PotashCorp - 2012 Q4 & Year-End Earnings
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PotashCorp - 2012 Q4 & Year-End Earnings

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PotashCorp - 2012 Q4 & Year-End Earnings Presentation Transcript

  • 1. Q4 2012ConferenceCallJanuary 31, 2013 PotashCorp.com
  • 2. Forward-looking StatementsThis presentation contains forward-looking statements or forward-looking information (forward-looking statements). Thesestatements can be identified by expressions of belief, expectation or intention, as well as those statements that are nothistorical fact. These statements are based on certain factors and assumptions including foreign exchange rates, expectedgrowth, results of operations, performance, business prospects and opportunities and effective tax rates. While the companyconsiders these factors and assumptions to be reasonable based on information currently available, they may prove to beincorrect. Several factors could cause actual results to differ materially from those expressed in the forward-lookingstatements, including, but not limited to: variations from our assumptions with respect to foreign exchange rates, expectedgrowth, results of operations, performance, business prospects and opportunities, and effective tax rates; fluctuations insupply and demand in the fertilizer, sulfur, transportation and petrochemical markets; costs and availability of transportationand distribution for our raw materials and products, including railcars and ocean freight; changes in competitive pressures,including pricing pressures; adverse or uncertain economic conditions and changes in credit and financial markets; theresults of sales contract negotiations within major markets; economic and political uncertainty around the world, timing andimpact of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets andcorresponding effects on the company’s investments; unexpected or adverse weather conditions; changes in currency andexchange rates; unexpected geological or environmental conditions, including water inflows; imprecision in reserveestimates; adverse developments in new and pending legal proceedings or government investigations; acquisitions we mayundertake; strikes or other forms of work stoppage or slowdowns; changes in and the effects of, government policies andregulations; security risks related to our information technology systems; and earnings, exchange rates and the decisions oftaxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in our Form10-K for the fiscal year ended December 31, 2011 under the captions “Forward-Looking Statements” and “Item 1A – RiskFactors” and in our other filings with the US Securities and Exchange Commission and the Canadian provincial securitiescommissions. Forward-looking statements are given only as at the date of this release and the company disclaims anyobligation to update or revise any forward-looking statements, whether as a result of new information, future events orotherwise, except as required by law. Slide#2
  • 3. Fourth-Quarter 2012 Highlights• Earnings of $0.48 per share1; trailing the $0.78 per share earned in 2011• Cash provided by operating activities of $0.9 billion• Gross margin of $0.6 billion; below the $0.9 billion earned last year• Contributions from offshore investments of $94 million• Market value of investments $9.1 billion, or $10 per PotashCorp share 2 1 All references to per-share amounts pertain to diluted net income per share 2 As of market close on January 30, 2013 Slide#3 Source: PotashCorp
  • 4. Full-Year 2012 Highlights• Earnings of $2.37 per share1; trailing the $3.51 per share earned in 2011• Non-cash impairment charge of $0.39 per share for investment in Sinofert• Cash provided by operating activities of $3.2 billion, second highest in history• Gross margin of $3.4 billion; below the $4.3 billion generated last year• Record nitrogen gross margin of $1.0 billion• Contributions from strategic investments of $412 million2, a new record 1 All references to per-share amounts pertain to diluted net income per share 2 Does not include $341 million impairment charge related to our investment in Sinofert Holdings Limited (Sinofert) in China Slide#4 Source: PotashCorp
  • 5. Quarterly Gross Margin ComparisonGross Margin Declines on Weaker Results in All Three Nutrients Potash Highlights: • Relatively strong North American sales volumes offset by decline in offshore demand • Realized prices lower on offshore weakness • Higher costs due to lower production, facility mix and increased Esterhazy costs Phosphate Highlights: • Weaker prices for fertilizer products • Slightly lower sales volume due to production constraints Nitrogen Highlights: • Strong agricultural and industrial demand supported higher ammonia prices • Relatively flat sales volumes Slide#5 Source: PotashCorp
  • 6. Annual Gross Margin ComparisonGross Margin Declines on Weaker Results in Potash and Phosphate Potash Highlights: • Decline in sales volumes on weaker Indian demand and global customer inventory destocking • Relatively flat realizations; price declines offset by increased sales to higher-netback regions • Higher costs due to lower production, facility mix, higher depreciation and increased Esterhazy costs Phosphate Highlights: • Weaker prices for fertilizer products • Reduced sales volumes due to production constraints Nitrogen Highlights: • Strong demand supported higher prices for all products • Slightly reduced sales volumes due to constrained Trinidad production Slide#6 Source: PotashCorp
  • 7. Annual Cash Provided by Operating Activities*Second-Best Cash Flow Year on Record US$ Millions * As we adopted International Financial Reporting Standards (IFRS) with effect from January 1, 2010 ; 2003 to 2009 information is presented on a previous Canadian generally accepted accounting principals (GAAP) basis. Accordingly, information for 2007 to 2009 may not be comparable to 2010 and 2011 Slide#7 Source: PotashCorp
  • 8. PotashCorp Capital Spending*Major Potash Expansion Program More Than 80 Percent Complete US$ Millions * Excluding capitalized interest and major repairs and maintenance Slide#8 Source: PotashCorp
  • 9. PotashCorp Dividend Per Share*Dividend More Than Eight-Times Higher Than Beginning of 2011 US$ Per Share * Dividends declared each quarter ** $0.10 per share dividend adjusted for 3 for 1 stock split; rounded to nearest cent. Slide#9 Source: PotashCorp
  • 10. World Grain and Oilseed Supply/DemandNeed For Historically Large Production Increase to Avoid Further Shortfall Million Tonnes 2013 Production Growth Rate Scenarios 6% (~ 3X Historical Growth Rate) 4% (~ 2X Historical Growth Rate) 2013F refers to the 2013/14 crop year. Consumption forecast based on historical trend line growth. Slide#10 Source: USDA, PotashCorp
  • 11. Crop and Fertilizer Price RelationshipAffordability of Fertilizer Makes Farmer Returns Even More Compelling Price Index (2005 Average = 100) * Based on corn, soybean and wheat prices (weighted by global consumption) ** Based on urea, DAP and KCl prices (weighted by global consumption) Slide#11 Source: Bloomberg, PotashCorp
  • 12. World Potash Shipments and ConsumptionSignificant Global Distributor Inventory Destocking Occurred in 2012 Million Tonnes KCl Slide#12 Source: Fertecon, IFA, PotashCorp
  • 13. World Potash Demand Reduced Destocking and Increased Demand Expected to Drive 2013 Shipments Estimated Shipments by Market* (million tonnes)Million Tonnes KCl Market 2012E 2013F China 10.6 11-11.5 India 3.5 3.5-4.5 Other Asia 7.5 ~8.5 North America 7.9 ~9.5 Latin America 9.5 ~10.0 Other 12.0 ~12.5 Total 51.0 55-57 * Estimates per PotashCorp Slide#13 Source: Fertecon, CRU, Industry Publications, PotashCorp
  • 14. PotashCorp Nitrogen ProfileBenefiting from Ammonia; New Capacity Adds Margin Potential 2012 Nitrogen Product Mix (Volume) Ammonia Capacity Million Tonnes Slide#14 Source: PotashCorp
  • 15. PotashCorp Phosphate ProfileExposure to Industrial and Feed Products Providing Greater Stability PotashCorp Average Realized Sales Price 2012 Phosphate Product Mix (Volume)US$/tonne * Mosaic’s percentage based on last four fiscal quarter’s feed sales volume relative to total phosphate sales volume as publicly disclosed. Slide#15 Source: PotashCorp, Company Filings
  • 16. 2013 Guidance* Full Year • Earnings per share: $2.75-$3.25 (Q1 $0.50-$0.65) • Potash gross margin: $1.9-$2.4 billion • Potash shipments: 8.5-9.2 million tonnes • Phosphate and nitrogen gross margin: $1.5-$1.7 billion* Guidance as at January 31, 2013 Slide#16 Source: PotashCorp
  • 17. 2013 Guidance* Full Year • Capital expenditures**: ~$1.5 billion • Annual effective tax rate: 25-27 percent • Provincial mining and other taxes: 11-13 percent of total potash gross margin • Other income: $320-$380 million • Selling and administrative expenses: $240-$260 million • Finance costs: $100-130 million* Guidance as at January 31, 2013** Does not include capitalized interest and major repairs and maintenance Slide#17 Source: PotashCorp
  • 18. Thank youThere’s more online: PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter