positive Demand Prospects
1. Positive Demand Prospects Change in Potash Shipments 2014 vs. 2010 China 10.9% 2010-14 shipment growth Brazil 6.0% Rest of World 10.3% – Led by China and Brazil but help from other regions North America 0.9% – India a major drag Indonesia/Malaysia 5.2% Other Asia/Oceania 2019 forecasts 1.9% E
Slide 25: 2. Less Current Operational Capacity (2015)
2. Less Current Operational Capacity (2015) – Consultants’ forecasts of current capacity look way too high to us • Main issue - Canadian capacity based on Canpotex proving runs not operational capacity – Mosaic capacity estimates • 2010 base capacity tied to peak production during 2004-08 • Brownfie
Slide 26: 3. Overly Optimistic Capacity Forecasts (2019)
3. Overly Optimistic Capacity Forecasts (2019) – Nearly three-quarters of new gross capacity by Canadian and FSU producers 2019 MOP Capacity Mosaic CRU Fertecon Mil Tonnes KCl (Mar 2015) (Feb 2015) (Sep 2014) World 85.9 96.1 99.6 MOP Capacity Estimates - Mosaic Most Likely Scenario Canada 31.7 37.6
Slide 27: 4. Optimization Mode By Leading Producers
4. Optimization Mode By Leading Producers – New brown/olivefield projects: • Come online in big lumpy increments due to scale economics • But unique capability to optimize potash operations at production levels required by market – Mosaic optimization strategy • Sold or closed small higher cost U.S.
Slide 28: 5. Overblown Concerns About North America
5. Overblown Concerns About North America We get analysts’ concerns about North America – Flat to modest demand growth – Near-record imports today and the first BPC imports since 2008 – New Agrium capacity targeted for its retail system – Start-up of K+S Legacy project now on the horizon – Disappe
Slide 29: 5. Overblown Concerns About North America
5. Overblown Concerns About North America Our assessments Estimates of Current Blend Grade Potash Netbacks $ MT Unless Noted Brazil NOLA – U.S. imports from offshore origins are vulnerable fob Price ($ ST) na $355 Less Vessel Discharge/Shrink ($ ST) na $5 • Global demand growth will change trade f
Slide 30: 5. Overblown Concerns About North America
5. Overblown Concerns About North America Our assessments – Larger export pull • Agrium Canpotex volume – Larger entitlement following proving run – Larger Canpotex sales during the next five years • K+S domestic vs. offshore mix? – Our best guesses • Mosaic produced 7.6 mmt KCl at our Saskatchewa
Slide 31: 6. Relatively Stable Outlook
Global Potash Capacity, Production and Operating Rate 6. Relatively Stable Outlook MMT KCl Op Rate 10 0 10 0% Source: Company Reports, Fertecon, CRU and Mosaic 90 95 % 80 90 % Relatively stable global supply/demand balance 70 85 % 60 80 % – Positive demand prospects 50 75 % – Much different capaci
Slide 32: What To Watch
What To Watch Agricultural commodity prices and impact on potash demand Indian demand growth FSU marketing strategies Start-up of new capacity especially by new entrants Potential consolidation particularly in the FSU
Slide 33: Thank You! The Market Outlook
Thank You! The Market Outlook Dr. Michael Rahm Vice President – Market and Strategic Analysis