Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Citi investor meeting (December 2008)
41 slides from Mosaic Company (the)'s conference presentation, Dec 3, 2008
Slide 1: Mosaic's Role: More Essential Than Ever
Exhibit 99.3 Mosaic’s Role:: Mosaic’s Role More More Essential Essential Than Than Ever Ever Larry Stranghoener Executive Vice President and CFO December 3, 2008
Slide 2: Welcome and thanks to Citi
Good morning everyone. Thank you all for attending. I’d like to thank Brian Yu and PJ Juvekar at Citi for this opportunity to meet with you and share our story and our viewpoints about our future. 1
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 I proceed, I need to remind you that our presentation contains forward-looking statements. The remarks I make are based on information and understandings we believe to be accurate as of today’s date – December 3, 2008. Actual results are likely to differ from those set forth in the forward-lo
Slide 5: Mosaic: Who We Are
Mosaic: Who We Are Mission: We help the world grow the food it needs. Global producer of crop nutrients #1 Phosphate producer in the world #3 Potash producer in the world Vertically integrated Mining, production, distribution Financial highlights for last 12 months ended August 31, 2008 Revenue of $
Slide 6: Background on The Mosaic Company
Unquestionably we are facing historic events in both the financial and commodity markets, with much yet to be sorted out. That said, we are staying focused and true to our mission of helping to feed the world. We believe we are well positioned financially, strategically and operationally to serve ou
Slide 7: Leading Global Potash Producer
Leading Global Potash Producer Mosaic potash production Potash Capacity market share 14.0 14% Globally 12.0 38% North America 10.0 Five mines 8.0 Low-cost & competitive 6.0 industry position 4.0 2.0 0.0 World capacity approximates 73 million tonnes (all potash products) 4
Slide 8: Potash as a core business
Let’s turn to one of our core businesses – potash. Simply put, it’s an exceptional business. Potash is produced in only 12 countries in the world and agricultural giants such as China, India and Brazil are all import dependent. Today, Mosaic is one of the world’s top producers of potash with an esti
Slide 9: Our Potash Expansions
Our Potash Expansions 16 14 12 Growth 10 from 10.4 8 to 15.5 million 6 4 2 tonnes - The projected annual capacity includes approximately1.3 million tonnes (as shaded in blue) that we currently produce under a third party tolling agreement at Esterhazy. This agreement will expire within the next few
Slide 10: Potash expansion economics
We announced expansions to our existing Saskatchewan potash mines as one of our key strategic priorities this past April. Upon completion of these expansions, we estimate our total annual potash capacity will approximate 15.5 million metric tonnes. This amount does not include the 1.3 million metric
Slide 11: World's Top Phosphate Producer
World’s Top Phosphate Producer World’s largest capacity Phosphate Fertilizer Capacity of phosphate fertilizer 10.0 Mosaic phosphate 8.0 production market share 15% Globally 6.0 59% North America 4.0 World scale & efficient 2.0 operations 0.0 World capacity approximates 71 million tonnes (DAP/MAP/TSP
Slide 12: Phosphate business and vertical integration
Mosaic’s other core business is phosphates. This business possesses its own attractive attributes due to its sheer size and the benefits of vertical integration – our owned rock reserves - granulation capacity – and a world wide supply chain and distribution network. Our rock reserves provide us wit
Slide 13: Capitalizing on Our Global Reach
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/Warehouse Brazil 7 Ware
Slide 14: Offshore production and distribution network
Our North American based Phosphate and Potash businesses are bolstered by our production assets and distribution network in prime growth regions, such as Asia and Latin America. We have agronomists, sales teams, and committed staff with the operational expertise that know how to serve customers and
Slide 15: Strategic Focus
Strategic Focus Focus on Potash and Phosphate Grow Potash Strengthen Phosphate Expand Offshore distribution Exit Nitrogen business Maintain a strong balance sheet Deliver value for shareholders 8
Slide 16: Key strategic priorities
Our focus on key strategic priorities will, we believe, produce outstanding results for our shareholders. We plan to focus on our core businesses – potash and phosphates. We plan to grow our potash business through our previously announced expansions. As noted, this is an excellent business and we h
Slide 17: Cash Allocation Priorities
Cash Allocation Priorities Continued cash flow generation Strong balance sheet Capital expenditures Shareholder distribution policy 9
Slide 18: Cash flow and liquidity
Cash flow has been very strong, allowing us to fund our capital expenditures and investment needs even as we begin returning cash to shareholders with dividends. Clearly, liquidity is king right now, and our focus on building cash and a strong balance sheet is serving us well. We believe we have the
Slide 19: Market Outlook
Market Outlook
Slide 20: Growing Global Affluence + Fuel
Growing Global Affluence + Fuel USA: China: Ethanol growth Middle class to 15 billion growth from 130 gallons by 2015 million to 690 million by 2025 The 2008 mandate for ethanol is India: 9 billion gallons Middle class growth from 50 million in 2008 to 580 million by 2025 Source: McKinsey 11
Slide 21: Demand drivers: population, middle class, biofuels
Now let me shift to the outlook for our business. The fundamental demand driver for our business is population growth, especially the growth of the middle class in developing economies. Strong economic growth in a number of rapidly developing countries is creating a large and increasingly affluent m
Slide 22: Growing Grain & Oilseed Use
Growing Grain & Oilseed Use Bil Tonnes World Grain and Oilseed Use 2.75 Source: USDA and Mosaic 2.50 2.25 2.00 1.75 1.50 1.25 1.00 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08E Actual Actual for US Ethanol Forecast Forecast for U.S. Ethanol 12
Slide 23: Global grain and oilseed demand growth
Combine the boost from biofuels with the growth in the global middle class and you get growing global demand for grain and oilseeds. According to USDA estimates, global grain and oilseed demand has been increasing 2.5 percent per year – twice the historical rate. Note that there have only been 3 yea
Slide 24: Record Crop Needed in 2009
Record Crop Needed in 2009 Mil Tonnes World Grain and Oilseed Stocks Percent 650 34% Source: USDA and Mosaic (for 09/10 estimates) 600 31% 550 28% 500 25% 450 22% 400 19% 350 16% 300 13% 250 10% 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 09/10 09/10 L M H Stocks Percent of Use
Slide 25: Crop production and stocks scenarios
Farmers have responded to grain and oil seed demand by growing bin-busting crops during the last two years. Yet, this has barely moved the needle on the gauge measuring overall grain and oilseed stocks. You can see from the cross hatched bar that inventories are projected to increase this year but s
Slide 26: Current Environment – Crop Nutrient Markets Re-Calibrate
Current Environment – Crop Nutrient Markets Re-Calibrate Factors Affecting Current Market Broad and sharp commodity sell-off Global economic slowdown Global credit constraints Late North American harvest High inventory levels in the Americas Leading to: Changing buyer sentiment Weak volume and softe
Slide 27: Market softness and re-calibration
Though the long-term fundamentals in our business are intact and compelling, the current market environment is soft, and the crop nutrient market is re-calibrating. A confluence of factors in just the past three months have caused demand – especially for phosphates – to weaken. We have experienced a
Slide 28: Key Drivers for DAP Pricing
Key Drivers for DAP Pricing DAP Prices $ Tonne Quarterly Averages of Weekly Published Spot DAP fob Tampa 1,200 Source: Fertecon 1,000 Near-Term Drivers: Pipeline inventory 800 Raw materials China exports Global demand 600 400 200 Q1 07 Q2 Q3 Q4 Q1 08 Q2 Q3 Q4 Q1 09 Q2 15
Slide 29: DAP prices and phosphate volumes
As noted, these factors have especially affected the phosphates business. DAP prices have tailed off from historically high levels after sharp run-up earlier this year. These price movements were due to the combination of several demand-pull and cost-push factors. DAP selling prices have come under
Slide 30: Attractive Phosphate Market Margins
Attractive Phosphate Market Margins DAP Market Margin Quarterly Averages Calculated from Weekly Published Spot Prices $ Ton for a Central Florida Plant 800 Source: Fertecon, Green Markets, Mosaic 700 600 500 400 300 200 100 Q1 07 Q2 Q3 Q4 Q1 08 Q2 Q3 Q4 Q1 09 Q2 *Spot DAP price less spot sulfur and
Slide 31: Phosphate raw material costs and margins
It is important to note that price tells only half the story in phosphates. Equally important are raw material costs, primarily sulfur and ammonia, and phosphate rock. Costs for sulfur, ammonia and rock had escalated dramatically over the past year as demand for these materials surged and natural ga
Slide 32: Key Drivers for MOP Pricing
Key Drivers for MOP Pricing Source: ICIS MOP Prices Quarterly Averages of Weekly Published Spot MOP c&f Brazil $ Tonne 1,150 1,000 Near-Term Drivers: China contract 850 Brazil slowdown FX impact 700 Buyer sentiment 550 400 250 100 Q1 07 Q2 Q3 Q4 Q1 08 Q2 Q3 Q4 Q1 09 Q2 17
Slide 33: Potash price and volume factors
In our potash business, the dramatic price increases of the past 12-15 months were the result of surging demand. Producers struggled to keep up, and producer inventories remained at historic lows until recently. Upward price momentum and sales volume have slowed in the recent past, however. As a res
Slide 34: Growth Expected to Resume in '09 Following '08 Downturn
Growth Expected to Resume in ’09 Following ’08 Downturn Mil Tonnes World Nutrient Use 180 Source: IFA November 2008 170 160 150 140 130 120 110 95 96 97 98 99 00 01 02 03 04 05 06 07 08E 09F 18
Slide 35: World nutrient use outlook
It is clear now that world nutrient use will be down in 2008, due to the convergence of several factors. Current global economic and credit conditions are unsettled – to say the least – and it is difficult to project upcoming results with confidence. We believe, however, that global agricultural fun
Slide 36: Crop Prices at Respectable Levels
Crop Prices at Respectable Levels $ Bushel Crop Prices Quarterly Averages of the Daily Closing of Nearby Options 15 Source: CBOT and KCBOT 13 Corn Soybean Hard Red Winter Wheat 11 9 7 5 3 1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 05 06 07 08 09 19
Slide 37: Agricultural commodity price outlook
We believe agricultural commodity markets will have to price in a need for more area and higher yields in 2009. Futures prices for 2009 -- while down from the peaks earlier this summer and hit hard these past couple weeks -- still remain at respectable levels with new crop soybean, wheat and corn pr
Slide 38: Mosaic's Near Term Priorities
Mosaic’s Near Term Priorities Maintain balance sheet strength Focus on phosphate margins – not prices Manage production levels to meet market demand Focus on operational discipline and risk management 20
Slide 39: Disciplined management in soft markets
In the meantime, while market conditions remain soft we will maintain a highly disciplined approach to managing our business. The benefits of strengthening our balance sheet and building a large cash position are now obvious, providing us with significant financial flexibility . In the phosphate bus
Slide 40: Fundamentals are Positive
Fundamentals are Positive Global demand for food, feed and fuel Crop nutrient outlook remains positive Mosaic well positioned to meet demand 21
Slide 41: Closing remarks: four key points
Notwithstanding current market disruptions, we are pleased and proud to be in the business at this time. We serve an ever more important role to help meet the world’s growing demand for food and fuel. In closing, I want to emphasize four key points. First, we believe agricultural fundamentals remain