Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Investor Presentation (December 2005)
70 slides from Mosaic Company (the)'s investor presentation, Dec 7, 2005
Slide 1: The Mosaic Company Overview and Fiscal 2006 Outlook
Exhibit 99.2 The Mosaic Company Overview and Fiscal 2006 Outlook Fritz Corrigan, President & CEO December 7, 2005
Slide 2: Welcome and introduction
Thank you and good afternoon. I am Fritz Corrigan, President and CEO of The Mosaic Company.
Slide 3: Safe Harbor Statement
Safe Harbor Statement Forward - Looking Statements Certain statements contained herein or made today constitute “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995. Although we believe that the assumptions made in connection with the forwar
Slide 4: Forward-looking statements reminder
Before we start today, I want to remind you that there are forward-looking statements in this presentation. The remarks made today are based on information and understanding that we believe to be accurate as of today’s date. Actual results may differ from those set forth in the forward looking state
Slide 5: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook November 2005 3
Slide 6: Overview of presentation topics
Today I’d like to give you an overview of Mosaic, discuss our business segments and our strategy. I will focus especially on the phosphate outlook as you already have heard about the outlook for nitrogen and potash. I’ll also address Mosaic’s priorities for fiscal 2006 and give you an overview of ou
Slide 7: Mosaic Profile
Mosaic Profile Formed on October 22, 2004 through the combination of Cargill Crop The Company Nutrition and IMC Global Headquartered in Plymouth, MN CEO and President: Fritz Corrigan EVP and CFO: Larry Stranghoener Management Selected the best people from both companies to fill out management team E
Slide 8: Combination of Cargill Crop Nutrition and IMC Global
Just over one year ago, the combination of Cargill Crop Nutrition and IMC Global was completed. With more than $5 billion in pro forma annual sales, a diversified business portfolio, and a global distribution network, Mosaic emerged as a leader in the crop nutrition industry. The rationale for creat
Slide 9: Value Proposition
Value Proposition Financially Strong Low Cost Diversified Industry Leader Positioned to deliver superior returns during the cyclical swings in global crop nutrient markets
Slide 10: Value proposition: financially strong, low cost, diversified
Our value proposition starts with becoming financially strong. Cargill’s crop nutrition business was contributed with very little debt. Thus, Mosaic’s credit ratings have improved versus IMC’s prior ratings and we intend to further strengthen the balance sheet to achieve investment grade ratings. We
Slide 11: Mosaic Net Sales by Business Segment
Mosaic Net Sales by Business Segment 9/1/2004 – 8/31/2005 Total Net Sales were $5.1 billion Nitrogen 2% Potash 22% Phosphate 52% Offshore 24% November 2005 6
Slide 12: Net sales by segment commentary
For the last twelve months ending August 31, 2005, Mosaic’s net sales were $5.1 billion. Approximately half of our net sales were from the Phosphate business with 24% from our Offshore business; 22% from the Potash business segment and 2% from the Nitrogen business.
Slide 13: Mosaic Operating Earnings by Business Segment
Mosaic Operating Earnings by Business Segment LTM Ending 8/31/2005 Total Operating Earnings - $453.5 million 400 326.2 300 200 165.1 100 8.1 0 -8.8 -37.1 -100 November 2005 7
Slide 14: Operating earnings by segment commentary
This chart shows Mosaic’s operating earnings by business segment. It does not include equity income from Mosaic’s investments in non-consolidated joint ventures, which was $56 million in Fiscal 2005. Potash is our star performer with operating earnings of $326 million, or about two-thirds of the tot
Slide 15: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook November 2005 8
Slide 16: Phosphates business and market outlook
Next I will discuss Mosaic’s phosphates business along with the global market outlook.
Slide 17: Mosaic: The Phosphate Leader - Rock Mining
Mosaic: The Phosphate Leader Rock Mining Operations Top Five Rock Producers 2004 OCP Mosaic PhosAgro GCT PotashCorp 0 5 10 15 20 25 30 Million Tonnes Rock Phosphate Rock Production 2004 OCP 18% Other Mosaic 52% 14% PhosAgro 6% GCT PotashCorp 5% 5% November 2005 9
Slide 18: Phosphate rock mining locations and share
Mosaic is a leader in the phosphate business. As you can see from this slide, we currently have six active mining locations in Central Florida. These mines are capable of producing 21 million tonnes of phosphate ore that is ready for further processing each year. The combination of mine locations th
Slide 19: Mosaic: The Phosphate Leader - Fertilizer Operations
Mosaic: The Phosphate Leader Phosphate Fertilizer Operations Top Five Phosphate Fertilizer Players by Capacity 2005 Mosaic OCP PotashCorp PhosAgro CF Industries 0 2 4 6 8 10 12 14 MMT DAP+MAP+TSP+MES Phosphate Fertilizer Capacity 2005 Mosaic 18% OCP 4% PotashCorp 4% PhosAgro Other 3% 68% CF Industri
Slide 20: Phosphate fertilizer manufacturing facilities
Phosphate rock, of course, is the primary building block for the finished crop nutrient products that our customers and their customers – the farmer - can actually use. This is the product that we actually ship. Mosaic’s capabilities lie in the five manufacturing facilities in Florida as well as one
Slide 21: World Processed Phosphate Import Demand
World Processed Phosphate Import Demand MMT Processed Phosphate Trade 25 20 15 10 5 Source: Fertecon and Mosaic 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05E 06F MMT Processed Phosphate Import Demand by Region 12 Source: Fertecon and Mosaic 10 Processed phosphate 8 includes DAP, MAP and TSP 6 4
Slide 22: Import demand forecast commentary
In 2005, world processed phosphate import demand is projected to decline by around 2% to 21 million metric tonnes. Brazil has been a slow market in 2005 but this has been partially offset by growth in Asia, particularly India and Pakistan. In 2006, world import demand is forecast to decline by about
Slide 23: Strong Growth in India and Pakistan
Strong Growth in India and Pakistan MMT India and Pakistan Processed Phosphate Imports 4.5 4.0 Source: IFA and Mosaic 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 95 96 97 98 99 00 01 02 03 04 05E 06F India Pakistan November 2005 12
Slide 24: Asian demand commentary
A key factor in the phosphates market in 2005 has been the strong Asian demand. As already noted, we are seeing a large increase in India’s and Pakistan’s imports. This has been due to strong GDP growth and good monsoons resulting in strong demand growth. In 2005, imports from these countries are pr
Slide 25: Brazil Market Remains Weak
Brazil Market Remains Weak MMT Brazilian Processed Phosphate Imports 4.0 3.5 Source: ANDA and Mosaic 3.0 2.5 TSP 2.0 DAP 1.5 MAP 1.0 0.5 0.0 95 96 97 98 99 00 01 02 03 04 05E 06F November 2005 13
Slide 26: Brazil imports commentary
In 2003 and 2004, Brazil showed remarkable growth in imports of 47% and 14% respectively. However, imports are expected to decline 40% in 2005 due to the appreciation of the real, lower soybean prices, higher input costs and a severe drought in Southern Brazil. We are projecting a modest recovery in
Slide 27: Phosphate Export Supply Declining
Phosphate Export Supply Declining MMT Processed Phosphate Export Supply by Region 14 Source: Fertecon and Mosaic 12 10 8 6 4 2 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05E 06F USA Africa & Mideast FSU Processed phosphate November 2005 includes DAP, MAP and TSP 14
Slide 28: Export supply commentary
The U.S. phosphate industry exported 12 million tonnes of processed phosphate per year during the last half of the 1990s. These exports have dropped to the 9.2 to 9.4 million tonne range since 2000. As already noted, world phosphate trade is expected to decline 2% in 2005. U.S. processed phosphate e
Slide 29: U.S. Phosphates Production Lower
U.S. Phosphates Production Lower Mosaic announces 400,000 to 600,000 tonnes cutback from Nov 05 to Mar 06 U.S. Industry events including recent closing of U.S. Agri-Chem and Mississippi Phosphates idled Sept 05 – Jan 06 due to Hurricane Katrina Mosaic reduces phosphate sales volume guidance by 500,0
Slide 30: Industry capacity and production cutbacks
We estimate that Industry capacity will decline by about 1.2 million tonnes of finished phosphate fertilizer and assist in bringing the phosphate market to a balanced situation in 2006. This is, in part, due to the recent closure of the U.S. Agri-Chemical plant in Florida. In addition, Mississippi P
Slide 31: U.S. Phosphoric Acid Operating Rate Remains High
U.S. Phosphoric Acid Operating Rate Remains High MMT P2O5 U.S. Phosphoric Acid Production and Operating Rate 13 100% 12 95% 11 90% 10 85% 9 80% 8 75% 7 70% 6 65% 5 60% 4 55% 95 96 97 98 99 00 01 02 03 04 05 06F Fertilizer Year Ending June 30 For DAP/MAP/TSP For Other Capacity Operating Rate November
Slide 32: Phosphoric acid operating rate commentary
Phosphoric acid is the most comprehensive measure of phosphate production. After bottoming at 78% of capacity in 2000/01, the U.S. phosphoric acid operating rate has climbed steadily to the mid-90% range today. This trend is the result of both permanent plant closures as well as increases in acid pr
Slide 33: DAP Prices near record highs
DAP Prices near record highs $ MT DAP Prices fob Tampa Vessel 270 250 230 210 190 170 150 Source: Fertecon 130 95 96 97 98 99 00 01 02 03 04 05 06 November 2005 17
Slide 34: DAP price commentary
Now let’s look at phosphate prices. DAP prices have been on the rise for the last three years and reached $265 per tonne fob Tampa in July. Prices have remained at these high levels due largely to strong demand from India and Pakistan and the tightening supply/demand balance in the global phosphate
Slide 35: DAP Market Margins Pressured by Raw Materials
DAP Market Margins Pressured by Raw Materials DAP Margin Before Rock $ ST Calculated from Published Spot Prices for a Central Florida Plant 150 140 130 120 110 100 90 80 70 60 Source: Fertecon, Green Markets, Mosaic 50 40 30 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 November
Slide 36: DAP market margin commentary
We manage our business based on margins. This chart shows the DAP market margin, or DAP margin minus sulfur and ammonia costs. Similar to the price trend, the DAP market margin has also been increasing, particularly over the last year and was also recently near a 20-year high – due largely to a stro
Slide 37: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook November 2005 19
Slide 38: Potash
I’ll turn now to Potash, where we have a strong position in an attractive industry.
Slide 39: Potash - World Scale and Low Cost Operations
Potash - World Scale and Low Cost Operations Export Shipments 3.50 mmt 41% of Total North American Shipments Top 5 Export Markets 5.10 mmt China 59% of Total Brazil India Indonesia Malaysia November 2005 20
Slide 40: Potash mines and shipments
Potash is a business with good supply - demand fundamentals, strong prices and margins, and good cash flow. We operate four significant mines in Canada as well as two in the United States. About 59% of our product is shipped into the North American market where Mosaic is a significant market partici
Slide 41: Mosaic: Low Cost Operations
Mosaic: Low Cost Operations Mosaic’s four Canadian facilities rank among the lowest cost mines worldwide 3.5 3.0 Source: British Sulphur 2.5 2.0 1.5 1.0 0.5 0.0 Rest of the Industry Mosaic Mines November 2005 21
Slide 42: Potash cost structure and Esterhazy expansion
Mosaic has a good cost structure in this industry, as do all of the Saskatchewan potash producers. Our one higher-cost potash mine produces a profitable specialty product. We have previously announced a 500,000 tonne per year expansion at our Esterhazy mine which is expected to be onstream by the en
Slide 43: 2004 Estimated Potash Production by Company
2004 Estimated Potash Production by Company World Potash Production 2004 31,240 MT K2O ICL Uralkali Kali & Salz 10.3% Silvinit 9.7% 11.6% 8.2% APC 3.7% Belaruskali Agrium 14.8% 3.3% Other PCS 15.4% Mosaic 7.5% 15.4% Source: IFA & Mosaic November 2005 22
Slide 44: Potash production share commentary
In 2004 Mosaic produced 15.4% of the world’s potash products, about the same as PCS. However, Mosaic produced approximately 580,000 tonnes K2O for PCS in 2004 or almost 2% of the world’s production. So, if you consider the tons toll-produced for PCS, we were the world’s largest potash producer in 20
Slide 45: Mosaic Announces Lower Potash Production and Sales Volume
Mosaic Announces Lower Potash Production and Sales Volume Production reduced by approximately 200,000 million tonnes per annum • Downtime during the upcoming holiday period • Lower production at Belle Plaine to reduce high-cost natural gas consumption Mosaic Potash sales guidance reduced by 400,000
Slide 46: Potash production reduction commentary
Consistent with my prior comments relating to our Phosphate segment, Mosaic recently announced plans to reduce potash production by about 200,000 tonnes, by taking downtime during the upcoming holiday period. In addition we will reduce production rates at our Belle Plaine plant, which is a large con
Slide 47: Potash prices stabilizing at high levels
Potash prices stabilizing at high levels Cornbelt-Saskatchewan Potash Prices US$ ST Granular Grade 240 220 Source: Green Markets 200 180 160 140 120 100 80 60 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Cornbelt Saskatchewan November 2005 24
Slide 48: Potash price commentary
Potash prices are at record high levels. Prices were historically quite stable from 1990 to 2002, but the supply/demand situation tightened over the last three years because of high world demand growth. Therefore, prices have steadily climbed since mid-2003. Demand growth was initially strong in Lat
Slide 49: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook November 2005 25
Slide 50: Nitrogen and Offshore segments
Our other two business segments are Nitrogen and Offshore.
Slide 51: Strong North American Nitrogen Position
Strong North American Nitrogen Position Faustina 500,000 metric ton ammonia plant that supplies DAP/MAP granulation requirements in Louisiana Saskferco (Equity Earnings of $15 mil for Fiscal 2005 JV with Investment Saskatchewan, Inc. (49%) and Citibank Canada (1%) Owner and operator of 1.2 million m
Slide 52: Nitrogen position commentary
Mosaic has a good North American Nitrogen position, primarily through our 50% equity investment in Saskferco – a nitrogen plant strategically located in Saskatchewan. This facility has a competitive cost position as it is highly energy efficient, plus it is able to purchase lower price natural gas c
Slide 53: Offshore – Global Footprint in Attractive Markets
Offshore – Global Footprint in Attractive Markets Distribution assets including port terminals, bagging lines, warehouses and blending/NPK plants in Argentina, Brazil, Canada, Chile, China, India, Thailand, Ukraine and the United States Approximately 1.0 million tonnes of owned storage capacity at t
Slide 54: Offshore segment differentiation commentary
Our Offshore business segment differentiates Mosaic from our North American competitors. We have a large global production and distribution footprint in key growth markets, particularly in Latin America and Asia. It includes approximately one million tonnes of storage capacity at two dozen facilitie
Slide 55: Distribution – A Competitive Advantage
Distribution – A Competitive Advantage Capturing time and place utility Squeezing inefficiencies out of the supply chain Adding value by delivering crop nutrition solutions Harvesting market intelligence November 2005 28
Slide 56: Distribution business commentary
Our distribution business today is a low margin business which nonetheless produces attractive returns on capital due to low capital intensity. Longer term, we believe there is a substantial opportunity to capture more value “Beyond the plant gate.” By combining our considerable agricultural experie
Slide 57: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook November 2005 29
Slide 58: Financial review and outlook
I will end with a brief financial review and outlook.
Slide 59: Fiscal 2006 First Quarter Highlights
Fiscal 2006 First Quarter Highlights Net sales of $1.4 billion Net earnings of $76.1 million Improved Phosphate segment results with net sales of $865 million and operating earnings of $107 million Strong Potash segment with net sales $268 million and operating earnings of $99 million Offshore net s
Slide 60: First quarter results commentary
For the first quarter of 2006 ended August thirty first, we earned $76.1 million or $0.18 per share with net sales of $1.4 billion. During the first quarter, our Phosphate business showed continued improvement with earnings of $107 million, aided by a strong pricing environment and good market funda
Slide 61: Mosaic's Balance Sheet Highlights
Mosaic’s Balance Sheet Highlights 8-31-05 Total Debt $2.6 billion Total Equity $3.5 billion Total Capital $6.1 million Debt:Capital Ratio 42.8% November 2005 31
Slide 62: Balance sheet commentary
I would like to quickly highlight some of Mosaic’s balance sheet information as information of August 31, 2005. Our total debt was $2.6 billion and total capital was $6.1 billion giving us a debt-to-capital ratio of 42.8%. One of our key goals is to strengthen the balance sheet and achieve investmen
Slide 63: Fiscal 2006 Mosaic Financial Outlook
Fiscal 2006 Mosaic Financial Outlook Phosphate sales volume of 9.7 to 10.1 million tonnes Potash sales volume of 7.9 to 8.3 million tonnes S,G&A cost projected at about $60 million per quarter, including new ERP costs Interest cost expected about $40 million per quarter including about $12 million o
Slide 64: Fiscal 2006 outlook commentary
For 2006, we are focused on earnings and cash generation. We are projecting phosphate sales volumes of 9.7 to 10.1 million tonnes for fiscal 2006 which is down 500,000 tonnes compared to our prior guidance. For potash, we are projecting sales of 7.9 to 8.3 million tonnes for fiscal 2006, down 400,00
Slide 65: Sensitivities
Sensitivities ($ in millions, except per share data) Earnings Change ($ in millions) EPS Marketing MOP Price ($/tonne) $10 $54.6 $0.07 Potash Volume (000 tonnes) 500 $37.5 $0.05 DAP Price ($/tonne) $10 $100.0 $0.13 Phosphate Volume (000 tonnes) 500 $10.0 $0.01 Raw Materials Sulfur ($/lt) $5 $23.9 $0
Slide 66: Sensitivity analysis commentary
Note that our results can vary widely based upon external trends, as shown by this sensitivity analysis. Clearly, the most upside potential is for our phosphates business. The one raw material that is not on this chart over which we have direct control – rock cost – is an area that is getting signif
Slide 67: Mosaic Management Priorities
Mosaic Management Priorities Cash flow generation Grow our successful potash business Harvest cost synergies Reduce phosphate mining and processing costs Pay down debt – achieve investment grade status Demonstrate market leadership Show operating discipline Earn the right to grow Focus on Execution
Slide 68: Conclusion and priorities
In conclusion, let me note that Mosaic has an experienced management team that is driven to deliver superior returns during the industry’s cyclical swings. Our immediate priorities are to harvest the cost synergies and reduce phosphate mining and processing costs. We plan to grow our successful pota
Slide 69: http://www.mosaicco.com
http://www.mosaicco.com November 2005 35
Slide 70: Closing remarks
I am excited about Mosaic’s prospects. We’ve made good progress during the past year, but realize this is just one step toward our full potential. Thank you.