Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Goldman Sachs Tenth Annual Agricultural Forum (February 2006)
61 slides from Mosaic Company (the)'s conference presentation, Feb 14, 2006
Slide 1: The Mosaic Company Overview and Outlook
Exhibit 99.1 The Mosaic Company Overview and Outlook Fritz Corrigan President & CEO February 14, 2006 Goldman Sachs Tenth Annual Agricultural Forum
Slide 2: Welcome and introduction
Good Morning and thank you for inviting Mosaic to present at this conference. I am Fritz Corrigan, President and CEO of The Mosaic Company.
Slide 3: Safe Harbor Statement
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 r
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 understandings that we believe to be accurate as of today’s date. Actual results are likely to differ from those set forth in the forward lo
Slide 5: Business Overview
Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook February 7, 2006 3
Slide 6: Overview of segments and fiscal 2006 priorities
I’d like to start today with an overview of Mosaic and then discuss each of our business segments. I’ll also address Mosaic’s priorities for fiscal 2006 and give you an overview of our expectations for remainder of the fiscal year. Please note that our fiscal year ends on May 31st.
Slide 7: Mosaic vision: global leader in nourishing crops
Mosaic will be the global leader in nourishing crops, delivering distinctive value to world agriculture and to all we touch.
Slide 8: Mosaic is 15 months old
Mosaic is now 15 months old. We are the product of an October 2004 combination between the former Cargill Crop Nutrition and the former IMC Global Inc. We are still working hard to complete our integration, but remain very focused on reaching our vision: Mosaic will be the global leader in nourishin
Slide 9: Ag Fundamentals are Solid
Ag Fundamentals are Solid Population growth plus per capita GDP growth in developing countries Leads to more protein in diets and increasing growth in feed grain demand Along with growth in bio-fuels, especially ethanol in U.S. Limited arable land results in need for higher productivity / increase i
Slide 10: Economic fundamentals in world agriculture
Before I review our fertilizer outlook, let me start with the economic fundamentals at work in world agriculture, which we believe show a lot of promise. We see steadily growing population in the developing countries, and these people have increasing earning power and higher standards of living. Thi
Slide 11: Ag Fundamentals are Solid: Developing country growth
Ag Fundamentals are Solid General Economic Growth Rates in Developing Countries 2006 GDP Country Population Growth Rates China 1.3 billion 8 - 10% India 1.1 billion 7 - 8% Indonesia 241 million 4 - 5% Brazil 186 million 4 - 5% Argentina 40 million 7 – 8% Source: CIA Fact book, Mosaic February 7, 200
Slide 12: Growth in Asia and Latin America
As you’re well aware, Asia and Latin America is where most of this growth in population and GDP is happening. Five key growth countries are shown in this chart. GDP growth rates in these areas are expected to range from 4% to as high as 10%. Fertilizer demand growth is likely to be among the highest
Slide 13: Mosaic's Sales and Operating Earnings
Mosaic’s Sales and Operating Earnings December 2004 – November 2005 3500 Total Net Sales - $5.5 billion 3068.4 3000 2500 2000 1500 1301.9 1224.1 1000 500 69.8 0 Phosphate Potash Offshore Nitrogen 500 Total Operating Earnings - $582.1 million 414.2 400 300 232 200 100 9.3 0 -31.1 -42.3 -100 Phosphate
Slide 14: Net sales and operating earnings, last twelve months
Now let me turn to Mosaic’s net sales and operating earnings for the last twelve months ending November 30th, 2005. Mosaic’s net sales were $5.5 billion, over half of which were from the Phosphates business, about one quarter from our Potash business, and most of the remaining quarter from our Offsh
Slide 15: Mosaic Net Sales by Country
Mosaic Net Sales by Country December 2004 - November 2005 Total Net Sales $5.5 Billion China Canada 8% 2% India 12% Brazil 15% Canpotex 7% United States 32% Other 21% Argentina 3% February 7, 2006 8
Slide 16: Markets served
As for as the markets we serve, North America represents approximately one-third of our sales, with Brazil at 15% and India and China at a combined 20% of net sales. Canpotex’s 7% represents our potash exports, which is through Canpotex, the export association for Saskatchewan potash producers. As y
Slide 17: Phosphates
Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook February 7, 2006 9
Slide 18: Phosphates business and market outlook
Now I will discuss Mosaic’s Phosphates business along with the global market outlook.
Slide 19: Mosaic's Phosphates Segment
Mosaic’s Phosphates Segment Attractive supply/demand with seasonal challenges Reduce costs Minimize exposure to volatility in raw material and energy costs Focus on marketing products with high value Such as MAP, MicroEssentials™ and feed Adapt Mosaic’s Phosphate operations to seasonal challenges in
Slide 20: Phosphates supply/demand and seasonal challenges
Phosphates has an attractive supply/demand balance as a decline in 2006 trade is being about offset by a recent plant closure in the United States. However, there are clearly seasonal challenges, mainly in the December through February period, which is our third quarter. Both the domestic and export
Slide 21: Mosaic: The Phosphate Leader
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 22: Phosphate rock mines and manufacturing facilities
Mosaic has six phosphate rock mines in Florida with capacity of about 21 million tonnes per year. Phosphate rock, of course, is the primary building block for the finished phosphate fertilizer and products that our customers and their customers – the farmer - can actually use. Mosaic’s has five manu
Slide 23: World Processed Phosphate Import Demand
World Processed Phosphate Import Demand MMT Processed Phosphate Trade 25 In 2006, world import 20 demand is forecast to decline 15 by about 6% to 7%. Source: Fertecon and Mosaic China’s quest for phosphate 10 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05E 06F self-sufficiency MMT Processed Phospha
Slide 24: 2006 phosphate import demand forecast
In 2006, world-processed phosphate import demand is projected to decline by around 6% to 7% to 20 million metric tonnes. These numbers are based on our current analysis and are slightly lower than our prior communication. Imports by Brazil declined by over 40% in 2005. We expect a modest recovery in
Slide 25: Phosphate Export Supply Declining
Phosphate Export Supply Declining MMT Processed Phosphate Export Supply by Region 14 Source: Fertecon and Mosaic 2006 U.S. Production Lower 12 Recent US plant closure 10 in December 2005 of 1.1 8 million tonne capacity 6 Mosaic reduction of 0.6 4 million tonnes 2 0 90 91 92 93 94 95 96 97 98 99 00 0
Slide 26: U.S. phosphate exports and plant closures
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 around the 9 million tonne range since 2000. World phosphate trade was about flat in 2005, but we expect it to decline by 6% to 7% in 2006. U.S. pro
Slide 27: DAP Prices near record highs
DAP Prices near record highs $ MT DAP Prices fob Tampa Vessel 275 250 225 200 175 150 125 Source: Fertecon 100 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 DAP Prices have been on the rise for the last three years and reached $265 per tonne fob Tampa in July, 2005 February 7, 2006 14
Slide 28: Recent phosphate prices
Now let’s look at recent 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 strong levels due largely to strong demand from India and Pakistan and the tightening supply/demand balance in the global p
Slide 29: DAP Market Margins Pressured by Raw Materials
DAP Market Margins Pressured by Raw Materials $ ST DAP Margin Before Rock Calculated from Published Spot Prices for a Central Florida Plant 150 Source: Fertecon, Green Markets, Mosaic 140 130 120 110 100 90 80 70 60 50 40 30 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 The DAP Market Margin ha
Slide 30: DAP market margin and ammonia prices
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 also increased over the last year and was near a 20-year high in mid 2005. The DAP market margin, however, declined towards
Slide 31: Florida Land Holdings
Florida Land Holdings Mosaic’s preliminary estimate of Florida land holdings total about 260,000 acres or approximately 400 square miles Develop a strategy to maximize value of Florida land assets Over 300,000 people move to Florida each year February 7, 2006
Slide 32: Florida land footprint and value strategy
Our Phosphate business covers lots of central Florida. This chart shows our Florida foot print and the green shaded areas represent Mosaic’s land holdings. We are one of the largest landowners in Florida with holdings totaling about 400 square miles. We are in the process of developing a strategy to
Slide 33: Potash
Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook February 7, 2006 17
Slide 34: Mosaic's star performer: Potash
Now I will turn to Mosaic’s star performer – our Potash business.
Slide 35: Mosaic's Potash Segment
Mosaic’s Potash Segment Great fundamentals Superior earnings with high cash generation Excellent platform for growth Low cost and intelligent operator One of the largest manufacturers in the world World Potash Demand Growth to Continue in Developing Countries February 7, 2006 18
Slide 36: Potash fundamentals and near-term conditions
The potash business has great fundamentals. But today we face normal seasonal demand swings in this business compounded by some unusual circumstances, namely the protracted contract negotiations between Canpotex and the Chinese. As a result, current sales activity is very slow, and inventories are b
Slide 37: Potash - World Scale
Potash - World Scale 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 February 7, 2006 19
Slide 38: Potash mines, shipments and Esterhazy fire
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 participant. As many of you know, on January 29th, we had a fire in our Esterhazy mine. I had the opportunity to be
Slide 39: Potash Price Stabilizes
Potash Price Stabilizes 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 February 7, 2006 20
Slide 40: Potash price trends
Potash prices have about doubled over the last three years due to very strong demand and the industry’s tight supply/demand balance. This followed a long period of relatively stable prices. Demand growth was initially strong in Latin America, mainly Brazil, but the last two years the growth has been
Slide 41: Nitrogen / Offshore
Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook February 7, 2006 21
Slide 42: Nitrogen and Offshore segments
Now let me turn to Mosaic’s Nitrogen and Offshore segments.
Slide 43: Mosaic's Nitrogen Segment
Mosaic’s Nitrogen Segment Equity stake of 50% in Saskferco Products Inc., a world scale facility Energy-efficient plant with 1.2 million tonnes nitrogen capacity Continued to run profitably even with high-priced natural gas Mosaic is agency marketer for Saskferco production Saskferco’s equity earnin
Slide 44: Nitrogen segment and Saskferco
Our Nitrogen segment is our smallest and consists mainly of our equity investment in Saskferco Products, Inc. Saskferco is a great performer and yields good cash flow. We market all of Saskferco’s production through an agency relationship plus we are also a distributor of other nitrogen products in
Slide 45: Mosaic's Offshore Segment
Mosaic’s Offshore Segment Emphasis on distribution of Mosaic’s production Manages seasonality of global demand Mainly Brazil and other large growth markets Challenging short-term environment, but long-term platform growth Reduce supply chain costs On the ground expertise and timely market intelligen
Slide 46: Offshore segment footprint and differentiation
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 47: Financial Outlook
Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook February 7, 2006 24
Slide 48: Mosaic's financial outlook
Finally let me address Mosaic’s financial outlook.
Slide 49: First Half Fiscal 2006 Highlights
First Half Fiscal 2006 Highlights Net sales of $2.9 billion Net earnings of $131.1 million Improved Phosphate segment results with net sales of $1.6 billion and operating earnings of $149 million Strong Potash segment with net sales $577 million and operating earnings of $210 million Offshore net sa
Slide 50: First half fiscal 2006 results discussion
For the first half of 2006 ended November 30th, we earned $131.1 million or $0.30 per share with net sales of $2.9 billion. During the first half, our Phosphates business showed year-over-year improvement with earnings of $149 million, aided by a strong pricing environment in the summer and early fa
Slide 51: Fiscal 2006 Financial Outlook
Fiscal 2006 Financial Outlook Third quarter results expected to be very weak but stronger fourth quarter results Phosphate fertilizer and feed sales volume of 10.5 to 10.9 million tonnes, down 0.1 million tonnes from January announced earnings Focus on Execution and Cash Flow Generation February 7,
Slide 52: Execution and cash flow focus for 2006
For 2006, we are focused on execution and cash flow generation. We continue to expect a strong fourth quarter, which is seasonally Mosaic’s best quarter, and the supply and demand fundamentals over the medium term remain attractive. Based on our current assessment, however, the third quarter may be
Slide 53: Fiscal 2006 Financial Outlook
Fiscal 2006 Financial Outlook Third quarter results expected to be very weak but stronger fourth quarter results Phosphate fertilizer and feed sales volume of 10.5 to 10.9 million tonnes, down 0.1 million tonnes from January announced earnings Potash sales volume reduced by 0.5 million tonnes to 7.3
Slide 54: Potash volume, interest cost and equity earnings guidance
Similarly, for Potash, we are projecting sales of 7.3 to 7.6 million tonnes for fiscal 2006, down 500,000 tonnes compared with our prior guidance. This is mainly due to lower domestic sales volume, but also slightly lower export volume as well. These revised expectations give you an indication of ho
Slide 55: Sensitivities
Sensitivities Operating Earnings Change ($ in millions) EPS Marketing MOP Price ($/tonne) $10 $72.2 $0.09 Potash Volume (000 tonnes) 500 $27.3 $0.03 DAP Price ($/tonne) $10 $73.8 $0.09 Phosphate Volume (000 tonnes) 500 $13.5 $0.02 Raw Materials Sulfur ($/lt) $5 $25.0 $0.03 Ammonia ($/tonne) $10 $16.
Slide 56: Sensitivity analysis discussion
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 57: Mosaic Finance Priorities
Mosaic Finance Priorities Generate cash to pay down debt / lower interest expense Investment grade goal New ERP / SOX / financial controls Grow our successful potash business Adapt phosphate capacity to seasonal challenges in cost- efficient manner Be a market leader, react swiftly and exercise stro
Slide 58: Conclusion and immediate 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 generate cash to pay down debt with a goal towards achieving an investment grade rating. We are in the process o
Slide 59: Mosaic Overview
Mosaic Overview Management: Fritz Corrigan, President & CEO Jim Thompson, Executive Vice President Larry Stranghoener, Executive Vice President & CFO Website: www.Mosaicco.com Headquarters: 3033 Campus Drive, Suite E490, Plymouth, MN 55441 Trading Symbol: NYSE: MOS Investor Relations: Doug Hoadley,
Slide 60: Thank you for your time
Thank you for your time. I will now take questions.
Slide 61: Thank you
Thank you February 7, 2006 fi. | za TTT ameasreerernere
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