Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Investor Day (October 2013)
102 slides from Mosaic Company (the)'s investor day presentation, Oct 7, 2013
Slide 1: Mosaic Analyst Day 2013
October 7, 2013 Mosaic Analyst Day 2013 Exhibit 99.1
Slide 2: Safe Harbor
Safe Harbor 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 future financial and operating results. Such statements are based upon the current beliefs a
Slide 3: Speakers
Speakers James T. Prokopanko, President and Chief Executive Officer, joined Mosaic as Executive Vice President and Chief Operating Officer in 2006. Previously, Prokopanko was a Corporate Vice President at Cargill, Incorporated, where he had executive responsibility for procurement and served as a le
Slide 4: Agenda
Agenda Mosaic’s Strengths & Strategy Jim Prokopanko, Chief Executive Officer Mosaic’s Operations Strategy Joc O'Rourke, Chief Operating Officer Mosaic’s Go-to-market Strategy and Product Innovation at Mosaic Floris Bielders, VP International Distribution Rick McLellan, Senior VP Commercial Financial
Slide 5: A Powerful Portfolio of Assets
A Powerful Portfolio of Assets 5
Slide 6: Mosaic asset map
@ Phosphate Production @ Potash Production © Distribution Facilities © Joint Ventures Mosaic
Slide 7: North American Phosphate Operations
North American Phosphate Operations
Slide 8: Mosaic: Phosphate Operations
Mosaic: Phosphate Operations
Slide 9: Phosphate Assets
Phosphate Assets Well positioned on the global cost curve *Excludes all other high analysis finished phosphate products 2013 DAP Industry Cost Curve fob Tampa* Million Tonnes US$/Tonne Source: CRU and Mosaic
Slide 10: North American Potash Operations
North American Potash Operations
Slide 11: Potash locations map
Voncouver Portland CConporate Headquarters Business Unit Office Deep Shaft ine Solution Mine Por Colney Regina Belle Phine a @ Esteshazy KI & K2 Thunder Boy Plymouth = e Hersey Carlsbad Becument
Slide 12: Potash Assets
Potash Assets Flat global cost curve minimizes advantages Brine Mgt US$/Tonne Million Tonnes 2013 MOP Industry Cost Curve fob Port Source: CRU and Mosaic
Slide 13: China distribution map
Xinjiang In-country Distribution Major Office Gansu Qinghai ‘Phosphate Production (Joint Venture) @ Warehouse and Blender @ Feed Warehouse (Leased) Jellongiang Nei Mongol ca Being. Qinhuangdao Hebei, Yantai Ningia Shanxi Shandong Shaanxi Henan fiangsu Anhui Hubei Jiangxi Hunan Fujian Haikou Yunnan G
Slide 14: Potash and distribution map
@ Pot Main Office IEE n-county Distrbuton
Slide 15: Brazil facilities map
> Phi Roraima Por all Ma Amazonas Acre Rondonia cosphate Fadlty sin Office arehouse and Blender inry Distibution Ammapa Poa vareohao tal emambuca Aagoas Tocantins or Sorriso® ba Candeias” Mota Grosso Goins Venture) ito Araguaia Rio Verde oe Minas Gerais @Uberaba Mato Grosgp do Sul Alfenas Campo Gran
Slide 16: Mosaic’s Strengths
Mosaic’s Strengths 16
Slide 17: Premium products
KMag MicroEssentials: y Nexfos ~=Pegasus:
Slide 18: Water reuse and recycling
4 In 2011, Mosaic reused or recycled approximately 95 percent of all water used in our Flonda Phosphates operations and more than 80 percent in our Canadian, Potash shaft mines. GLOBAL WAY WITHDRAWALS: 285 280
Slide 19: Safety and record dividend
SAFETY ae RECORD ANNUAL DIVIDEND PROGRAM
Slide 20: Financial Strength
Financial Strength Surplus Cash Debt Capacity Redeployment
Slide 21: Culture and Values
Culture and Values
Slide 22: External Recognition of Mosaic’s Success
External Recognition of Mosaic’s Success
Slide 23: Mosaic’s Strategy
Mosaic’s Strategy 23
Slide 24: Our Strategic Priorities
Our Strategic Priorities People Invest in talent and development so that Mosaic is known as a company where people want to work and grow Growth Grow our production of essential crop nutrients and operate with increasing efficiency Market Access Expand our reach and impact by continuously strengtheni
Slide 25: Feeding the World: Responsibility and Opportunity
Feeding the World: Responsibility and Opportunity
Slide 26: The Drivers of Our Success: Growing Demand
The Drivers of Our Success: Growing Demand Source: United Nations Global Population Growth Estimated U.N. High U.N. Medium Actual
Slide 27: Growing Demand for Protein
The Drivers of Our Success: Growing Demand Region 1964-66 1997-99 2030 Developing 10.2 25.5 36.7 Near East and North Africa 11.9 21.2 35.0 Latin America 31.7 53.8 76.6 Asia 12.6 43.0 70.2 Per capita meat consumption, kg/year Source: World Health Organization Growing Demand for Protein
Slide 28: The Food Story by the Numbers
The Food Story by the Numbers The Challenge and Opportunity The ABCs of the Food Story Based on long term population and GDP forecasts, grain and oilseed demand is projected to increase from 2.74 billion tonnes in 2011/12 to 3.09 billion tonnes in 2020/21 and to 4.43 billion tonnes in 2050/51. The 3
Slide 29: Farm Economics: Strong Across the Globe
Farm Economics: Strong Across the Globe 0.50 0.75 1.00 1.25 1.50 1.75 Plant Nutrient Affordability Plant Nutrient Price Index / Crop Price Index Affordability Metric Average Source: Green Markets, CME, USDA, AAPFCO, Mosaic 13F Bil $ U.S. Net Cash Income Government Payments Market Source: USDA
Slide 30: Helping the World Grow the Food it Needs
Helping the World Grow the Food it Needs
Slide 31: Mosaic’s Operations Strategy
Mosaic’s Operations Strategy Mosaic Analyst Day 2013
Slide 32: Free Cash Flow Growth
32 32 Free Cash Flow Growth P K Both Strategic Investments Expansions Underway Margins Expansions via: Cost Management Premium Products … and sustaining capital expenditure reductions
Slide 33: Grow Phosphates Volume
Grow Phosphates Volume Miski Mayo Saudi Arabia JV
Slide 34: Phosphates Margin History
Phosphates Margin History Phosphate manufacturing margin history 0% 5% 10% 15% 20% 25% 30% 35% 1,000 1,500 2,000 2,500 FY 09 FY 10 FY 11 FY 12 FY 13 Margin $ Margin %
Slide 35: Grow Phosphates Margins
Grow Phosphates Margins Mined rock cost trends Conversion cost trends $36 $35 $37 $39 $33 $46 $45 $50 $52 $44 $20 $25 $30 $35 $40 $45 $50 $55 FY 09 FY 10 FY 11 FY 12 FY 13 $/Tonne Fiscal Year Ending May 31 Mosaic Rock Production Costs Cash Cost Total Cost $77 $67 $66 $74 $79 $50 $55 $60 $65 $70 $75
Slide 36: Phosphates Sustaining Capital Expenditure
Phosphates Sustaining Capital Expenditure Sustaining CapEx FY 09 FY 10 FY 11 FY 12 FY 13 FY 18 Depreciation Expense
Slide 37: Grow Potash Volumes – Expansion Update
Grow Potash Volumes – Expansion Update
Slide 38: Grow Potash Volumes – Esterhazy K3 Update
Grow Potash Volumes – Esterhazy K3 Update
Slide 39: Grow Potash Volumes – Esterhazy K3 Optionality
Grow Potash Volumes – Esterhazy K3 Optionality
Slide 40: Potash Margin History
Potash Margin History Potash Gross Margin Rate MOP realized price fob plant, $/tonne $ 521 $ 352 $ 359 $ 448 $ 405 Operating Rate 65% 57% 80% 81% 79% 53% 48% 48% 49% 46% 30% 35% 40% 45% 50% 55%
Slide 41: Potash Margin Leverage
Potash Margin Leverage *Actual operating rate of 79% Esterhazy Belle Plaine Colonsay Carlsbad Mosaic $100 $140 $180 $220 $260 $80 $100 $120 $140 $160 $180 $200 Cash Costs (including royalties, excluding resource taxes) Production Costs by Mine - Fiscal 2013* $/Tonne
Slide 42: Potash Margin Leverage
Potash Margin Leverage *Actual operating rate of 95% **Production costs are reflective of actual costs during the quarter. These costs are captured in inventory and are not necessarily reflective of costs included in costs of goods sold for the period Esterhazy Belle Plaine Colonsay Carlsbad Mosaic
Slide 43: Potash Cost Curve
Potash Cost Curve Well positioned to deliver value today Brine Mgmt 2013 MOP Industry Cost Curve Delivered Midwest Retailer
Slide 44: Potash Cost Curve
Potash Cost Curve Brine Mgmt 2013 MOP Industry Cost Curve Delivered China
Slide 45: Esterhazy K3 Optionality Impact
Esterhazy K3 Optionality Impact • Brine management costs = $0 • K3 scenario results in $30 per tonne reduction in average costs/tonne. • Mosaic moves from third quartile to near lowest cost producer Future MOP Industry Cost Curve fob Port
Slide 46: Manage Sustaining Capital Expenditure
Manage Sustaining Capital Expenditure $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 FY 09 FY 10 FY 11 FY 12 FY 13 FY 18 Sustaining CapEx Farfield CapEx Inflow Depreciation Expense
Slide 47: Summary
Summary A track record of successful strategic investments Cost competitive and focused on further improving margins in both businesses Building optionality within potash operations Optimizing sustaining capital spending across enterprise
Slide 48: Mosaic
Mosaic
Slide 49: Mosaic’s Go-to-Market Strategy
Mosaic’s Go-to-Market Strategy Mosaic Analyst Day 2013
Slide 50: Market Access: Agenda
Market Access: Agenda Product destinations Mosaic’s access-to-market strategy Highlight two examples North America Brazil
Slide 51: Phosphates: Destinations
Phosphates: Destinations Phosphates: Destinations Deliberate destination shift 63% 77% Million Tonnes Optimizing logistics
Slide 52: Phosphates: Product Mix Shift
Phosphates: Product Mix Shift Million tonnes 42% 62%
Slide 53: Potash: Primary Destinations
Potash: Primary Destinations FY13 in million tonnes
Slide 54: Mosaic Uses Four Complementary Channels to Market
Mosaic Uses Four Complementary Channels to Market
Slide 55: Mosaic’s Access to Market Strategy
Mosaic’s Access to Market Strategy Focus on logistics Strong customer relationships with long-term agreements Exclusive space Premium product differentiation Portfolio approach
Slide 56: North America: Home Court Advantage
North America: Home Court Advantage
Slide 57: North America: Home Court Advantage
North America: Home Court Advantage
Slide 58: International Distribution
International Distribution Alignment with upstream production Excellent premium products channel Value capture of premium products Market intelligence Advantages of owned market access Quick facts 4.5 million tonnes (FY13) Two-thirds from Mosaic production Owned port facilities in Brazil, India and
Slide 59: Why Invest in Brazil? Grain and Oilseed Area and Production
Brazil Distribution: Why Invest in Brazil? Brazil Grain and Oilseed Harvested Area and Production Brazil 2012 Global Production Rank Coffee 1 Oranges 1 Soybeans 2 Sugar Cane 1 Corn 3 Source: USDA Million tonnes Million hectares Harvested Area Production st st nd st rd
Slide 60: Why Invest in Brazil? Fertilizer Supply
Brazil Distribution: Why Invest in Brazil? Brazil Fertilizer Supply Million tonnes
Slide 61: Why Invest in Brazil? MOP and Phosphate Supply
Brazil Distribution: Why Invest in Brazil? MOP Supply Phosphate Products Supply Million tonnes Million tonnes
Slide 62: Mosaic Brazil 5-Year Growth Strategy
Mosaic Brazil 5-Year Growth Strategy Uberaba Passo Fundo Rio Verde Sorriso Rio Grande Current Mosaic facilities Approved projects Candeias $300 million planned investment in blend capacity / port access Focus on phosphate and potash Grow owned blend capacity by more than 3 million tonnes by Attracti
Slide 63: Fospar port in Paranagua: capacity growth project
Fospar port in Paranagua: capacity growth project Logistics Opportunities Passo Fundo Rio Verde Sorriso Rio Grande São Luiz Miritituba Current Mosaic facilities Logistics driven opportunities: • Imports shift from South to North • Shift from less truck to more river / rail • Small bags to big bags t
Slide 64: Summary: Mosaic Brazil and distribution
Mosaic has… Many channels for distribution Strong positions in growing geographies Excellent customer relationships A clear strategy for growth in Brazil Summary
Slide 65: Mosaic
Mosaic
Slide 66: Product Innovation at Mosaic
Product Innovation at Mosaic Mosaic Analyst Day 2013
Slide 67: Premium Products
Premium Products
Slide 68: Innovation: Growing Demand
Innovation: Growing Demand Crop nutrients drive up to 60 percent of grain yields
Slide 69: Innovation: Mosaic’s Growing Portfolio
Innovation: Mosaic’s Growing Portfolio More in the pipeline…
Slide 70: Premium Products Strategy
Premium Products Strategy
Slide 71: MicroEssentials: Differentiators
MicroEssentials ® : Differentiators
Slide 72: MicroEssentials Incremental Value (estimated)
MicroEssentials ® Incremental Value (estimated) 2% Yield Gain 4% Yield Gain Assumes $5.50/bu corn price *MicroEssentials ® SZ™ $17 $36 $147 $376
Slide 73: Premium Products: Value Sharing
Premium Products: Value Sharing Creating value is important. Sharing value is critical to long-term success. Mosaic & Retail ~40% Farmer ~60%
Slide 74: Volume Growth
Volume Growth Expectations Historical 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 FY09 FY10 FY11 FY12 CY13 CY15 CY17 Historical 2013 10 - yr Plan (MID) 2013 10-yr Plan (HIGH) MicroEssentials ® Capability
Slide 75: Building on Our Success
Building on Our Success 2205: increasing yields and return on investment Uniform nutrient distribution in one granule Improved operational efficiency Coming soon: A new potash product
Slide 76: Why a Premium Potash Product?
Why a Premium Potash Product? One extra row of kernels equals 8 extra bushels, or $44 per acre Meeting another customer need Without 2205 With 2205 Assumes $5.50/bu corn price
Slide 77: 2205: Benefits for the Retailer
2205: Benefits for the Retailer Creates value through higher yields Mosaic relationship support Convenient storage, blending and application Differentiation builds lasting relationships
Slide 78: Customers – Selective Distribution Strategy
Customers – Selective Distribution Strategy Real growth—in both volume and value FY08 FY09 FY10 FY11 FY12 FY13 MicroEssentials® - Retailer A MicroEssentials® - Retailer B
Slide 79: Promoting Our Innovation
Promoting Our Innovation
Slide 80: Mosaic
Mosaic
Slide 81: Financial Outlook
Financial Outlook Mosaic Analyst Day 2013
Slide 82: Strategic priorities
r PREHOLDEp > yy PEOPLE x %, GROWTH cS) @, O O O MARKET | ACCESS i Zz INNOVATION
Slide 83: Growing Global Demand
Growing Global Demand 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 World Grain and Oilseed Use Source: USDA and Mosaic Actual for Biofuels Actual Forecast for Biofuels Forecast
Slide 84: Phosphates Near Term Outlook
Phosphates Near Term Outlook Narrowed 2013 range. Expect continued growth in 2014. Global Phosphate Shipments 63-64 64-66 13F 14F Source: Fertecon and Mosaic
Slide 85: Phosphates Medium Term Supply and Demand
Phosphates Medium Term Supply and Demand Phosphate Production, Capacity and Operating Rate 65% 70% 75% 80% 85% 90% 95% Capacity Production Op Rate
Slide 86: 2018 Phosphates Cost Curve
2018 Phosphates Cost Curve *Excludes all other high analysis finished phosphate products 2018 DAP Industry Cost Curve fob Port Likely Demand US$/Tonne Million Tonnes Likely Demand Scenario: 38.4 million tonnes Source: CRU and Mosaic
Slide 87: Phosphates Manufacturing Scenarios
Phosphates Manufacturing Scenarios 1. Assumes ammonia plant benefit 2. Difference between gross margin and cash margin includes deductions for depreciation, depletion and amortization, Ma’aden which would be treated as equity investment under US GAAP and not included in operating earnings, and other
Slide 88: Potash Near Term Outlook
Potash Near Term Outlook Lowered and narrowed 2013 range. Modest growth in 2014. Source: Fertecon and Mosaic Global Potash Shipments
Slide 89: Potash Medium Term Supply and Demand
Potash Medium Term Supply and Demand Capacity Production Operating Rate 40% 50% 60% 70% 80% 90% 100% Potash Production, Capacity and Operating Rate
Slide 90: 2018 Potash Cost Curve Position
2018 Potash Cost Curve Position Source: Fertecon and Mosaic US$/Tonne 2018 MOP Industry Cost Curve fob Port Million Tonnes
Slide 91: Potash Cash Margin Scenarios
Potash Cash Margin Scenarios Later K3 Optionality = $30 costs/tonne reduction Assumptions 1. All Scenarios 1. Mosaic costs = $102/tonne* 2. Later K3 Optionality not included 2. Low 3. Medium 4. High * Assumes constant costs/tonne. Higher volumes will improve per tonne productivity Difference between
Slide 92: Consolidated View – Cash Margin
Difference between gross margin and cash margin includes deductions for depreciation, depletion and amortization, Canadian Resource Taxes, Ma’aden which would be treated as equity investment under US GAAP and not included in operating earnings, and other non cash charges. $6.4 B $4.5 B $2.7 B High M
Slide 93: Consolidated View – Operating Income
Consolidated View – Operating Income FY 2013 = $2.2 billion $1.4 B Assumptions 1. SG&A expenses = $380 million 2. Resource Taxes = 15% of gross margin before CRT 3. DD&A = $850 million $4.7 B $3.0 B High Medium Low Pre Tax Operating Earnings
Slide 94: Investments/Capital Allocation Hurdle Rates
Investments/Capital Allocation Hurdle Rates Probability of meeting or exceeding required return WACC Country/External Risk 0% - 4.8% Project Risk 1.0% - 9.7% Required Return 10.3% - 23.8% 9.3% Rigorous process to evaluate and prioritize investments
Slide 95: Investment Proofs
Investment Proofs Plant Planned Expansion Tonnes Estimated Capital Costs/Tonne Estimated ROI Esterhazy K2 800,000 $807 19.9% Belle Plaine 570,000 $932 16.2% Colonsay 500,000 $1,448 14.4% Economic Assumptions 1. 2. $335 per metric tonne netback 75% operating rate
Slide 96: Estimated Future Capital Investments: Sustaining and Growth
Estimated Future Capital Investments: Sustaining and Growth in billions * Not fully approved investments Calendar year Estimated Future Capital Investments $0.0 $0.5 $1.0 $1.5 $2.0 Sustaining Potash Mines Ma'aden JV International & Supply Chain* Ammonia Plant*
Slide 97: Unchanged Balance Sheet Targets
Unchanged Balance Sheet Targets Our primary objective is to maintain a solid investment grade rating and financial flexibility Contingent Capital Long term Target Cash Committed Lines $ in billions multiple Liquidity Adjusted Debt / EBITDA
Slide 98: Current Balance Sheet Strength
Current Balance Sheet Strength Surplus Cash Debt Capacity Redeployment
Slide 99: Capital allocation priorities
Maintain ratings & financial strength Sustain assets & recurring dividend Investments to drive organic growth Opportunistic strategic investments Return surplus to shareholders Mosaic
Slide 100: Returns to Shareholders
Returns to Shareholders Disciplined approach to return meaningful capital via share repurchases Capital Return History in billions Calendar year Favor share repurchases Able to execute after November 26, Favor share repurchases over special dividends Mix of opportunistic buy-back and time-period ave
Slide 101: Implications for Total Shareholder Return
Implications for Total Shareholder Return Profitability (ROI) Growth (Investments) Free Cash Flow TSR Share Price Dividends
Slide 102: Helping the World Grow the Food it Needs
Helping the World Grow the Food it Needs