Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Q1 2018 Earnings Presentation
44 slides from Mosaic Company (the)'s earnings presentation, Feb 23, 2018
Slide 1: Investor Information First Quarter 2018
Investor Information First Quarter 2018 1 Laura Gagnon Vice President Investor Relations Tel 763-577-8213 Cell 612-201-7550 laura.gagnon@mosaicco.com Anton Pshon Director Investor Relations Tel 763-577-2876 Cell 612-834-0988 anton.pshon@mosaicco.com
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation 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 anticipated benefits and synergies of our acquisition of the global phosphate
Slide 3: The Mosaic Company Overview
The Mosaic Company Overview 3
Slide 4: Mosaic: Benefits from Economies of Scale
0.0 4.0 8.0 12.0 16.0 20.0 24.0 Mosaic PotashCorp Uralkali Belaruskali OCP K+S ICL Yuntianhua Qinghai Salt Lake Agrium Million Tonnes MOP Equivalent DAP Equivalent World's Largest P&K Producers (Mosaic includes Vale Fertilizantes) 4 Based on 2015 production Mosaic includes approximately 2 million to
Slide 5: Mosaic Assets: Global, Long Life, Low Cost
Mosaic Assets: Global, Long Life, Low Cost 5 Phosphate Production Potash Production Distribution Facilities Joint Ventures
Slide 6: Transformational Year for Mosaic
6 Transformational Year for Mosaic Asset Optimization Capital Deployment ▪ Idled Plant City Concentrates Plant ▪ Additional Transformational Efforts in: • Potash • Phosphates • Corporate ▪ Increased Vale Fertilizantes Value Creation Target to $275 million ▪ Issued Debt to Finance Vale Fertilizantes
Slide 7: Estimated Cash Conversion Costs/Tonne - 2017
7 Estimated Cash Conversion Costs/Tonne* - 2017 * Phosphate cash conversion costs are reflective of actual costs, excluding realized mark-to-market gains and losses. These costs are captured in inventory and are not necessarily reflective of costs included in costs of goods sold for the period. $70
Slide 8: Tightened phosphate supply & demand
8 Tightened phosphate supply & demand even without expected China capacity rationalization Transformation: Idled Plant City, Anticipated S&D Impact -1 0 1 2 3 4 5 18F 19F 20F Million Tonnes DAP/MAP/NPS Source: CRU and Mosaic Forecast Global Phosphate Capacity vs. Shipments Cumulative Change 2018-202
Slide 9: Transformation in Potash: Asset Optimization and Cost Control
Transformation in Potash: Asset Optimization and Cost Control 9 $/Tonne $- $20 $40 $60 $80 $100 $120 $140 MOP Cash Production Costs Per Tonne* Brine *MOP cash production costs are reflective of actual costs during the quarter, excluding CRT and realized mark-to-market gains and losses. These costs a
Slide 10: Transformation in Potash: Expected Elimination of Brine Management Costs
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2013 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 30 40 50 60 70 80 90 Cash Production Costs / Tonne K1/K2 Ore K3 Ore Transformation in Potash: Expected Elimination of Brine Management Costs 10 Esterhazy Expected Cash Production Cos
Slide 11: Transformation in Mosaic Fertilizantes: Expected Benefits through 2020
Transformation in Mosaic Fertilizantes: Expected Benefits through 2020 $- $50 $100 $150 $200 $250 $300 2018E 2019E 2020E Annual Synergy and Operational Improvements
Slide 12: Selling, General & Administrative Expenses: Visible Cost Controls
8 10 12 14 16 18 20 2013 2014 2015 2016 2017 Selling, General & Administrative Expenses 12 Visible Cost Controls $ Per Tonne
Slide 13: Consistent Capital Allocation Philosophy
Consistent Capital Allocation Philosophy 13
Slide 14: Markets Agricultural Outlook
Markets Agricultural Outlook 14
Slide 15: Steady Crop Prices Underpin Positive P&K Demand Outlook
Steady Crop Prices Underpin Positive P&K Demand Outlook 15 50.0 55.0 60.0 65.0 70.0 75.0 80.0 85.0 90.0 Sep-15 Sep-16 Sep-17 US$ CWT Source: NYMEX Cotton Prices Daily Close of Nearby Option 1,900 2,100 2,300 2,500 2,700 2,900 3,100 3,300 3,500 Sep-15 Sep-16 Sep-17 Rngts Tonne Source: CRB Malaysian P
Slide 16: Plant Nutrients Still Affordable
Plant Nutrients Still Affordable 16 Less Affordable More Affordable Positive Agronomic & Economic Demand Drivers Record Harvests Remove Record Amounts of P&K 0.40 0.50 0.60 0.70 0.80 0.90 1.00 10 11 12 13 14 15 16 17 18 Plant Nutrient Affordability Plant Nutrient Price Index / Crop Price Index Index
Slide 17: Grain and Oilseed Fundamentals Still OK
Grain and Oilseed Fundamentals Still OK Despite the String of Bin-Busting Harvests 17 g131 A big step-up in global production since 2012/13 g131 But continued strong and steady demand growth g131 Stocks ex China increased to a record high in 2016/17 g131 Inventories ex China projected to decline in
Slide 18: Markets Brazil
Markets Brazil 18
Slide 19: Brazil: Agricultural Powerhouse
0 25 50 75 100 125 150 175 200 225 250 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F 18F 19F 20F 21F Million Tonnes Brazil Grain and Oilseed Production Soybean Summer corn Second corn crop Wheat Cotton Others Brazil: Agricultural Powerhouse 19Source: CONAB and projections from FIESP Outlook
Slide 20: Mosaic is Logistically Advantaged to Key Growing Areas
Mosaic is Logistically Advantaged to Key Growing Areas 20 • Exposure to the Cerrado region • Just-in-time deliveries • Long-term relationship with customers • Integrated logistics
Slide 21: Brazil MAP Cost Curve 2021
21 Mosaic Uberaba 0 1,000 2,000 3,000 4,000 5,000 Thousand Tonnes Brazil MAP Cost Curve 2021 Forecast Delivered Upcountry Source: Mosaic Post Transformation: Competitive Delivered Basis
Slide 22: Markets Potash Outlook
Markets Potash Outlook 22
Slide 23: Prices Continue to Trend Up
Prices Continue to Trend Up 23 g131 Strong broad-based demand growth g131 Stable to stronger potash export currencies g131 No immediate threat from new capacity g131 Optimized/restructured operations
Slide 24: Record Canpotex Exports Required to Meet Record Demand
Record Canpotex Exports Required to Meet Record Demand 24 g131 Canpotex exported a record 11.6 million tons in 2017 in order to meet the big jump in global demand last year. g131 Exports are projected to increase to another record this year. Shipments likely will climb to 12.0-12.5 million tonnes in
Slide 25: Strong, Broad-Based and Less Volatile Demand Growth
Strong, Broad-Based and Less Volatile Demand Growth 25 65.0 47.5 50.0 52.5 55.0 57.5 60.0 62.5 65.0 67.5 70.0 10 11 12 13 14 15 16 17E 18F Global Potash ShipmentsMil Tonnes KCl Source: IFA, CRU, Mosaic and Company Reports 65.5-67.5 g131After declining during the two previous years, we now estimate t
Slide 26: Strong and Broad-Based Demand Growth
Strong and Broad-Based Demand Growth 26 Indonesian and Malaysian shipments also have trended steadily upward with surges in 2011 and 2014. The gains are driven mostly by increases in palm oil production, but positive rice profitability also has helped to underpin potash use in this region as well as
Slide 27: Muriate of Potash shipments by region
Muriate of Potash Million Tonnes (KCl) 2015 2016 2017E Low 2018F High 2018F Comments China 16.4 14.0 14.8 16.0 16.2 2017 shipments were revised down to 14.8 mmt (7.5 mmt production plus 7.3 mmt net imports). 2018 shipments are projected to rebound to more than 16 mmt (7.5 mmt production plus 8.6 mmt
Slide 28: Five-Year Outlook: Strong, Broad-Based and Less Volatile Demand Growth
Five-Year Outlook: Strong, Broad-Based and Less Volatile Demand Growth the Key Feature 28 40 45 50 55 60 65 70 75 10 11 12 13 14 15 16 17E 18F 22F MMT MOP Actual High Forecast Low Forecast Likely Forecast CRU - August 2017 Source: Mosaic, CRU -7.0% -0.2% 0.3% 0.2% 6.8% 2.3% 2.0% 3.7% 5.3% 7.9% -3.0
Slide 29: Demand Growth Projected to Keep Pace with the Ramp-Up of New Capacity
Demand Growth Projected to Keep Pace with the Ramp-Up of New Capacity 29 g131 After declining during the two previous years, we now estimate that global MOP shipments jumped 6.9% or 4.2 million tonnes KCl to 65.0 million in 2017. Shipments are forecast to increase another 2.6% or 1.7 million tonnes
Slide 30: Five-Year Outlook: Mosaic Forecasts (February 2018)
Five-Year Outlook: Mosaic Forecasts (February 2018) 30 g131We project no chronic or severe long term supply and demand imbalance. Global operational capacity is projected to increase 11.9 million tonnes from 69.3 million in 2016 to 81.2 million in 2022. This assumes no additional optimization of cap
Slide 31: 2021 MOP Cost Curve
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Thousand Tonnes Capacity 2021 MOP Cost Curve fob Mine at Effective Capacity 2021 Cost Curve Forecast 31Source: CRU, Mosaic Brine
Slide 32: Markets Phosphate Outlook
Markets Phosphate Outlook 32
Slide 33: Beginning of Phosphate Cyclical Recovery
33 Beginning of Phosphate Cyclical Recovery
Slide 34: Key Phosphates Currencies Have Strengthened
34 Key Phosphates Currencies Have Strengthened g131 Currencies of key phosphate importing and exporting countries have strengthened during the last year or two, putting upward pressure on phosphate prices. g131 A stronger currency for exporting countries increases the dollar cost of exports (i.e., e
Slide 35: DAP Margin Has Moved Up Since Mid-2017
DAP Margin Has Moved Up Since Mid-2017 35 g131 Our DAP benchmark stripping margin is calculated from published spot prices for DAP, sulphur and ammonia. It is a gauge to measure relative profitability of the phosphate industry over time and is not intended to approximate Mosaic’s realized margins. g
Slide 36: Pace of Demand Growth Picked Up in 2017
Pace of Demand Growth Picked Up in 2017 36 g131Shipments of the leading finished phosphate products are estimated to have risen 2.5% or 1.7 million tonnes to 68.2 million in 2017, but slowing to 1.8% or 1.2 million tonnes to 69.4 million in 2018. The slowdown in shipment growth is not predicated on
Slide 37: Strong Broad-Based Demand Growth
Strong Broad-Based Demand Growth 37 1.0 1.5 2.0 2.5 3.0 3.5 4.0 15 16 17E 18F Latin America less Brazil DAP/MAP/NPS/TSP Shipments DAP MAP NPS TSP Mil Tonnes Source: CRU and Mosaic Shipments in the rest of Latin America held flat last year after a surge in 2016, led by large gains in Argentina follow
Slide 38: Phosphate shipments by region
Mil Tonnes DAP/ MAP/NPS*/TSP 2015R 2016R 2017E Low 2018F High 2018F Comments China 19.8 18.4 17.9 18.1 18.3 We estimate that shipments came in a whisker shy of 18 mmt in 2017, slightly below our expectations despite a good fall and a fast start to the winter fill season (which carried over into the
Slide 39: Five-Year Outlook: Positive Demand Outlook
Five-Year Outlook: Positive Demand Outlook 39 g131Global shipments increased 1.9% per year or 8.3 million tonnes from 2010 to 2017. India was a heavy drag on demand with shipments dropping 2.2 million tonnes during this period due to subsidy cuts and a doubling of retail phosphate prices. Demand sli
Slide 40: Five-Year Outlook: Mosaic Forecasts (February 2018)
Five-Year Outlook: Mosaic Forecasts (February 2018) 40 g131We project that global phosphoric acid capacity will increase less than a million tonnes P2O5 from 2017 to 2022, with Morocco and Saudi Arabia accounting for all of the net increase, but largely offset by the idling of Plant City. Nearly all
Slide 41: Key Factor Update: New Capacity Ramp Up
Key Factor Update: New Capacity Ramp Up ▪ More clarity on the start-up and ramp-up of new P&K capacity • Ma’aden Wa’ad al Shamal Phosphate Company (MWSPC) 41 g131 First DAP produced on July 8, 2017. g131 MWSPC produced ~450,000 tonnes of DAP in 2017 and we are expecting ~1.5-2.0 million tonnes in 20
Slide 42: Key Factor Update: Chinese Exports
Key Factor Update: Chinese Exports 42 g131Chinese exports of DAP/MAP/TSP surpassed most analyst expectations in 2017 by increasing to over 10 million tonnes. g131Exports during Q4, however, showed a dramatic slowdown from a year earlier, falling by 1mmt y-o-y (and q-o-q). g131Based on our five-year
Slide 43: Phosphates S&D: Taxes + Scrutiny on the Yangtze
43 Phosphates S&D: Taxes + Scrutiny on the Yangtze Phosphate Production
Slide 44: 2021 Cost Curve Forecast
2021 Cost Curve Forecast 44 Source: CRU, Mosaic MOS FL MOS LA Chinese Producers