Attached files
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| 8-K - 8-K - MOSAIC CO | d768747d8k.htm |
| EX-99.1 - EX-99.1 - MOSAIC CO | d768747dex991.htm |
 The
Mosaic Company Earnings Conference Call –
Second Quarter 2014
July 31, 2014
Jim Prokopanko, President and Chief Executive Officer
Larry Stranghoener, Interim Chief Executive Officer
Rich Mack, Executive Vice President and Chief Financial Officer
Laura Gagnon, Vice President Investor Relations
Exhibit 99.2 |
 2
Safe Harbor Statement
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 Northern Promise Joint Venture, the acquisition and assumption of certain related liabilities of
the Florida phosphate assets of CF Industries, Inc. (“CF”) and Mosaic’s ammonia supply
agreements with CF; repurchases of stock; other proposed or pending future transactions or
strategic plans and other statements about future financial and operating results. Such statements are
based upon the current beliefs and expectations of The Mosaic Company’s management and are
subject to significant risks and uncertainties. These risks and uncertainties include but are
not limited to risks and uncertainties arising from the ability of the Northern Promise Joint Venture to
obtain additional planned funding in acceptable amounts and upon acceptable terms, the future success
of current plans for the Northern Promise Joint Venture and any future changes in those plans;
difficulties with realization of the benefits of the transactions with CF, including the risks that
the acquired assets may not be integrated successfully or that the cost or capital savings from the
transactions may not be fully realized or may take longer to realize than expected, or the
price of natural gas or ammonia changes to a level at which the natural gas based pricing under one of
the long term ammonia supply agreements with CF becomes disadvantageous to Mosaic; customer defaults;
the effects of Mosaic’s decisions to exit business operations or locations; the
predictability and volatility of, and customer expectations about, agriculture, fertilizer, raw material,
energy and transportation markets that are subject to competitive and other pressures and economic
and credit market conditions; the level of inventories in the distribution channels for crop
nutrients; changes in foreign currency and exchange rates; international trade risks and other risks
associated with Mosaic’s international operations and those of joint ventures in which Mosaic
participates, including the risk that protests against natural resource companies in Peru
extend to or impact the Miski Mayo mine; changes in government policy; changes in environmental and other
governmental regulation, including greenhouse gas regulation, implementation of numeric water quality
standards for the discharge of nutrients into Florida waterways or possible efforts to reduce
the flow of excess nutrients into the Mississippi River basin or the Gulf of Mexico; further
developments in judicial or administrative proceedings, or complaints that Mosaic’s operations
are adversely impacting nearby farms, business operations or properties; difficulties or
delays in receiving, increased costs of or challenges to necessary governmental permits or approvals or
increased financial assurance requirements; resolution of global tax audit activity; the
effectiveness of Mosaic’s processes for managing its strategic priorities; adverse
weather conditions affecting operations in Central Florida, the Mississippi River basin or the Gulf Coast of the United
States, or Canada, and including potential hurricanes, excess heat, cold snow, rainfall or drought;
actual costs of various items differing from management’s current estimates, including,
among others, asset retirement, environmental remediation, reclamation or other environmental
regulation, Canadian resources taxes and royalties, the liabilities Mosaic assumed in the Florida
phosphate assets acquisition, or the costs of the Northern Promise Joint Venture, its existing
or future funding and Mosaic’s commitments in support of such funding; reduction of Mosaic’s
available cash and liquidity, and increased leverage, due to its use of cash and/or available debt
capacity to fund share repurchases, financial assurance requirements and strategic
investments; brine inflows at Mosaic’s Esterhazy, Saskatchewan, potash mine or other potash shaft mines;
other accidents and disruptions involving Mosaic’s operations, including potential mine fires,
floods, explosions, seismic events or releases of hazardous or volatile chemicals, as well as
other risks and uncertainties reported from time to time in The Mosaic Company’s reports filed with the
Securities and Exchange Commission. Actual results may differ from those set forth in the
forward-looking statements.
|
 3
1.
Strong global phosphate and potash
demand.
2.
Farmers continue to be incented to
maximize yield.
3.
Mosaic executing well against strategic
priorities to create shareholder value.
Key Messages |
 •
Seasonal price
weakness shorter
and less
pronounced.
•
Well positioned into
Q3.
•
Expect 2014
shipments to be at
high end of 65-66
million tonnes.
Volume First, Then Price and Margin
As Expected: Market Conditions Tightened
* Excluding impact of CF phosphate acquisition accounting. See
reconciliation on slide 22. Source: Mosaic
4
Phosphates |
 Expect producer inventories to decline further in H2 2014
Potash
Volume First, Then Price and Margin
•
As expected,
volume momentum
came first, pricing
followed.
•
Good demand at
current $390/short
ton warehouse
price.
•
On track to achieve
2014 shipments of
57-58 million tonnes
Source: Mosaic
5 |
 6
Second Quarter Financial Highlights
$0.64 diluted earnings per share
Includes $0.06 negative impact of notable items
$796 million in cash from operations
$2.4 billion
$403 million
$206
$213
Operating Earnings
$1,672
$762
Net Sales
Phosphates
Potash |
 7
Strategic Accomplishments
Potash expansions continue to be on time and on budget.
Received Brazil antitrust clearance for ADM acquisition.
Made significant progress on CF Industries phosphates
integration:
High confidence in announced $40-50 million in annual pre-tax
synergies Executing
well
on
MicroEssentials®
expansion
at
New
Wales.
Finalized $5 billion project financing for Ma’aden phosphate
joint venture.
Sold decommissioned potash mine in Hersey, Michigan.
Announced decision to close Carlsbad MOP production.
Continued strong safety performance. |
 Financial Results Review |
 9
Phosphates Segment Highlights
$ In millions, except DAP price
Q2 2014
Q1 2014
Q2 2013
Net sales
$1,672
$1,254
$1,646
Gross Margin
$284
$207
$279
Percent of net sales
17%
17%
17%
Operating earnings
$206
$138
$191
Sales volumes
3.4
2.7
2.9
NA
production
volume
(a)
2.5
2.0
2.1
Finished product operating rate
85%
79%
84%
Avg DAP selling price
$465
$414
$477
(a)
Includes crop nutrient dry concentrates and animal feed ingredients
Second quarter highlights:
•
The year-over-year increase in net sales is driven by higher sales volumes, partially
offset by lower finished product pricing.
•
The year-over-year increase in gross margin dollars reflects higher sales volumes, lower raw
material costs, partially offset by lower finished product pricing.
o
Three percentage point impact from acquisition accounting of CF Industries phosphates business.
|
 10
Potash Segment Highlights
$ In millions, except MOP price
Q2 2014
Q1 2014
Q2 2013
Net sales
$762
$733
$974
Gross Margin
$250
$212
$389
Percent of net sales
33%
29%
40%
Operating earnings
$213
$166
$346
Sales volumes
2.5
2.4
2.5
Production volume
2.0
1.9
2.2
Production operating rate
76%
70%
81%
Avg MOP selling price
$267
$267
$366
Second quarter highlights:
•
Decline in net sales was driven by lower realized MOP prices, partially offset by higher sales
volumes. •
The year-over-year decrease in operating earnings was driven by lower realized prices, a lower
operating rate, and higher depreciation, partially offset by an unrealized gain on derivatives
in costs of goods sold. |
 Capital and Balance Sheet Update
11
A balanced approach to capital allocation
*June
30
2012
–
June
30
2014.
**Includes full 51.6 million share repurchase, and assumes dividends of $1/share
annually. Total:
$8.5 Billion
16%
14%
32%
38%
Capital Allocation: 2 Year Summary*
Maintenance
Organic Growth
Investment Commitments
Return to Shareholders**
-
$520M P
-
$710M K
-
$120M Other
-
~$2.4B share repurchases
-
~$840M dividends
-
$260M P
-
$740M K
-
$200M Other
-
$1B Ma’aden
-
$1.4B CF Phosphates acquisition
-
$350M ADM Fertilizer acquisition |
 12
Current Capital Resources
Targeted Leverage of 1.5 to 2.0 times
$ in millions
Adjusted Debt
$ 3,636
5 year average EBITDA*
$ 2,460
Adjusted Debt to EBITDA
1.5
Available Resources
$ in millions
Estimated Excess Cash Balance
$ 400
Expect continued strong operating cash flow generation
July 30 completed $2.4 billion share repurchase commitment;
$600 million in remaining share repurchase authorization
Annual dividend of $1 / share
* Reconciliation on slide 23 |
 13
Financial Guidance Summary
Phosphates
Guidance –
2014
Q3 Sales volume 3.3 –
3.6 million tonnes
Q3
DAP
selling
price
$440
-
$470
per
tonne
Q3 Gross margin rate in the mid to high teens
Q3 Operating rate approaching 90 percent
Potash
Guidance –
2014
Q3
Sales
volume
1.8
–
2.0
million
tonnes
Q3
MOP
selling
price
$275
-
$295
per
tonne
Q3 Gross margin rate in the high 20 to low 30 percent range
Q3 Operating rate in the low 70 percent range
Canadian Resource Taxes
and Royalties -
2014
$170
-
$210
million
Brine
Management
–
2014
Approximately $200 million |
 14
Financial Guidance Summary
Corporate
Guidance –
2014
Total
SG&A
-
2014
$390
-
$410
million
Capital Expenditures and
Equity
Investments
-
2014
$1.0
-
$1.2
billion
Effective
Tax
Rate
-
2014
Mid to high 20 percent range |
 15
Constructive P&K fundamentals
Factors to watch:
India monsoon
China phosphate exports
Geopolitical conflicts
Logistical problems
Near term soft commodity prices
Near Term Outlook |
 Helping the World Grow the
Food it Needs |
 Q2
2014 Percent
Ammonia ($/MT)
Realized in COGS
$473
Average Purchase Price
$553
Sulfur ($/LT)
Realized in COGS
$128
Average Purchase Price
$146
Phosphate rock (realized in COGS)
('000 metric tonnes)
US mined rock
4,159
92%
Purchased Miski Mayo rock
279
6%
Other purchased rock
84
2%
Total
4,522
100%
Average cost / tonne consumed rock
$68
Raw Material Cost Detail
17 |
 18
Phosphate Raw Material Trends
Ammonia
Sulfur
($/tonne)
($/tonne)
1.
Market
ammonia
prices
are
average
prices
based
upon
Tampa
C&F
as
reported
by
Fertecon
2.
Market sulfur prices are average prices based upon Tampa C&F as reported by
Green Markets 3.
Realized raw material costs include:
~$20/tonne of transportation, transformation and storage costs for sulfur
~$30/tonne of transportation and storage costs for ammonia
2 |
 (a)
These factors do not change in isolation; actual results could vary from the above
estimates (b)
Assumes no change to KMAG pricing
2014 Q2
Actual
Change
2014 Q2
Margin %
Actual
% Impact on
Segment
Margin
Pre-Tax
Impact
EPS Impact
Marketing
MOP Price ($/tonne)
(b)
$267
$50
33%
16%
$125
$0.24
Potash Volume
(million tonnes)
2.5
0.5
33%
10%
$78
$0.15
DAP Price ($/tonne)
$465
$50
17%
8%
$127
$0.24
Phosphate Volume
(million tonnes)
3.4
0.5
17%
4%
$74
$0.14
Raw Materials
Sulfur ($/lt)
$128
$50
17%
3%
$56
$0.11
Ammonia ($/tonne)
$473
$50
17%
2%
$29
$0.06
Earnings
Sensitivity
to
Key
Drivers
(a)
19 |
 CF
phosphate acquisition accounting impact Q2 2014
$ in millions
Mosaic
CF
Mosaic
(Excluding CF)
Sales
1,672
$
198
$
1,474
$
COGS
1,388
$
202
$
1,186
$
Gross Margin
284
$
(4)
$
288
$
Gross Margin %
17%
20%
20
CF
phosphate
acquisition
accounting
impact
reconciliation |
 EBITDA Reconciliation
21
(1)
EBITDA is earnings before interest, taxes, depreciation and amortization.
(1)
US$ Millions
Est. 16*
Est. 15*
Est. 14*
CY 13
CY 12
Net earnings
1,063
$
1,852
$
+ Interest (income) expense, net
6
(20)
+ Income tax expense
385
348
+ Depreciation, depletion & amortization
656
562
EBITDA
2,688
$
2,531
$
2,231
$
2,110
$
2,742
$
EBITDA 5-Year Average
2,460
$
* Based on FactSet estimates
Adjusted Debt
As of June 30, 2014
Short Term Debt
13
$
Long Term Debt
3,014
Unfunded Pension and Postretirement Obligations
9
Lease Obligations (Annual Rental Expense x 6)
600
Total Adjusted Debt **
3,636
$
** Estimated based on written description of rating agency methodology
Adjusted Debt to EBITDA
1.5
|