Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Q2 2018 Earnings Presentation
45 slides from Mosaic Company (the)'s earnings presentation, May 11, 2018
Slide 1: Investor Information Second Quarter 2018
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 Investor Cell 612-834-0988 Information anton.pshon@mosaicco.com Second Quarter 2018 1
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: Executive Summary
Executive Summary ▪ Raising full year adjusted EBITDA to $1.7B - $1.9B and adjusted EPS guidance 1 to $1.20 - $1.60 per share*: Constructive • Expect to recoup most logistics related shipment delays Outlook • Expect market momentum to continue through 2018 • Ahead of schedule on debt pay-down, targe
Slide 5: Mosaic Assets: Global, Long Life, Low Cost
Mosaic Assets: Global, Long Life, Low Cost Phosphate Production Potash Production Distribution Facilities Joint Ventures 55
Slide 6: Transformation: Idled Plant City
Transformation: Idled Plant City $/Tonne Conversion Costs Mined Rock Costs $/Tonne $50 $80 $70 $40 $60 $30 $50 $20 $40 2014 2015 2016 2017 Q1 2018 2014 2015 2016 2017 Q1 2018 Cash Production Costs Cash Conversion Costs * Phosphate cash conversion costs are reflective of actual costs, excluding reali
Slide 7: Transformation: Anticipated S&D Impact of Idling Plant City
Transformation: Anticipated S&D Impact of Idling Plant City Million Tonnes Forecast Global Phosphate Capacity vs. Shipments DAP/MAP/NPS Cumulative Change 2018-2020 5 Cumulative Net Capacity Growth 4 Cumulative Demand Growth 3 2 1 0 -1 18F 19F 20F Source: CRU and Mosaic Tightened phosphate supply & d
Slide 8: Transformation in Potash: Asset Optimization and Cost Control
Transformation in Potash: Asset Optimization and Cost Control $ Per Tonne Despite Logistics Related Costs $140 $120 $100 $80 $60 $40 $20 $- 2013 2014 2015 2016 2017 Q1 2018 MOP Cash Production Costs Per Tonne* Brine *MOP cash production costs are reflective of actual costs during the quarter, exclud
Slide 9: Transformation in Potash: Expected Elimination of Brine Management Costs
Transformation in Potash: Expected Elimination of Brine Management Costs Esterhazy Expected Cash Production $/Tonne 16,000 Costs Below $50 per Tonne 90 14,000 80 12,000 70 10,000 8,000 60 6,000 50 4,000 Thousand Ore Tonnes Cash Production Costs 40 2,000 0 30 2013 2016 2017F 2018F 2019F 2020F 2021F 2
Slide 10: Mosaic Fertilizantes Transformation on Track
Mosaic Fertilizantes Transformation on Track Mosaic Fertilizantes Transformation Actions taken in Q1’18 $300 expected to generate $100M of value $250 $200 $150 $100 H2 $50 H1 $- H1 2018E 2019E 2020E 10
Slide 11: Visible Cost Controls
Visible Cost Controls $ Per Tonne Selling, General & Administrative Expenses 20 18 16 14 12 10 8 2013 2014 2015 2016 2017 2018F 11 *Does not include the intra-segment volume eliminations, which are negative impacting SG&A/Tonne metric starting in 2018 as a result of the Vale Fertilizantes acquisitio
Slide 12: Capital Allocation Philosophy
Capital Allocation Philosophy Further accelerating debt repayment in 2018 12
Slide 13: Tremendous Upside Leverage
Tremendous Upside Leverage $3,500 EBITDA $2.9B – $3.1B $3,000 FCF $2.2B $2,500 EBITDA $2.0B – 2.2B – $2.4B EBITDA $1.7B-$1.9B $2,000 FCF $1.3B - $1,500 $1.5B FCF $750M- $1,000 950M $500 $0 2018F EBITDA Scenario 1* Scenario 2** EBITDA FCF *Scenario 1 assumes K3 is fully operational and all Mosaic Fer
Slide 14: Markets: Agricultural Outlook
Markets Agricultural Outlook 14
Slide 15: Agricultural Fundamentals Begin to Tighten
Agricultural Fundamentals Begin to Tighten Following a String of Bin-Busting Harvests World Less China Grain and Oilseed Stocks . A big step-up in global production since 2012/13 Mil Tonnes Percent 450 22% Source: USDA 425 21% . But continued strong and steady demand growth 400 20% 375 19% . Stocks
Slide 16: Mostly Firm Crop Prices Underpin Positive P&K Demand Outlook
Mostly Firm Crop Prices Underpin Positive P&K Demand Outlook Corn Prices Soybean Prices HRW Wheat Prices US$ BU US$ BU US$ BU Daily Close of the December Contract (Sep 1 - Aug 31) Daily Close of the November Contract (Sep 1 - Aug 31) Daily Close of the July Contract (Jun 1 - May 31) 4.50 12.00 6.50
Slide 17: Positive Agronomic & Economic Demand Drivers
Positive Agronomic & Economic Demand Drivers Record Harvests Remove Record Amounts of P&K Plant Nutrients Still Affordable World Grain and Oilseed Production Bil Tonnes Plant Nutrient Affordability Plant Nutrient Price Index / Crop Price Index 3.2 1.00 Source: USDA Less Affordable 3.0 0.90 2.8 0.80
Slide 18: Brazil Farmers Benefit from Argentine Drought and Weaker Real
Brazil Farmers Benefit from the Argentine Drought, a Weaker Real, and the Threat of a U.S.-China Trade War Cents Bu Soybean Premium at Paranaguá Port 225 200 175 Soybean Premium at Paranaguá Port 150 Four-Year Cents Bu 125 2018 Average Change January $0.64 $0.36 77% 100 February $0.64 $0.34 91% 75 M
Slide 19: Markets: Brazil
Markets Brazil Maseic
Slide 20: Brazil: Agricultural Powerhouse
Brazil: Agricultural Powerhouse Brazil Grain and Oilseed Production Million Tonnes 250 225 200 175 150 125 100 75 50 25 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17F 18F 19F 20F 21F Soybean Summer corn Second corn crop Wheat Cotton Others Source: CONAB and projections from FIESP Outlook 2
Slide 21: Mosaic is Logistically Advantaged to Key Growing Areas
Mosaic is Logistically Advantaged to Key Growing Areas • Exposure to the Cerrado region • Just-in-time deliveries • Long-term relationship with customers • Integrated logistics 21
Slide 22: Post Transformation: Competitive Delivered Basis
Post Transformation: Competitive Delivered Basis Brazil MAP Cost Curve 2021 Forecast Delivered Upcountry Mosaic Uberaba 0 1,000 2,000 3,000 4,000 5,000 Source: Mosaic Thousand Tonnes 22
Slide 23: Markets: Potash Outlook
Markets Potash Outlook Maseic
Slide 24: Key Prices Move Up
Key Prices Move Up Potash Prices $ Tonne KCl 475 450 425 400 375 . Strong broad-based demand growth 350 325 . Optimized/restructured operations 300 275 250 . No immediate threat from new capacity 225 Source: Argus 200 175 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 fob NOLA fob U.S. Corn Belt c&f Brazil c&f
Slide 25: Strong, Broad-Based and Less Volatile Demand Growth
Strong, Broad-Based and Less Volatile Demand Growth Mil Tonnes KCl Global Potash Shipments 70.0 Source: IFA, CRU, Mosaic and Company Reports 65.5-67.5 67.5 . After declining during the two previous years, we 65.0 65.0 estimate that global MOP shipments jumped 6.8% or 4.1 million tonnes KCl to 65.0 m
Slide 26: Strong and Broad-Based Demand Growth
Strong and Broad-Based Demand Growth Mil Tonnes Brazil MOP Shipments Mil Tonnes China MOP Shipments KCl KCl Chinese shipments also are 10.5 18.0 Source: ANDA, Mosaic and Company Reports 10.0 Source: CRU and Mosaic trending up due to record crop 16.0 9.5 Brazil demand continues its production as well
Slide 27: Global Potash Shipment Forecasts by Region (May 2018)
Global Potash Shipment Forecasts by Region (May 2018) Source: IFA, CRU and Mosaic Muriate of Potash Low High (Numbers may not sum to total due to rounding) Million Tonnes (KCl) 2015 2016 2017E 2018F 2018F Comments 2017 shipments were revised down to 14.6 mmt due to lower production (7.3 mmt producti
Slide 28: Supply and Demand Scenarios
Supply and Demand Scenarios Potential Potash Supply/Demand Changes in 2018 Price Scenario Mil Tonnes KCl Low Likely High Shipment Increase 1.00 1.70 2.50 Met from Drawdown of Producer Inventories 0.60 0.50 0.40 Supply Net Changes Price Scenario 1.90 1.40 0.95 Low Likely High ICL Boulby Closure -0.20
Slide 29: Record Canpotex Exports Required to Meet Record Demand
Record Canpotex Exports Required to Meet Record Demand Mil Tonnes Canpotex Exports Canpotex Sales by Destination KCl Calendar Year 2015-17 Average 12 Source: Canpotex 11 Rest of 10 World Brazil 13% 25% 9 Other Asia 8 16% 7 India China 6 10% 18% 5 Indo/Mala 2010 2011 2012 2013 2014 2015 2016 2017 18%
Slide 30: 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 MMT MOP Global Potash Shipments Change in Potash Shipments 2017 vs. 2010 Change in Potash Shipments 2022 vs. 2017 75 China 7.4% China 3.2% Source: Mosaic, CRU Brazil 5.2% 70 Brazil 3.0% Other Asia/Oceania 4.9% Ind
Slide 31: Demand Growth Projected to Keep Pace with New Capacity
Demand Growth Projected to Keep Pace with the Likely Ramp-Up of New Capacity Mil Tonnes KCl Global Potash Capacity vs. Shipments Cumulative Change 2016-22 14.0 Source: IFA, CRU and Mosaic . After declining during the two previous 12.0 years, we now estimate that global MOP shipments jumped 6.8% or 4
Slide 32: Five-Year Outlook: Mosaic Forecasts (May 2018)
Five-Year Outlook: Mosaic Forecasts (May 2018) Mil Tonnes Global Potash Supply and Demand Op Rate . We project no chronic or severe long term supply and demand KCl MOP Capacity, Production and Operating Rate 90 100.0% imbalance. Global operational capacity is projected to increase 7.9 80 95.0% milli
Slide 33: 2021 Cost Curve Forecast
2021 Cost Curve Forecast 2021 MOP Cost Curve fob Mine at Effective Capacity Brine 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Thousand Tonnes Capacity Source: CRU, Mosaic 33
Slide 34: Markets: Phosphate Outlook
Markets Phosphate Outlook 34
Slide 35: Phosphate Margins Move Up in Response to Constructive Fundamentals
Phosphate Margins Move Up in Response to Constructive Fundamental Developments Benchmark DAP Stripping Margin $ Tonne Calculated from Published Weekly Spot Prices 350 . Strong broad-based demand growth 325 . Supply adjustments are taking hold including the temporary idling of Mosaic’s Plant City fac
Slide 36: Both Higher Prices and Lower Ammonia Costs Have Boosted Margins
Both Higher Prices and Lower Ammonia Costs Have Boosted Margins Phosphate Prices Ammonia Weekly Raw Materials Prices Sulphur $ Tonne Published Spot Prices $ Tonne c&f Tampa $ LT 550 700 175 525 $655 in November 2014 500 600 150 $147 in 2015 Q1 475 450 500 125 $116 in 2018 Q2 425 400 100 400 375 300
Slide 37: Pace of Demand Growth Has Picked Up
Pace of Demand Growth Has Picked Up MMT Product Global Phosphate Shipments DAP/MAP/NPS/TSP 72.5 Source: CRU and Mosaic 69-71 . Global shipments of the leading phosphate products increased 70.0 just 0.8% per year from 2011 to 2016. Shipments increased 2.4% 68.5 or 1.6 million tonnes to 68.5 million i
Slide 38: Strong Broad-Based Demand Growth
Strong Broad-Based Demand Growth Mil China DAP/MAP/NPS/TSP Shipments Mil India DAP/MAP/NPS/TSP Shipments Tonnes Chinese shipments peaked at Tonnes Indian shipments collapsed 24.0 12.0 Source: CRU and Mosaic following subsidy cuts in 2010/11 more than 22 million tonnes in Source: CRU and Mosaic 21.0
Slide 39: Global Phosphate Shipment Forecasts by Region (May 2018)
Global Phosphate Shipment Forecasts by Region (May 2018) Source: IFA, CRU and Mosaic DAP / MAP / NPS/ Low High (Numbers may notSource: sum to CRUtotal due and to Mosaic. rounding) TSP (Million Tonnes) 2015R 2016R 2017E 2018F 2018F Comments Numbers may not sum to total due to rounding. Shipments are
Slide 40: Supply Adjustments are Taking Hold
Supply Adjustments are Taking Hold . Mosaic’s idling of its Plant City facility in December 2017 impacts both fundamentals and sentiment. . Later start-up and slower ramp-up of new capacity with commissioning of OCP JPH 4 now delayed until late Q2 2018, but still a significant but needed increase in
Slide 41: Fundamentals Math
Fundamentals Math Potential Phosphate Supply/Demand Changes in 2018 Price Scenario Mil Tonnes DAP/MAP/NPS/TSP Low Likely High Shipment Increase 1.00 1.20 1.40 Supply Changes Price Scenario 0.60 -0.30 -1.20 Low Likely High Plant City Idling -1.50 -1.50 -1.50 OCP JPH 3 Ramp-Up 0.60 0.50 0.40 OCP JPH 4
Slide 42: Five-Year Outlook: Positive Demand Outlook
Five-Year Outlook: Positive Demand Outlook Global Phosphate Shipments Change in Phosphate Shipments 2017 vs. 2010 Change in Phosphate Shipments 2022F vs. 2017 MMT DA P/MA P/NPS/TSP 80 Source: Mosaic and CRU Phosphate Outlook April 2018 Brazil 6.7% India 4.0% 75 Other Asia + Oceania 4.5% Africa 9.1%
Slide 43: Five-Year Outlook: Mosaic Forecasts (February 2018)
Five-Year Outlook: Mosaic Forecasts (February 2018) Mil Tonnes Global Phosphate Supply and Demand Opr MMT Global PhosAcid Capacity by Country Global PhosAcid Capacity by Country MMT P2O5 P2O5 Acid Capacity, Production and Operating Rate Rate P2O5 60 95% 57 63 Source: Company reports, CRU and Mosaic
Slide 44: Five-Year Outlook: CRU Forecasts (May 2018)
Five-Year Outlook: CRU Forecasts (May 2018) Mil Tonnes Global Phosphate Supply and Demand Opr Global PhosAcid Capacity by Year Global PhosAcid Capacity by Country MMT P2O5 MMT P2O5 P2O5 Acid Capacity, Production and Operating Rate Rate 70 90% 63 63 Source: CRU April 2018 62 0.6 62 0.2 0.5 60 85% 61
Slide 45: 2021 Cost Curve Forecast: DAP
2021 Cost Curve Forecast 2021 DAP Cost Curve fob Plant at Effective Capacity MOS LA MOS FL 45 Chinese Producers Source: CRU, Mosaic