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PotashCorp - 2012 Q2 Earnings
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  • 1. Q2 2012 EarningsConference CallJuly 26, 2012 Slide #1 PotashCorp.com
  • 2. Forward-Looking StatementsThis presentation contains forward-looking statements or forward-looking information (forward-looking statements).These statements can be identified by expressions of belief, expectation or intention, as well as those statements thatare not historical fact. These statements are based on certain factors and assumptions including with respect to foreignexchange rates, expected growth, results of operations, performance, business prospects and opportunities and effectivetax rates. While the company considers these factors and assumptions to be reasonable based on information currentlyavailable, they may prove to be incorrect. Several factors could cause actual results to differ materially from thoseexpressed in the forward-looking statements, including, but not limited to: variations from our assumptions with respect toforeign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, andeffective tax rates; fluctuations in supply and demand in the fertilizer, sulfur, transportation and petrochemical markets;costs and availability of transportation and distribution for our raw materials and products, including railcars and oceanfreight; changes in competitive pressures, including pricing pressures; adverse or uncertain economic conditions andchanges in credit and financial markets; the results of sales contract negotiations with major markets; the Europeansovereign debt crisis and the recent downgrade of US sovereign debt and political concerns over budgetary matters;timing and impact of capital expenditures; risks associated with natural gas and other hedging activities; changes incapital markets and corresponding effects on the company’s investments; unexpected or adverse weather conditions;changes in currency and exchange rates; unexpected geological or environmental conditions, including water inflows;imprecision in reserve estimates; adverse developments in new and pending legal proceedings or governmentinvestigations; acquisitions we may undertake; strikes or other forms of work stoppage or slowdowns; changes in and theeffects of, government policies and regulations; security risks related to our information technology systems; andearnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates.Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2011 under thecaptions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our other filings with the US Securities andExchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given onlyas at the date of this presentation and the company disclaims any obligation to update or revise the forward-lookingstatements, whether as a result of new information, future events or otherwise, except as required by law. Slide #2
  • 3. Second-Quarter 2012 Highlights• Earnings of $0.60 per share 1• Second-quarter impairment of $341 million ($0.39 per share) for Sinofert investment• Record second-quarter earnings prior to non-cash impairment charge• Gross margin of $1.2 billion – third-best quarterly total in company history• Potash sales volumes of 2.6 million tonnes – offshore shipments at record levels• Market value of investments $8.6 billion, or $10 per PotashCorp share2 1 Allreferences to per-share amounts pertain to diluted net income per share 2 As of market close (July 25, 2012) Slide #3
  • 4. World Grain Stocks-to-Use RatioGrain Inventories Expected to Remain Tight Beyond 2012 Percent Historical 25-Year Average 40 35 30 25 20 15 10 86 88 90 92 94 96 98 00 02 04 06 08 10 12F Based on crop year data. For example, 12F refers to the 2012/13 crop year. Slide #4Source: USDA
  • 5. World Crop Prices Prices Have Moved Sharply Higher in Response to Global Production IssuesUS$/Bushel US$/Bushel 9 18 8 16 7 14 6 12 5 10 4 10-Year Average 10-Year Average 3 8 2 6 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-10 Jul-11 Jul-10 Jan-11 Jan-12 Jul-12 Corn Soybean Slide #5 Source: Bloomberg
  • 6. Fertilizer Cost Percentage of US Corn Revenue Potash and Phosphate Costs Account for Small Percentage of Projected Corn Revenue Nitrogen Phosphate PotashPercent Percent Percent18 18 18 10- year high16 16 1614 14 1412 12 1210 10 10 8 8 8 10- year low 10- year high 6 6 10- year high 6 4 4 4 2 2 10- year low 2 10- year low 0 0 0 $4 $5 $6 $7 $8 $4 $5 $6 $7 $8 $4 $5 $6 $7 $8 US$/bushel US$/bushel US$/bushel Based on DTN reported retail fertilizer prices as of July 20, 2012. Slide #6 Source: USDA, DTN, PotashCorp
  • 7. US Corn/Soybean Potash Application and RemovalApplication Rates Have Not Kept Pace With Nutrient RemovalMillion Tonnes KCl Equivalent Column4 Crop Removal 8 7 6 5 4 3 2 1 0 2012F assumes 135 bu/acre corn & 38 bu/acre soybean yields. Application estimate does not include nutrients received from manure which can Slide #7 reduce the deficit on a regional basis.
  • 8. 2012 US Corn/Soybean Potash Application and Removal Estimated Removal Exceeds Application Even in Low Yield Scenarios Million TonnesKCl Equivalent Crop Removal Scenarios 6.5 2012 Estimated Potash Application 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Corn 120 & Corn 130 & Corn 140 & Corn 150 & Soybean 35 Soybean 37 Soybean 39 Soybean 41 Yield Scenarios – bushels per acre Slide #8Application estimate does not include nutrients received from manure which can reduce the deficit on a regional basis.
  • 9. US Fertilizer Use Following Major Yield DeclinesFertilizer Use Increased in Majority of Fertilizer Years Following a Major Yield DeclinePercentage Change Change in US Fertilizer use (in following fertilizer year) 30% Year-over-Year Corn Yield Decline 20% 20% 10% 7% 7% 3% 4% 0% 0% -10% -9% -20% -30% -40% 1970 1974 1980 1983 1988 1993 1995 Year Slide #9Source: USDA, AAPFCO
  • 10. Brazil Fertilizer Deliveries to Final ConsumerExpect Record Fertilizer Use in 2012Million Product Tonnes 35 30 25 20 15 10 5 0 2002 2004 2006 2008 2010 2012F 2012 YTD fertilizer deliveries are up 6 percent yr/yr as of June. Slide #10Source: Potafertz, ANDA, PotashCorp
  • 11. India Market SituationUnbalanced Fertilizer Application and a Weak Monsoon Could Impact Crop Production N:K Application Ratio Percentage of Normal Monsoon Rain (Season to Date) 7 120 6 100 5 80 4 60 3 40 2 20 1 0 0 2010 2011 2012F 00 02 04 06 08 10 12 Rains less than 90 percent considered to be a drought. Slide #11
  • 12. PotashCorp Capital Spending and Cash FlowCash Flow Expected to Remain StrongUS$ Millions Capital Expenditures Estimates* 4,000 Cash Provided by Operating Activities 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F * Excluding capitalized interest and major repairs and maintenance Slide #12
  • 13. 2012 Guidance*Third-quarter: – Earnings per share: $0.70-$0.90Full-year: – Earnings per share: $2.80-$3.20 • (revised guidance mainly due to the adjustment for second-quarter impairment change) – Potash gross margin: $2.6-$2.8 billion – Potash shipments: 8.8-9.2 million tonnes – Phosphate and nitrogen gross margin: $1.4-$1.6 billion* Guidance as at July 26, 2012 Slide #13
  • 14. 2012 Guidance* Full-year: – Capital expenditures**: $2.2 billion – Annual effective tax rate on ordinary income: 24-26 percent – Provincial mining and other taxes: 9-10 percent of total potash gross margin – Other income: $375-$425 million – Selling and administrative expenses: $225-$245 million – Finance costs: $100-$120 million* Guidance as at July 26, 2012** Does not include capitalized interest and major repairs and maintenance Slide #14
  • 15. Thank You There’s more online PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter Slide #15