Mosaic Company (the) · NYSE:MOS
Mosaic Company (the) — Conference Presentation (November 2005)
72 slides from Mosaic Company (the)'s conference presentation, Nov 29, 2005
Slide 1: The Mosaic Company Overview and Fiscal 2006 Outlook
The Mosaic Company Overview and Fiscal 2006 Outlook Exhibit 99.1 Larry Stranghoener, Executive VP & CFO November 29, 2005
Slide 2: Welcome and introduction
Thank you and good afternoon. I am Larry Stranghoener, CFO and Executive Vice-President of The Mosaic Company. It is a pleasure to be here in Oslo at this conference and to present to the European investment community.
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
Slide 6: Overview of today's presentation
Today I’d like to give you an overview of Mosaic, discuss our business segments and our strategy. In addition, I will provide a brief overview of the phosphate outlook as I imagine you already have heard about the outlook for nitrogen and potash. I’ll also address Mosaic’s priorities for fiscal and
Slide 7: Mosaic Profile
Mosaic Profile The Company Formed on October 22, 2004 through the combination of Cargill Crop Nutrition and IMC Global Headquartered in Plymouth, MN Management CEO and President: Fritz Corrigan EVP and CFO: Larry Stranghoener Selected the best people from both companies to fill out management team C
Slide 8: Combination of Cargill Crop Nutrition and IMC Global
Over one year ago, on October 22, 2004, 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 rat
Slide 9: Value Proposition
Financially Strong Low Cost Diversified Industry Leader Positioned to deliver superior returns during the cyclical swings in global crop nutrient markets Value Proposition
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 Potash 22% Offshore 24% Phosphate 52% Nitrogen 2% 9/1/2004 – 8/31/2005 Total Net Sales were $5.1 billion
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 -37.1 8.1 165.1 326.2 -8.8 -100 LTM Ending 8/31/2005 Total Operating Earnings - $453.5 million
Slide 14: Operating earnings commentary
This chart shows Mosaic’s operating earnings by business segment but note that it does not include equity income from Mosaic’s investments in non-consolidated joint ventures, which was $56 million in Fiscal 2005. Potash is the star performer with operating earnings of $326 million, or about two-thir
Slide 15: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook
Slide 16: Phosphates
Next I will discuss Mosaic’s phosphates business along with the world and U.S. phosphate market and outlook.
Slide 17: Mosaic: The Phosphate Leader
Mosaic: The Phosphate Leader Top Five Rock Producers 2004 OCP Mosaic PhosAgro GCT PotashCorp Million Tonnes Rock Phosphate Rock Production 2004 PhosAgro 6% OCP 18% PotashCorp 5% GCT 5% Mosaic 14% Other 52% Rock Mining Operations
Slide 18: Phosphate rock mining operations
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 million tonnes of phosphate ore that is ready for further processing each year. The combination of mine locations that
Slide 19: Phosphate Fertilizer Operations
Mosaic: The Phosphate Leader Mosaic’s Uncle Sam facility produces only phosphoric acid. Acid from this facility is barged to Faustina where it is granulated into DAP and MAP using ammonia that is produced on-site. Mosaic has closed permanently the smaller acid plant at Faustina and the granulation p
Slide 20: Phosphate fertilizer production leadership
It is the production of 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 in Louisiana where we produce phosph
Slide 21: World Processed Phosphate Import Demand
World Processed Phosphate Import Demand Processed Phosphate Trade 05E 06F MMT Source: Fertecon and Mosaic Processed Phosphate Import Demand by Region 05E 06F MMT Asia Europe L Amer Source: Fertecon and Mosaic Processed phosphate includes DAP, MAP and TSP
Slide 22: World import demand outlook
In 2005, world processed phosphate import demand is projected to decline by around 2% to million metric tonnes. Brazil has been a slow market in 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 4% to 5
Slide 23: Strong Growth in India and Pakistan
Strong Growth in India and Pakistan India and Pakistan Processed Phosphate Imports 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 05E 06F Source: IFA and Mosaic MMT India Pakistan
Slide 24: Asian demand commentary
A key factor in the phosphates market in has been the strong Asian demand. As already noted, there will be 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 are projected at 3.5 million ton
Slide 25: Brazil Market Remains Weak
Brazil Market Remains Weak Brazilian Processed Phosphate Imports 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 05E 06F Source: ANDA and Mosaic MMT TSP DAP MAP
Slide 26: Brazil import outlook
In and 2004, Brazil showed remarkable growth in imports of 47% and 14% respectively. However, imports are expected to decline 40% in 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 which co
Slide 27: Phosphate Export Supply Declining
Phosphate Export Supply Declining Processed phosphate includes DAP, MAP and TSP Processed Phosphate Export Supply by Region 05E 06F MMT USA Africa & Mideast FSU Source: Fertecon and Mosaic
Slide 28: Export supply commentary
The U.S. phosphate industry exported million tonnes of processed phosphate per year during the last half of the 1990s. U.S. 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 expor
Slide 29: U.S. Phosphates Production Lower
U.S. Phosphates Production Lower U.S. Agri-Chem closes plant with 1.2 million tonnes per annum capacity Mississippi Phosphates idled Sept 05 – Jan 06 with 0.8 million tonnes per annum capacity Mosaic announces 400,000 to 600,000 tonnes cutback from Nov 05 to Mar 06 Mosaic reduces phosphate sales vol
Slide 30: U.S. supply-side developments
So let’s turn to the supply side of U.S. phosphates industry. The key development is the expected closure of the U.S. Agri-Chemical plant in Florida this month. Capacity will decline by about 1.2 million tonnes of finished phosphate fertilizer and assist in bringing the phosphate market to a balance
Slide 31: U.S. Phosphoric Acid Operating Rate Remains High
U.S. Phosphoric Acid Operating Rate Remains High U.S. Phosphoric Acid Production and Operating Rate 06F Fertilizer Year Ending June 30 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% For DAP/MAP/TSP For Other Capacity Operating Rate
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 DAP Prices fob Tampa Vessel $ MT Source: Fertecon
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 Calculated from Published Spot Prices for a Central Florida Plant $ ST Source: Fertecon, Green Markets, Mosaic
Slide 36: DAP market margin commentary
We like to manage our business based on margins. This charts show 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. The strong expo
Slide 37: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook
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
Export Shipments 3.50 mmt 41% of Total North American Shipments 5.10 mmt 59% of Total Top 5 Export Markets China Brazil India Indonesia Malaysia Potash - World Scale and Low Cost Operations
Slide 40: Potash operations and shipments
Potash is a business with good supply - demand fundamentals, strong prices, widening margins, and strong 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
Slide 41: Mosaic: Low Cost Operations
Mosaic: Low Cost Operations 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Rest of the Industry Mosaic Mines Source: British Sulphur Mosaic’s four Canadian facilities rank among the lowest cost mines worldwide
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 PCS 15.4% Belaruskali 14.8% Kali & Salz 11.6% Uralkali 9.7% Silvinit 8.2% APC 3.7% Agrium 3.3% Other 7.5% Mosaic 15.4% ICL 10.3% World Potash Production 2004 31,240 MT K O Source: IFA & Mosaic
Slide 44: World potash production commentary
In Mosaic produced 15.4% of the world’s potash products. The chart indicates we produced about the same as PCS. However, Mosaic produced approximately 580,000 tonnes K2O for PCS in or almost 2% of the world’s production. So, if you consider the tons toll-produced for PCS, we were the world’s largest
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 to my prior comments relating to our Phosphate segment, Mosaic recently announced plans to reduce potash production by about 200,000 tonnes. This will mostly occur during the upcoming holiday period combined with lower production rates at our Belle Plaine plant to reduce high-cost natural
Slide 47: Potash prices stabilizing at high levels
Potash prices stabilizing at high levels Cornbelt-Saskatchewan Potash Prices US$ ST Granular Grade Cornbelt Saskatchewan Source: Green Markets
Slide 48: Potash price commentary
Potash prices are at record high levels. Prices were historically quite stable from 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 Latin Am
Slide 49: Presentation Outline
Presentation Outline Business Overview Phosphates Potash Nitrogen / Offshore Financial Outlook
Slide 50: Nitrogen and Offshore
Our other two business segments are Nitrogen and Offshore.
Slide 51: Strong North American Nitrogen Position
500,000 metric ton ammonia plant that supplies DAP/MAP granulation requirements in Louisiana Faustina 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 metric ton nitrogen fertilizer plant loca
Slide 52: Saskferco nitrogen investment
Mosaic has a good North American Nitrogen position. This is 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 comp
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
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
Slide 56: Distribution value opportunity
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
Slide 58: Financial Outlook
I will end with a brief discussion of Mosaic’s financial 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, 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 fundamentals. The export market
Slide 61: Mosaic's Balance Sheet Highlights
Mosaic’s Balance Sheet Highlights 42.8% $6.1 million $3.5 billion $2.6 billion Debt:Capital Ratio Total Capital Total Equity Total Debt 8-31-05
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 investme
Slide 63: Fiscal 2006 Mosaic Financial Outlook
Fiscal 2006 Mosaic Financial Outlook Focus on generating cash and lowering costs, including synergy capture Phosphate sales volume of 9.7 to 10.1 million tonnes Potash sales volume of 7.9 to 8.3 million tonnes Second Quarter: High phosphate prices and higher potash shipments partially offset by high
Slide 64: Fiscal 2006 volume and price outlook
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. DAP prices and margins should remain at or near current levels during the second quarter, but increases in raw materials cost will pressure Mosaic to inc
Slide 65: Fiscal 2006 Mosaic Financial Outlook
Fiscal 2006 Mosaic Financial Outlook 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 of amortization credit Capital Expenditures expected of $350 to $400 million including some synergy pro
Slide 66: Additional financial drivers
For the Fiscal outlook, let me finish with some additional financial drivers. S,G&A costs are projected to be about $60 million per quarter. As we have noted before, SG&A costs will benefit from the implementation of a new enterprise resource planning system, which is on track for a summer implement
Slide 67: Sensitivities
Sensitivities ($ in millions, except per share data) Change Earnings ($ in millions) EPS Marketing MOP Price ($/tonne) $10 $54.6 $0.07 Potash Volume (000 tonnes) $37.5 $0.05 DAP Price ($/tonne) $10 $100.0 $0.13 Phosphate Volume (000 tonnes) $10.0 $0.01 Raw Materials Sulfur ($/lt) $5 $23.9 $0.03 Ammo
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 item that is not on this chart over which we have direct control – rock cost – is an area that is getting significant fo
Slide 69: Mosaic Management Priorities
Mosaic Management Priorities Focus on Execution & Cash Flow Generation Harvest cost synergies - $145 million annual run rate goal Cash flow generation Sustain potash momentum Reduce phosphate mining and processing costs Pay down debt – achieve investment grade status Demonstrate market leadership Sh
Slide 70: Management priorities and synergy commentary
From the start, 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 sustain the excellent momentum in the po
Slide 71: mosaicco.com
http://www.mosaicco.com
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.