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| 8-K - 8-K - INVESTOR PRESENTATION (AUGUST 2016) - MOSAIC CO | a8-kinvestorpresentationau.htm |
The Mosaic Company
Third Quarter 2016
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 MWSPC) and 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 MWSPC to obtain additional planned funding in acceptable amounts and upon acceptable terms, the timely development and commencement of operations of
production facilities in the Kingdom of Saudi Arabia, the future success of current plans for MWSPC and any future changes in those plans; difficulties with realization of
the benefits of our long term natural gas based pricing ammonia supply agreement with CF Industries, Inc., including the risk that the cost savings initially anticipated
from the agreement may not be fully realized over its term or that the price of natural gas or ammonia during the term are at levels at which the pricing is
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; the effect of future product innovations or development of new technologies on
demand for our products; 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 expansion of the types and extent of water resources regulated
under federal law, greenhouse gas regulation, implementation of numeric water quality standards for the discharge of nutrients into Florida waterways or efforts to
reduce the flow of excess nutrients into the Mississippi River basin, the Gulf of Mexico or elsewhere; 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, 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, or the costs of the MWSPC, 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 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, sinkholes or releases of hazardous or volatile chemicals; and risks associated with cyber security, including reputational loss, 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.
Safe Harbor Statement
2
Agriculture: Declining Farm Income
Source: USDA 3
0
20
40
60
80
100
120
140
160
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16F
Bil $ U.S. Net Cash Income
Source: USDA
• Net Cash Income is the sum of crop and livestock receipts, direct government payments and other farm-related income
(e.g. custom harvesting services), minus cash expenses, including rent.
• This metric is used to benchmark the short term financial health of the U.S. farm sector.
• As of May, 2016
Crop Nutrient Affordability a Significant Tailwind for
Farmers
Based on actual market prices
Less A
ffordable
M
ore A
ffordable
4
0.40
0.60
0.80
1.00
1.20
1.40
1.60
05 06 07 08 09 10 11 12 13 14 15 16
Plant Nutrient Affordability
Plant Nutrient Price Index / Crop Price Index
Affordability Metric Average
Source: Weekly Price Publications, CME, USDA, AAPFCO, Mosaic
Agricultural Backdrop
5
Corn, soybeans and wheat prices
are making headlines
But El Niño left its mark on several
commodities
Brazil especially benefits from high
sugar, cotton and coffee prices
10
11
12
13
14
15
16
17
18
19
20
21
Sep-15 Dec-15 Mar-16 Jun-16
US$
CWT
Source: NYMEX
Sugar Prices
Daily Close of Nearby Option
1,900
2,000
2,100
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
Sep-15 Dec-15 Mar-16 Jun-16
Rngts
Tonne
Source: CRB
Malaysian Palm Oil Prices
Daily Close of Nearby Option
100
110
120
130
140
150
160
Sep-15 Dec-15 Mar-16 Jun-16
US$
CWT
Source: NYMEX
Coffee Prices
Daily Close of Nearby Option
55
58
60
63
65
68
70
73
75
Sep-15 Dec-15 Mar-16 Jun-16
US$
CWT
Source: NYMEX
Cotton Prices
Daily Close of Nearby Option
As of August 2, 2016
Good Demand Fundamentals
6
No change in 2016 forecast ranges
Bunching of demand expected in second half 2016
Shipments projected to accelerate in 2017
65‐66
66‐68
30
35
40
45
50
55
60
65
70
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16F17F
Global Phosphate ShipmentsMil Tonnes
DAP/MAP/NPS/TSP
Source: CRU and Mosaic
59‐60
61‐63
25
30
35
40
45
50
55
60
65
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16F17F
Global PotashShipmentsMil Tonnes KCl
Source: CRU and Mosaic
FX Impact on Supply
7
FSU exporters have benefited from a collapse of local currencies
Russian ruble and Belarussian ruble are down 45% and 50% since 2014 Q1
Brazil potash price has declined 60% in dollars but is off just 5% in Belarussian rubles since January 2012
40
50
60
70
80
90
100
110
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
Index
Source: CRB
Key Potash Exporter Exchange Rates
2014 Q1=100
Canadian Dollar Russian Ruble Belarus Ruble
0
750
1500
2250
3000
3750
4500
5250
6000
200
250
300
350
400
450
500
550
600
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
1000 Belarus
Rubles Tonne
US$
Tonne
Source: Argus FMB and CRB
MOP Price
c&f Brazil Port
US$ Tonne 1000 Belarussian Rubles Tonne
Multiple Actions to Reduce Costs
8
*Production costs are reflective of actual costs, excluding realized mark‐to‐market gains and
losses. These costs are captured in inventory and are not necessarily reflective of costs
included in costs of goods sold for the period.
$67 $73
$100
$74
$36 $19
$‐
$20
$40
$60
$80
$100
$120
Esterhazy Belle Plaine Colonsay EnterpriseC
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Cash Costs by Mine H1 2016
Brine Cash costs including royalites, excluding resource taxes, brine and realized derivative gains/(losses)
average
North American Potash Operations:
Optimized, Efficient, Strategically Located
46%
54%
Potash Sales
2012-15
North
America Offshore
Corporate Headquarters
Business Unit Office
Deep Shaft Mine
Solution Mine
Export Terminal and Shipping
• Our sales outside of the U.S. and Canada of Saskatchewan potash products are
made through Canpotex
• Mosaic’s current allocation of Canpotex sales is approximately 38.1%.
• Canpotex members have equal voting rights in the affairs of the company (one
member, one vote).
• Major decisions made by Canpotex require unanimous agreement by the
shareholders.
Potash Shipments
2012 ‐ 2015
Low Cash Cost Opportunity
10
*Production costs are reflective of actual costs, excluding realized mark‐to‐market gains and
losses. These costs are captured in inventory and are not necessarily reflective of costs
included in costs of goods sold for the period.
*Assumes 1.30: 1 CAD to USD.
$53
$71 $66
$26
$18
$‐
$10
$20
$30
$40
$50
$60
$70
$80
$90
Esterhazy Belle Plaine Enterprise
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Cash Costs by Mine (95% Operating Rate)
Brine Cash costs including royalties, excluding resource taxes, brine and realized derivative gains/(losses)
average
Phosphate Operations:
Vertically integrated, low cost
U.S. Phosphate Operations
Additional Phosphate Operations
Faustina, LA ammonia and concentration plant
Peru: 35% equity stake in Bayovar phosphate rock
mine
Saudi Arabia: 25% equity stake in world‐scale
Ma’aden II mine and chemical complex scheduled
to produce in 2016
53%47%
Phosphate Sales
2012-15
North
America Offshore
Phosphate Shipments
2012 ‐ 2015
$39
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2011 2012 2013 2014 2015
D
o
l
l
a
r
s
/
T
o
n
n
e
Mining Cash Costs/Tonne of Phosphate Rock
Mosaic Phosphates: Operational Excellence
Source: Mosaic 12
Mosaic: History of Innovation
Source: Mosaic 13
0%
5%
10%
15%
20%
25%
‐
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2011 2012 2013 2014 2015
T
h
o
u
s
a
n
d
T
o
n
n
e
s
MicroEssentials® sales volume
MicroEssentials® % of phosphate product volumes
Mosaic: Effective Capital Management
Source: Mosaic 14
* 2013 through 2015
18%
13%
29%
40%
Capital Allocation: Three Year Summary*
Maintenance
Organic Growth
Investment Commitments
Return to Shareholders
(dividends & repurchases)
($ in billions)
Total:
$11.5 Billion
A Balanced Approach to Capital Allocation
Managing Costs and Capital
• $500 million Expense Reduction
• +$75 million from Support Functions
• Asset Optimization
• Lower Capital Spending
15
Long Term
13
Yield Growth Required To Keep Up With Demand
And The Long-term Trend Is Up
1.75
2.00
2.25
2.50
2.75
3.00
3.25
3.50
3.75
4.00
750
775
800
825
850
875
900
925
950
975
80 85 90 95 00 05 10 15F 20F 25F 30F
MT HaMil Ha
Actual Area Forecast Area Actual Yield Required Yield 1980-12 Yield Trend
Source: USDA and Mosaic
World Harvested Area and Average Yield
17
Mosaic’s Focus
Build on Mosaic’s Track Record of Success:
Execution
Smart Investments
Environmental Stewardship & Safety
Prudently Manage Capital
Grow Value for Mosaic’s Shareholders
18
Thank you
16
Global Phosphate Shipment Forecasts by Region (August 2, 2016)
Source: CRU and Mosaic.
Numbers may not sum to total due to rounding.
* NPS products included in this analysis are those with a combined N and P2O5 nutrient content of 45 units or greater.
Million Tonnes
DAP/MAP/NPS*/TSP 2015R
Aug
Low
2016F
Aug
High
2016F
Aug
Low
2017F
Aug
High
2017F Comments
China 19.6 18.8 19.0 19.1 19.5
We again have lowered our 2016 forecast. Spring season shipments were less than expected due to a
destocking of channel inventories and a slow start to summer stockpiling. Lower stocks and domestic
prices (closer to export values) set the stage for a rebound next year.
India 9.2 9.3 9.5 9.4 10.0
Despite starting the year with a large overhang of channel inventories, the above‐average monsoon,
high domestic crop prices, and 15% drop in retail DAP prices (thanks to lower international prices, a
workable subsidy, and stable rupee) boost our 2016 forecast. Strong demand drivers are expected to
carry through to 2017, provided that the rupee remains stable.
Other Asia/Oceania 8.7 8.1 8.2 8.3 8.5
We revised modestly higher our expectations for 2016 last quarter due to higher crop prices, more
moderate P prices, average to below‐average channel inventories, improved weather prospects (La
Niña), and more stable forex rates. Our 2017 forecast calls for a moderate rebound, as we expect the
positive drivers to persist.
Europe and FSU 5.1 5.1 5.2 5.1 5.3
Our 2016 forecast is unchanged. Big harvests this year imply larger fertilizer replacement requirements,
but macroeconomic uncertainties and weaker farm economics in Europe likely will be a drag on growth
in 2017.
Brazil 6.9 7.4 7.6 7.5 7.7
Near‐record local currency prices for soybeans, corn, sugar, cotton and coffee have led to a big demand
pull (Jan‐Jun fertilizer shipments set an all‐time record). Phosphate shipments through the first half of
the year are up 12% from a year ago. Volatility of the real remains an issue, but we expect that highly
profitable farm economics will continue to drive strong phosphate demand in Brazil in the upcoming
peak application season as well as next year.
Other Latin America 2.7 3.4 3.5 3.6 3.7
Higher local‐currency ag commodity prices and more moderate fertilizer prices have boosted demand
more than previously anticipated in 2016, leading to an upward revision to our forecast, notably in
Argentina. Despite calls that Argentina’s soybean export tariff will not be lowered in 2017, we believe
that higher corn area will more than offset any impact on phosphate demand. Elsewhere in the region,
we believe that solid farm economics will lead to modest to moderate shipment gains.
North America 8.9 9.1 9.4 9.0 9.2
2016 shipments were revised up as a result of larger‐than expected spring shipments (including a large
de‐stocking of channel inventories) and prospects for a strong fall season. A small drop is projected next
year mainly due to an expected decline in U.S. corn acreage.
Other 3.6 3.7 3.8 3.8 4.0
Our 2016 forecast is revised slightly higher. Modest growth is expected in the Middle East in 2017, with
much stronger (~5% y‐o‐y) growth anticipated in Africa.
Total 64.8 64.9 66.2 65.8 67.9
Our 2016 point estimate of 65.6 million tonnes is unchanged from the May forecast. Our initial shipment
forecast for 2017 calls for an increase to 66‐68 million tonnes, with a point estimate in the middle of the
range ‐‐ a gain of ~2% and in line with the long term trend rate.
Source: i .
Nu bers ay not su to t t l d t r i .
Global Potash Shipment Forecasts by Region (August 2, 2016)
Muriate of Potash
Million Tonnes (KCl) 2015
Aug
Low
2016F
Aug
High
2016F
Aug
Low
2017F
Aug
High
2017F Comments
China 15.9 12.8 13.0 13.7 14.1
Shipments this year are projected to drop more than previously anticipated due to the delayed
settlement of 2016 contracts and a drawdown of channel stocks. 1H imports were down 11% from year‐
ago levels. We do not anticipate that changes to government support policies to discourage corn
plantings will have a material adverse impact on demand in 2017, with a ~8% rebound to ~14 mmt.
India 4.0 4.4 4.6 4.4 4.7
Despite high inventories to start the year, we have upped our forecast for 2016 on the basis of the good
monsoon underway, lower potash prices, workable subsidy (which was cut only notionally this year) and
strong local ag commodity prices. Our forecast for 2017 calls for bullish demand drivers to continue,
though the stability of the rupee remains a wildcard.
Indonesia/
Malaysia 4.3 4.5 4.7 5.0 5.2
The rebound in shipments we were expecting in 2016 has been muted, but we believe that fundamentals
– better rainfall, lower K prices, and decent rice and palm oil prices – will deliver a more meaningful
increase in 2017.
Europe and FSU 10.4 10.3 10.5 10.6 10.8
Shipments in 2016 have been revised slightly higher and are now expected to be flat y‐o‐y. Our 2017
forecast calls for a moderate expansion to replace big soil nutrient drawdowns this year and to meet the
boost in production of NPKs for export.
Brazil 8.7 9.0 9.2 9.2 9.5
Near‐record local currency prices for soybeans, corn, sugar, cotton and coffee have led to a big demand
pull (Jan‐Jun fertilizer shipments set an all‐time record).. Potash shipments through the first half of the
year are up 16% from a year ago. At the same time, imports are running just 3% ahead of last year and
domestic production is off slightly, implying a sizable drawdown in channel inventories. We expect these
constructive market conditions to carry over into 2017, underpinning our forecast for shipments to
surpass the 2014 high of 9.3 mmt.
North America 8.9 8.9 9.1 8.8 9.0
We have trimmed our 2016 forecast slightly due to relatively high channel inventories, though we expect
a very solid fall season as a result of large potash withdrawals this year and the low cost of rebuilding
soil potassium levels. In 2017, we anticipate a pullback in corn acreage due to lower prices, but that is
expected to result in a minor decrease in shipments as acres shift to other crops and the economic
incentives to apply potash remain positive.
Other 8.9 9.0 9.2 9.4 9.7
Our 2016 forecast is revised slightly higher, as the lower reset in benchmark contract prices (i.e. in China
and India) provides a floor in spot market pricing that drives strong demand in the second half of the
year.
Total 61.2 58.9 60.3 61.1 63.0
Our 2016 global shipments point estimate is little‐changed at 59.6 million tonnes within an unchanged
range of 59‐60 mmt. Our initial shipment forecast for 2017 calls for robust demand growth of over 4%
to 61‐63 mmt (following two years of negative growth), with a point estimate in the middle of the range.
Source: CRU and Mosaic.
Numbers may not sum to total due to rounding.