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PotashCorp - 2013 Q3 Earnings
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PotashCorp - 2013 Q3 Earnings

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  • 1. Q3 2013 Conference Call October 24, 2013 PotashCorp.com
  • 2. Forward-looking Statements 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. Forward-looking statements are subject to risks and uncertainties that are difficult to predict. The results or events set forth in forward-looking statements may differ materially from actual results or events. 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. Slide#2
  • 3. Third-Quarter 2013 Highlights • Earnings of $0.41 per share1; trailed the $0.74 per share earned in 2012 • Cash from operating activities of $616 million • Repurchased 6.3 million common shares at an average cost of $30.95 per share • Market value of investments $6 billion, or $7 per PotashCorp share2 1 All references to per-share amounts pertain to diluted net income per share 2 As of market close on October 23, 2013 Slide#3 Source: PotashCorp
  • 4. Quarterly Gross Margin Comparison Gross Margin Decrease Largely Due to Weaker Potash Results US$ Millions 1,000 $927 Potash Highlights: • Weaker demand due to market uncertainty -$326 900 • Realizations declined due to increased competitive pressure in all key markets 800 700 Nitrogen Highlights: -$73 600 -$44 500 $484 400 • Increased sales volumes more than offset by decline in ammonia and urea realizations Phosphate Highlights: 300 • Relatively stable prices for feed and industrial products helped offset weakness in fertilizer product pricing 200 100 0 Q3 2012 GM Potash Nitrogen Phosphate Q3 2013 GM Slide#4 Source: PotashCorp
  • 5. World Potash Demand Growth Anticipated in 2014 Million Tonnes KCl 55-58 53-54 * Forecast per PotashCorp Slide#5 Source: Fertecon, CRU, Industry Publications, PotashCorp
  • 6. PotashCorp’s Opportunity CAPEX Spending Largely Complete PotashCorp Potash Projects Estimated Capital Spending* PotashCorp Total Capital Spending** US$ Millions 2,500 9% 2,000 1,500 1,000 500 91% 0 Completed Remaining 2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F * As at September 30, 2013. Includes both debottleneck and expansion spending ** Excluding capitalized interest, major repairs and maintenance Slide#6 Source: PotashCorp
  • 7. Cash Provided by Operating Activities (Year-to-Date) Continuing to Generate Significant Cash From Operations US$ Millions 3,000 2,500 2,000 1,500 1,000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 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 from 2010 to 2013. All figures represent totals for first nine months of the respective year. Source: PotashCorp Slide#7
  • 8. PotashCorp’s Opportunity Utilizing Strong Cash Flow to Enhance Long-term Shareholder Returns Dividend* per Share – US$ $0.40 $0.35 $0.35 $0.20 $2 Billion Share Repurchase Program $0.15 Announced July 24, 2013 (5% of outstanding shares) $0.30 $0.25 $0.10 $0.03 $0.05 $0.00 Q4-10** Q3-11 Q2-12 Q1-13 Q3-13 * Dividends declared each quarter ** $0.10 per share dividend adjusted for 3 for 1 stock split; rounded to nearest cent Opportunity Capital (10-year total) = $8.1B 1 Share Repurchases (since 1999) = $6.5B Equity Investments 4 (since 1998) = $2.0B 24% Return 22% Increase 201% Increase 5-year Average Cash Flow Return 2 (2008-2012) in current share price3 above average repurchase price Change in Market Value of Investments Since Acquisition3 1 10-year period represents 2003-2012 2 See reconciliation and description of certain non-IFRS measures at www.potashcorp.com 3 All figures as at October 23, 2013 4 Total acquisition cost for SQM, APC, Sinofert and ICL Source: PotashCorp Slide#8
  • 9. 2013 Guidance* Full Year • Earnings per share: $2.00-$2.20 • Potash gross margin: $1.5-$1.7 billion • Potash shipments: 8.0-8.4 million tonnes • Phosphate and nitrogen gross margin: $1.2-$1.3 billion * Guidance as at October 24, 2013 Slide#9 Source: PotashCorp
  • 10. 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***: ~$300 million • Selling and administrative expenses: $230-$240 million • Finance costs: $130-$150 million * Guidance as at October 24, 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#10
  • 11. 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