Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Investor Day (March 2015)
33 slides from Mosaic Company (the)'s investor day presentation, Mar 30, 2015
Slide 1: The Market Outlook
The Market Outlook Dr. Mike Rahm Vice President – Market and Strategic Analysis
Slide 2: Safe Harbor
Safe Harbor This document 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 Wa’ad Al Shamal Phosphate Company (also known as the Ma’aden joint venture), the acquisition
Slide 3: Objectives
Objectives • Explain Why We Like The Phosphate Business • Explain Why We Are Not As Worried As Some Of You About Potash
Slide 4: Methodology
4 Methodology square4 Present our long term P&K outlook square4 Benchmark our views with third-party forecasts square4 Address head-on your market questions and concerns
Slide 5: Why We Like the Phosphate Business
Why We Like the Phosphate Business
Slide 6: Why We Like the Phosphate Business
6 Why We Like the Phosphate Business 1. A positive long term demand outlook 2. Constructive supply developments 3. China has stopped building phosphate plants 4. Few projects in the pipeline behind Ma’aden and OCP 5. Current industry structure 6. Our cost position and innovation lead 7. Tighter supp
Slide 7: 1. A Positive Long-term Demand Outlook
7 1. A Positive Long-term Demand Outlook square4 Recent developments – Global shipments have increased 6.5 mmt since 2010 • Led by China and Brazil but help from other regions • But India a major demand drag since 2011 square4 2015 forecast – MOS: 64.5-66.5 range and 65.4 mmt point estimate • Bankin
Slide 8: 1. A Positive Demand Outlook: Forecasts by region
8 1. A Positive Demand Outlook square4 Forecasts by region – India: worst to first – China: more growth • Slower overall phosphate demand growth . . . • but further substitution of high- for low-analysis products – Brazil: more growth but a less blistering pace – Elsewhere: moderate but steady growt
Slide 9: 1. A Positive Demand Outlook: Underpinned by the food story
9 1. A Positive Demand Outlook square4 Underpinned by the food story – Not in vogue today but still solidly intact – The trend is our friend – The challenge remains 607 580 495 408 470 463 426 438 514 570 551 540 524 585 623 350 400 450 500 550 600 650 700 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1
Slide 10: 1. A Positive Demand Outlook: Banking on India
10 1. A Positive Demand Outlook square4 Banking on India – Gross nutrient use imbalance and unsustainable practices following 2010/11 subsidy changes – Wide recognition of problem but political constraints – Need to boost P&K use rather than slash N use – Take-off expected in response to more modera
Slide 11: 2. Constructive Supply Developments
11 2. Constructive Supply Developments square4 Significant supply reductions during the last few years – Permanent closures • Mainly non-integrated operations (outside India) • Rock/acid suppliers upgrading raw materials into finished product • Others on the brink? – Several temporary shut-downs or
Slide 12: 3. China Has Stopped Building Phosphate Plants
12 3. China Has Stopped Building Phosphate Plants – The massive 8-3-6 based expansion program has come to an end – China has accounted for all of the net increase in global phosphate capacity this century – China has transitioned from the largest phosphate importer to the largest exporter 0 10 20 30
Slide 13: 3. China Has Stopped Building Phosphate Plants: Restructuring
13 3. China Has Stopped Building Phosphate Plants square4 Further re-structuring of the Chinese phosphate industry is expected – New high analysis supplies to: • Meet further growth in overall phosphate demand • Continue to substitute for low analysis products (e.g. FMP, SSP, pan-granulated NPKs) –
Slide 14: 4. Few Projects Behind OCP And Ma'aden
14 4. Few Projects Behind OCP And Ma’aden square4 Few viable projects in the pipeline behind the large OCP and Ma’aden projects square4 Key CRU assumptions – Includes project categories “firm” and “probable” – Four Jorf Phosphate Hubs (JPH) by 2019 – Ma’aden II start-up mid-2016 – Net increase of 1.
Slide 15: 5. Current Industry Structure
15 5. Current Industry Structure – Steep cost curve mainly due to non-integrated production (no phosphate rock production) • Why non-integrated production? – Economic: access to extremely low-cost other raw materials (i.e. sulphur or ammonia) – Strategic: diversify sources of phosphate imports (e.g.
Slide 16: 5. Current Industry Structure (NA phosphoric acid industry)
16 5. Current Industry Structure (NA phosphoric acid industry) Capacity (mmt P2O5) Percent NA Capacity 12 20 12.3 4 12 8.8 5.4 61% 1.9 22% 0.8 9% 0.7 8% 18 21 10.9 Firms: Facilities: Capacity (mmt P2O5):
Slide 17: 5. Current Industry Structure: Exports
17 5. Current Industry Structure – Top five countries/companies account for more than 80% of total exports today – Smaller share but still large and stable U.S. exports going forward • Mainly serving more freight-competitive destinations in the Americas • Increasingly supplying larger percentage of
Slide 18: 6. Our Cost Position and Innovation Lead
18 6. Our Cost Position and Innovation Lead square4 More details from Jim, Joc, Rick and Rich tomorrow square4 Our sustainable competitive advantage – Natural as well as human resources – Scale, efficiency, scope and location 0 250 500 750 1000 1250 1500 1750 2000 07 08 09 10 11 12 13 14 MMT Product
Slide 19: 7. Tighter S/D Balances and Rising Operating Rates
19 7. Tighter S/D Balances and Rising Operating Rates – CRU forecasts • Relatively small capacity increases during the next five years • Moderate demand growth • Rising operating rates during the forecast period – Mosaic forecast differences • More rapid demand growth • China production and exports
Slide 20: What To Watch
What To Watch square4 Agricultural commodity prices and impact on phosphate demand square4 Indian demand growth square4 OCP and Ma’aden – timing of new capacity start-ups square4 China – always a wild card − Phosphate demand growth − Production and exports − Export policies − Pace of phosphate secto
Slide 21: Why We Are Not as Worried As Some of You About Potash
Why We Are Not as Worried As Some of You About Potash
Slide 22: Our Perspective
22 Our Perspective 1. Positive demand prospects 2. Less current operational capacity than most estimates 3. Overly optimistic capacity forecasts and ramp-up timelines 4. Optimization mode by leading producers – Mosaic example 5. Overblown concerns about North America 6. Stable supply/demand balance
Slide 23: 1. Positive Demand Prospects
23 1. Positive Demand Prospects square4 Recent developments – Global shipments have increased 7.6 mmt since 2010 • But all of the growth in 2014 • Led by China and Brazil but help from other regions • India a major demand drag since 2011 square4 2015 forecasts – MOS: 58-60 mmt range and 59.5 point e
Slide 24: 1. Positive Demand Prospects: Shipment growth
24 1. Positive Demand Prospects square4 2010-14 shipment growth – Led by China and Brazil but help from other regions – India a major drag square4 2019 forecasts – Some growth rates impacted by unusually high 2014 levels (e.g. North America) – Banking on a rebound in India – But widespread gains exp
Slide 25: 2. Less Current Operational Capacity (2015)
25 2. Less Current Operational Capacity (2015) – Consultants’ forecasts of current capacity look way too high to us • Main issue - Canadian capacity based on Canpotex proving runs not operational capacity – Mosaic capacity estimates • 2010 base capacity tied to peak production during 2004-08 • Brown
Slide 26: 3. Overly Optimistic Capacity Forecasts (2019)
26 3. Overly Optimistic Capacity Forecasts (2019) – Nearly three-quarters of new gross capacity by Canadian and FSU producers 2019 MOP Capacity Mil Tonnes KCl Mosaic (Mar 2015) CRU (Feb 2015) Fertecon (Sep 2014) World 85.9 96.1 99.6 Canada 31.7 37.6 38.0 Current Producers 29.7 35.5 35.7 New Entrants
Slide 27: 4. Optimization Mode By Leading Producers
27 4. Optimization Mode By Leading Producers – New brown/olivefield projects: • Come online in big lumpy increments due to scale economics • But unique capability to optimize potash operations at production levels required by market – Mosaic optimization strategy • Sold or closed small higher cost U
Slide 28: 5. Overblown Concerns About North America
28 5. Overblown Concerns About North America square4 We get analysts’ concerns about North America – Flat to modest demand growth – Near-record imports today and the first BPC imports since 2008 – New Agrium capacity targeted for its retail system – Start-up of K+S Legacy project now on the horizon
Slide 29: 5. Overblown Concerns About North America: Our assessments
29 5. Overblown Concerns About North America square4 Our assessments – U.S. imports from offshore origins are vulnerable • Global demand growth will change trade flows – Relatively flat FSU export supply until late this decade – Therefore a stronger pull of FSU product to other destinations • Is the
Slide 30: 5. Overblown Concerns About North America: Larger export pull
30 5. Overblown Concerns About North America square4 Our assessments – Larger export pull • Agrium Canpotex volume – Larger entitlement following proving run – Larger Canpotex sales during the next five years • K+S domestic vs. offshore mix? – Our best guesses • Mosaic produced 7.6 mmt KCl at our Sa
Slide 31: 6. Relatively Stable Outlook
31 6. Relatively Stable Outlook square4 Relatively stable global supply/demand balance – Positive demand prospects – Much different capacity estimates – But generally stable operating rate forecasts • Significant production increases required • No deep or prolonged down-cycle • Mosaic estimates of 8
Slide 32: What To Watch
What To Watch square4 Agricultural commodity prices and impact on potash demand square4 Indian demand growth square4 FSU marketing strategies square4 Start-up of new capacity especially by new entrants square4 Potential consolidation particularly in the FSU
Slide 33: Thank You!
Dr. Michael Rahm Vice President – Market and Strategic Analysis The Market Outlook Thank You!