PotashCorp - 2013 Q2 Earnings
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PotashCorp - 2013 Q2 Earnings

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PotashCorp - 2013 Q2 Earnings PotashCorp - 2013 Q2 Earnings Presentation Transcript

  • PotashCorp.com Q2 2013 Conference Call July 25, 2013
  • This 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 that are not historical fact. These statements are based on certain factors and assumptions including with respect to: foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities and effective tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results or events to differ materially from those expressed in the forward-looking statements, including, but not limited to the following: variations from our assumptions with respect to foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, and effective 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 ocean freight; changes in competitive pressures, including pricing pressures; adverse or uncertain economic conditions and changes in credit and financial markets; the results of sales contract negotiations within major markets; economic and political uncertainty around the world; timing and impact of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets; 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 government investigations; acquisitions we may undertake; strikes or other forms of work stoppage or slowdowns; rates of return on and the risks associated with our investments; changes in, and the effects of, government policies and regulations; security risks related to our information technology systems; and earnings and the decisions of taxing authorities, 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, 2012 under the captions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our other filings with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this presentation and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Forward-looking Statements Slide#2
  • Second-Quarter 2013 Highlights • Earnings of $0.73 per share1; exceeding the $0.60 per share earned in 20122 • Cash from operating activities of $1.2 billion; second-highest second-quarter total • Potash sales volume of 2.5 million tonnes • Successfully completed Canpotex3 run at Cory; Canpotex entitlement now 51.5% • Nitrogen gross margin of $276 million; second-highest second-quarter total • Market value of investments $6.8 billion, or $8 per PotashCorp share4 1 All references to per-share amounts pertain to diluted net income per share 2 Totals for the second quarter and first six months of 2012 included a $0.39 per share impairment charge related to our investment in Sinofert Holdings Limited (Sinofert) 3 Canpotex Ltd. (Canpotex), the offshore marketing company for Saskatchewan potash producers 4 As of market close on July 24, 2013 Source: PotashCorp Slide#3
  • Gross Margin Decrease Largely Due to Weaker Potash Results Quarterly Gross Margin Comparison $1,199 $979 -$188 -$26 -$6 0 200 400 600 800 1,000 1,200 1,400 Q2 2012 GM Potash Nitrogen Phosphate Q2 2013 GM US$ Millions Potash Highlights: • Strong demand in all markets; offshore shipments to Other Asia and India outpaced prior year levels • Realizations declined due to increased competitive pressure in all key markets • Lower per-tonne costs due primarily to the absence of higher-cost Esterhazy tonnage Nitrogen Highlights: • Gross margin near record levels; increased sales volumes partially offset decline in urea realizations • Additional ammonia capacity at Geismar contributed ~$30 million in incremental gross margin Phosphate Highlights: • Stable prices for feed and industrial products helped counterbalance weakness in fertilizer product pricing Source: PotashCorp Slide#4
  • Source: Fertecon, CRU, Industry Publications, PotashCorp Million Tonnes KCl World Potash Demand Consumption Growth Expected to Drive 2013 Shipments Market 2012 2013F China 10.6 ~11.5 India 3.5 ~4.0 Other Asia 7.5 ~8.3 Latin America 9.5 ~10.2 North America 7.9 ~9.5 Other 12.0 ~12.5 Total 51.0 ~56 Estimated Shipments by Market* (million tonnes) * Estimates per PotashCorp Slide#5 40 42 44 46 48 50 52 54 56 58 2012 China India Other Asia Latin America North America Other 2013F*
  • Potash Shipments to Key Regions Excluding India Strong Growth in Key Regions Source: Fertecon, CRU, IPNI, USDOC, Industry Publications, PotashCorp Million Tonnes KCl 0 5 10 15 20 25 30 35 40 45 2008 2009 2010 2011 2012 2013F Latin America China Other Asia North America Slide#6
  • Expect Fertilizer Will Remain Very Affordable Fertilizer Cost Percentage of Corn Revenue* Source: USDA, DTN, PotashCorp 0 5 10 15 20 25 04 05 06 07 08 09 10 11 12 13E 14F** Potash Phosphate Nitrogen Total $4.00/bushel 2014 Corn Price Scenarios $5.00/bushel $6.00/bushel Percent * Based on average US farm revenue and costs ** Based on projected fall 2013 retail prices of $500/st urea, $575/st DAP and $525/st KCl Slide#7
  • 47.7% PotashCorp Other Canpotex Members Source: Company Reports, PotashCorp Anticipate Increasing Canpotex Entitlement PotashCorp’s Opportunity Percentage of Canpotex Entitlement 51.5% PotashCorp Other Canpotex Members First-half 2013 Second-half 2013 Slide#8
  • Source: PotashCorp, Company Reports Competitor Greenfield Projects1 PotashCorp’s CAPEX Spending Largely Complete; Competitors Facing Rising Costs PotashCorp’s Opportunity 88% 12% Completed Remaining PotashCorp Potash Projects Estimated Capital Spending* 0 5 10 15 20 Original Estimate Current Estimate Billions - US$ 129% Increase 1 Greenfield projects include: K+S (Legacy) ; Eurochem (Volgograd); Vale (Rio Colorado) 2 Estimate based on publically available project cost discussion from current project developer or, in certain cases, previous project developer 3 Estimate based on publically available comments in presentations or transcripts from current project developer 2 3 Slide#9 * As at June 30, 2013
  • Source: IFA, PotashCorp IFA derives operational capability by multiplying capacity by the highest historical achievable operating rate. 50 55 60 65 70 75 80 85 90 2012 2013F 2014F 2015F 2016F IFA Forecast as of May 2013 IFA Forecast as of May 2012 Million Tonnes KCl Equivalent Significant Project Delays and Deferrals Over the Past 12 Months IFA Potash Operational Capability Outlook 8 million tonnes Slide#10
  • Continuing to Generate Significant Cash From Operations Cash Provided by Operating Activities (First Half) Source: PotashCorp Slide#11 0 500 1,000 1,500 2,000 2,500 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 US$ Millions As we adopted International Financial Reporting Standards (IFRS) with effect from January 1, 2010, 2004 to 2009 information is presented on a previous Canadian generally accepted accounting principals (GAAP) basis. Accordingly, information for 2004 to 2009 may not be comparable to information for 2010 to 2013. All figures represent totals for first-six months of respective year
  • Utilizing Strong Cash Flow to Enhance Long-term Shareholder Returns PotashCorp’s Opportunity $0.03 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 Q4-10 Q2-11 Q4-11 Q2-12 Q4-12 Q2-13 Dividend* per Share – US$ * Dividends declared each quarter ** $0.10 per share dividend adjusted for 3 for 1 stock split; rounded to nearest cent. Source: PotashCorp Opportunity Capital (10-year total) = $8.1B 24% Return 5-year Average Cash Flow Return 1,2 (2008-2012) Share Repurchases (since 1999) = $6.3B 46% Increase in current share price2 above average repurchase price Equity Investments 3 (since 1998) = $2.0B 245% Increase Change in Market Value of Investments Since Acquisition2 1 See reconciliation and description of certain non-IFRS measures at www.potashcorp.com 2 All figures as at July 24, 2013 3 Total acquisition cost for SQM, APC, Sinofert and ICL Slide#12 $2 Billion Share Repurchase Program Announced July 24, 2013 (5% of outstanding shares)
  • 2013 Guidance* Third Quarter • Earnings per share: $0.45-$0.60 Full Year • Earnings per share: $2.45-$2.70 • Potash gross margin: $1.8-$2.1 billion • Potash shipments: 8.5-9.2 million tonnes • Phosphate and nitrogen gross margin: $1.3-$1.5 billion * Guidance as at July 25, 2013 Source: PotashCorp Slide#13
  • 2013 Guidance* Full Year • Capital expenditures**: ~$1.5 billion • Annual effective tax rate: 27-28 percent • Provincial mining and other taxes: 11-13 percent of total potash gross margin • Income from offshore investments***: $320-$340 million • Selling and administrative expenses: $230-$240 million • Finance costs: $130-$150 million * Guidance as at July 25, 2013 ** Does not include capitalized interest and major repairs and maintenance *** Includes share of earnings in equity-accounted investees and dividend income from available-for-sale investments Source: PotashCorp Slide#14
  • There’s more online: PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter Thank you