Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — JPMorgan High Yield Conference (February 2006)
72 slides from Mosaic Company (the)'s conference presentation, Feb 7, 2006
Slide 1: The Mosaic Company Overview and Outlook
Exhibit 99.1 The Mosaic Company Overview and Outlook Kevin F. Brindley Vice President, Treasurer February 7, 2006 JPMorgan High Yield Conference Miami, FL
Slide 2: Welcome remarks
Good Afternoon. I am Kevin Brindley, the Treasurer of the Mosaic Company. We are a fairly new company with a great story to tell and I’m pleased to be here with you this afternoon.
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 Debt Management Outlook/Conclusion February 7, 2006 2
Slide 6: Overview of segments and debt profile
Today I’d like to give you an overview of Mosaic including a review of our business segments. I’ll also address Mosaic’s current debt profile and our priorities for the remainder of fiscal 2006. Please note that our fiscal year ends on May 31st.
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 15 months 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 crea
Slide 9: Mosaic Net Sales by Business Segment
Mosaic Net Sales by Business Segment December 2004-November 2005 Total Net Sales $5.5 Billion Nitrogen 1% Potash 23% Phosphate 54% Offshore 22% February 7, 2006 4
Slide 10: Net sales by segment commentary
For the last twelve months ending November 30th, 2005, Mosaic’s net sales were $5.5 billion. Approximately half of our net sales were from the Phosphate business with 23% from the Potash business segment; 22% from our Offshore business; and 1% from the Nitrogen business.
Slide 11: 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 5
Slide 12: Markets served commentary
As far as the markets we serve, North America represents approximately 1/3 of our sales, with Brazil at 15% and India and China at a combined 20% of our sales. The 7% Canpotex amount covers our potash exports through Canpotex (the export association for Saskatchewan potash producers). As you can see
Slide 13: Mosaic Operating Earnings by Business Segment
Mosaic Operating Earnings by Business Segment LTM Ending 11/30/2005 Total Operating Earnings - $582.1 Million 500 414.2 400 300 232.0 200 100 9.3 0 -31.1 -42.3 -100 February 7, 2006 6
Slide 14: Operating earnings 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 $57.4 million on an LTM basis ending November 2005. Potash is our star performer with operating earnings of $414 million. Our ph
Slide 15: Fiscal 2006 First Half Highlights
Fiscal 2006 First Half 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 16: First half results commentary
For the first half of 2006 ended November 30th, we earned $131.1 million or $0.30 per share on 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 fall
Slide 17: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen/Offshore Debt Management Outlook/Conclusion February 7, 2006 8
Slide 18: Phosphates
The first business segment I would like to talk about is our largest in terms of sales: Phosphates.
Slide 19: 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% February 7, 2006 9
Slide 20: Phosphate rock mining commentary
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 21: 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 22: Phosphate fertilizer capacity commentary
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 23: 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 February 7, 2006 includes DAP, MAP and TSP 11
Slide 24: Phosphate exports 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. In 2006, world exports are forecast to decline by about 4% to 5% with U.S. exports declining approxim
Slide 25: U.S. Phosphates Production Lower
U.S. Phosphates Production Lower Mosaic announced 600,000 tonnes cutback for fiscal 2006 U.S. industry events including recent closing of U.S. Agri-Chem and Mississippi Phosphates idled September 2005 – January 2006 due to Hurricane Katrina Mosaic reduces phosphate sales volume guidance by 500,000 t
Slide 26: Phosphate capacity and inventory commentary
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. Finally, Mosaic previously
Slide 27: DAP Prices Near Record High
DAP Prices Near Record High $ MT DAP Prices fob Tampa Vessel 280 260 240 220 200 180 160 140 120 Source: Fertecon 100 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 February 7, 2006 13
Slide 28: 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 29: 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 Source: Fertecon, Green Markets, Mosaic 130 120 110 100 90 80 70 60 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 February
Slide 30: DAP 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, over the last few years and last summer was near a 20-year high – due largely to a strong export
Slide 31: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen/Offshore Debt Management Outlook/Conclusion February 7, 2006 15
Slide 32: Potash
I’ll turn now to Potash, where we have a strong position in an attractive industry.
Slide 33: 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 February 7, 2006 16
Slide 34: Potash operations commentary
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. One of our mines has recently been in the news. On January 29th we had a fire at our Esterhazy mine, and 72 min
Slide 35: 2004 Estimated Potash Production by Company
2004 Estimated Potash Production by Company World Potash Production 2004 31,240 MT K 2O 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 February 7, 2006 17
Slide 36: 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 37: Mosaic Announces Lower Potash Production and Sales Volume
Mosaic Announces Lower Potash Production and Sales Volume Production reduced by approximately 400,000 tonnes per annum - Downtime during the holiday period - Lower production at Belle Plaine to reduce high-cost natural gas consumption Mosaic Potash sales guidance reduced by 400,000 tonnes to 7.8 – 8
Slide 38: Potash production reduction commentary
Consistent with my prior comments relating to our Phosphate segment, in December, Mosaic announced plans to reduce potash production by about 400,000 tonnes, by taking downtime during the holiday period. In addition we will reduce production rates at our Belle Plaine plant, which is a large consumer
Slide 39: 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 February 7, 2006 19
Slide 40: 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 41: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen/Offshore Debt Management Outlook/Conclusion February 7, 2006 20
Slide 42: Nitrogen and Offshore
Our other two business segments are Nitrogen and Offshore.
Slide 43: 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 44: 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 45: 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 46: Offshore segment 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 47: 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 February 7, 2006 23
Slide 48: Distribution business commentary
Our distribution business today is a low margin business which nonetheless historically 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 agricul
Slide 49: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen/Offshore Debt Management Outlook/Conclusion February 7, 2006 24
Slide 50: Debt Management
Now I would like to turn to an area that is of special interest to me as the Treasurer, and probably most of the people in this room: our debt position and opportunities.
Slide 51: Financial Highlights for November 2005
Financial Highlights for November 2005 Sales Revenue $5.5 Billion EBITDA $908.8 Million* Debt $2.5 Billion Debt/EBITDA 2.75 X * Reconciliation to US GAAP Net Earnings $264.0 Interest $217.3 Income Taxes $186.4 D,D&A $312.1 Amortization (contracts & fees) ($71.0) EBITDA Total $908.8 February 7, 2006
Slide 52: EBITDA and leverage commentary
• On an LTM basis, Mosaic generated EBITDA of over $900 million on sales of $5.5 billion. • Our leverage ratio has improved to 2.75x as of November ‘05, compared with an approximately 3x leverage ratio as of May ‘05
Slide 53: Mosaic's Balance Sheet Highlights
Mosaic’s Balance Sheet Highlights Total Debt $2.5 million Total Equity $3.6 million Total Capital $6.1 billion Debt: Capital Ratio 41.0% February 7, 2006 26
Slide 54: Capitalization commentary
• As far as capitalization goes, we continue to improve our balance sheet. • Our debt is declining and our equity is increasing. Debt to total capital as of November is down to 41%, compared to our May ‘05 value of 45%
Slide 55: Debt Maturity Schedule as of 11/30/05
Debt Maturity Schedule as of 11/30/05 1,800 1,600 $1,464 1,400 1,200 1,000 800 600 $409 400 $317 200 $62 $28 $34 0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 & beyond February 7, 2006 27
Slide 56: Debt maturity commentary
This chart shows the natural maturity of our debt. This is an attractive schedule as there is no imminent requirement for Mosaic to pay down its debt in the short term.
Slide 57: Debt Call Dates Schedule as of 11/30/05
Debt Call Dates Schedule as of 11/30/05 900 800 10.875% due 8/2013; callable at 8/2008 700 11.25% due 6/2011; 600 callable at 6/06 500 10.875% due 6/2008 400 PLP 7.0% 300 Phoschem 6.875% 200 7.30% 7.375% 100 7.70% 9.45% 0 FY FY FY FY FY FY FY FY '06 '07 '08 '09 '11 '19 '23 '28 February 7, 2006 28
Slide 58: Call dates commentary
Call dates for our debt are indicated on this chart and not surprisingly we are actively reviewing our options.
Slide 59: Long Term Financial Goals
Long Term Financial Goals Low cost access to the credit markets Investment grade credit rating Laddered maturity schedule Fixed / floating mix that takes advantage of yield curve while balancing risk to interest rate volatility Flexible capital structure capable of taking advantage of industry cycle
Slide 60: Long term balance sheet objective commentary
Our long term balance sheet objective is to maintain a flexible capital structure which allows us to take advantage of industry cycles, while preserving low cost access to credit markets. To do this, we believe it is important to achieve and maintain an investment grade rating, to maintain a laddere
Slide 61: Short Term Financial Goals
Short Term Financial Goals Reduce cash interest Address near-term financing needs/opportunities Obtain greater operational flexibility, selectively address covenant restrictions as needed Optimize international funding structure Achieve investment grade credit rating February 7, 2006 30
Slide 62: Short term interest reduction commentary
Shorter term, we are evaluating opportunities to reduce our high cash interest expense bill. As call dates approach, we are considering debt reduction and refinancing opportunities. We are motivated to continue to strengthen our balance in the near term.
Slide 63: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen/Offshore Debt Management Outlook/Conclusion February 7, 2006 31
Slide 64: Outlook / Conclusion
I will end with a brief outlook on fiscal ’06.
Slide 65: Fiscal 2006 Mosaic Financial Outlook
Fiscal 2006 Mosaic Financial Outlook Phosphate sales volume (including feed ingredients) of 10.6 to 11.1 million tonnes Potash sales volume of 7.8 to 8.2 million tonnes S,G&A cost projected at about $60 million per quarter, including new ERP costs Interest cost expected about $40 million per quarter
Slide 66: Fiscal 2006 outlook commentary
For 2006, we are focused on earnings and cash generation. We are projecting phosphate sales volumes of 10.6 to 11.1 million tonnes for fiscal 2006 which is down 600,000 tonnes compared to our prior guidance. For potash, we are projecting sales of 7.8 to 8.2 million tonnes for fiscal 2006, down 400,0
Slide 67: Sensitivities
Sensitivities Marketing Change Earnings (in millions) MOP Price ($/tonne) $10 $54.6 Potash Volume (000 tonnes) 500 $37.5 DAP Price ($/tonne) $10 $100.0 Phosphate Volume (000 tonnes) 500 $10.0 Raw Materials Sulfur ($/lt) $5 $23.9 Ammonia ($/mt) $10 13.6 February 7, 2006 33
Slide 68: 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 69: 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 70: Conclusion commentary
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 judiciously grow our suc
Slide 71: http://www.mosaicco.com
http://www.mosaicco.com February 7, 2006 35
Slide 72: 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.
Mosaic — JPMorgan High Yield Conference (February 2006) on 6ix