PotashCorp - Morgan Stanley Global Chemicals Conference - November 15, 2012

2,080 views

Published on

Published in: Investor Relations
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,080
On SlideShare
0
From Embeds
0
Number of Embeds
103
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

PotashCorp - Morgan Stanley Global Chemicals Conference - November 15, 2012

  1. 1. MorganStanleyGlobal ChemicalsConferenceNovember 15, 2012Bill DoylePresident and CEO PotashCorp.com
  2. 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 with respect to: foreign exchangerates, 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 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; economic andpolitical uncertainty around the world, including the European sovereign debt crisis; timing and impact of capitalexpenditures; risks associated with natural gas and other hedging activities; changes in capital markets and correspondingeffects on the company’s investments; unexpected or adverse weather conditions; changes in currency and exchangerates; 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 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 decisionsof taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in ourForm 10-K for the fiscal year ended December 31, 2011 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 provincialsecurities commissions. Forward-looking statements are given only as at the date of this release and the companydisclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, futureevents or otherwise, except as required by law.
  3. 3. Key Takeaways• Ongoing pressure on global grain inventories expected to keep agricultural fundamentals strong in coming years• Continuing strength in potash “spot” markets – Brazil, North America and Other Asia (excluding China and India)• Potash “contract” markets – China and India – expected to rebound in 2013• Well positioned in N, P and K to leverage growing demand• Major capex program winding down; strong track record in deploying free cash
  4. 4. Potash Phosphate Nitrogen % of Global Capacity 20% 5% 2%PotashCorp Profile Global Position % of Gross Margin (2011) #1 64% #3 15% #3 21%A Global Crop Nutrient Company Sinofert APC ICL Potash Phosphate (Mining/Processing) Nitrogen Investments SQM Source: Fertecon; CRU; Blue, Johnson & Associates; PotashCorp
  5. 5. PotashCorp ProfileUnique Potash Position Drives Earnings Growth Gross Margin by Segment Gross Margin Percentage of Net SalesUS$ Billions Percent – Sept 2012 YTD Potash GM Phosphate GM Nitrogen GM6 70%5 60% 50%4 40%3 30%2 20%1 10%0 0% 2004 2006 2008 2010 2012F* Potash Phosphate Nitrogen * 2012F as at October 25, 2012 Source: PotashCorp
  6. 6. Agriculture Update
  7. 7. World Grain Profile Recent Stagnated Production Has Tightened Grain Inventories World Grain Production Global Stocks-to-Use RatioBillion Tonnes Percent2.0 401.9 351.81.7 301.6 25-year average1.5 251.4 201.31.2 151.11.0 10 2000 2002 2004 2006 2008 2010 2012F Based on crop year data. For example, 12F refers to the 2012/13 crop year. Source: USDA
  8. 8. Global Crop Prices and Return on Fertilizer Strong Crop Prices Have Supported Fertilizer Affordability Index to 10-year Average by Crop Return per Dollar Spent by Crop10-year average = 100 2012E Return per US$250 7 Corn Wheat Soybean Palm Oil Rice Sugar Banana 6200 5150 4 3100 2 50 1 0 0 Brazil Malaysia India US Corn China Rice Soybean Oil Palm Wheat As of October 30, 2012 Source: IPNI, DTN, Safras and Mercado, Malaysian Palm Oil Board, Brilliant Pioneer Consultants, Bloomberg, Industry Publications
  9. 9. Potash Market Update
  10. 10. North American Potash Market Update Favorable Crop Economics Driving Strong Demand 2013 Return Over Variable Costs Scenarios Shipments to North American Market*US$/Acre Million Tonnes KCl1,000 Jan-Jun Jul-Dec 12.0 2013F 10-Year Average 10.0 800 Full-year Average** 8.0 600 6.0 400 First-half Average 4.0 200 2.0 0 0.0 $4 $5 $6 $7 2002/03 2004/05 2006/07 2008/09 2010/11 2012/13F Corn Price Scenarios (US$/bu) * Includes shipments from domestic producers and offshore imports ** Based on Olympic average Source: IPNI, USDA, PotashCorp
  11. 11. Brazil Potash Market Update Strong Returns and Agronomic Need Are Driving Record Nutrient Consumption Brazil Soybean Gross Margin Percentage Brazil Potash ImportsPercent Million Tonnes KCl60 1.20 2011 201250 1.0040 0.803020 0.6010 0.40 0 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 0.20-10-20 0.00 Jan Mar May Jul Sept Nov Source: Safras and Mercado, ANDA, PotashCorp
  12. 12. China Market UpdateConsumption Levels Increasing But Significant Agronomic Need Remains Potash Fertilizer Consumption Fertilizer Application Rates for CornMillion Tonnes K20 Pounds/acre N P2O5 K2O 25076 2005 15043 1002 5010 0 2002 2004 2006 2008 2010 2012F US China Source: Fertecon, IFA, USDA, PotashCorp
  13. 13. India Fertilizer Market Situation Existing Subsidy System Affecting Demand, Inventories and Application Imbalance Potash Consumption and Fertility Imbalance Estimated Year-end InventoryMillion Tonnes of K20 N:K Ratio Millions Tonnes of KCL4.0 Potash Fertilizer Consumption N:K Ratio 9 1.43.5 8 1.2 73.0 1.0 62.5 5 0.82.0 4 0.61.5 3 0.41.0 20.5 0.2 10.0 0 0.0 2002 2004 2006 2008 2010 2012F 2011 2012F Source: Fertecon, CRU, FAI, PotashCorp
  14. 14. Other Asia Market UpdateStrong Consumption Expected to Pull Year-end Inventories Lower Potash Consumption Estimated Year-end InventoryMillion Tonnes K20 Millions Tonnes of KCL5 1.8 1.64 1.4 1.23 1.0 0.82 0.6 0.41 0.20 0.0 2002 2004 2006 2008 2010 2012F 2011 2012F Source: Fertecon, FMB
  15. 15. Our Opportunity and Potential
  16. 16. World Potash ShipmentsLong-term Trend Supports Rising Demand Million Tonnes KCl 70 60 50 40 30 20 10 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012F 2014F 2016F Future growth scenarios based on long-term trend of approximately three percent CAGR Source: Fertecon, PotashCorp
  17. 17. Global Potash Operational Capability Changes*PotashCorp Represents Majority of New Capability Coming Online Million Tonnes KCl 6 POT Other NA Other 5 4 3 2 1 0 2013F 2014F 2015F 2016F * Estimated annual achievable production level from existing operations; announced probable and possible projects; assuming typical ramp-up periods for new capacity. Probable and possible projects based on PotashCorp’s view of project probabilities. ** Global operational capability for 2012 is estimated at approximately 62-63mmt Source: Fertecon, CRU, Public Filings, PotashCorp
  18. 18. Phosphate Product Pricing and Product Mix Exposure to Industrial and Feed Products Providing Greater Stability PotashCorp Average Realized Sales Price 2012 YTD Product Mix US$/tonne Industrial & Feed Fertilizer Fertilizer Feed & Industrial800 100% 90%700 80%600 70%500 60%400 50%300 40% 30%200 20%100 10% 0 0% Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11 Q1-12 Q3-12 PotashCorp Mosaic* As of October 30, 2012 * Mosaic’s percentage based on last three fiscal quarter’s feed sales volume relative to total phosphate sales volume. Source: IPNI, DTN, USDA, Bloomberg, PotashCorp, Company Filings
  19. 19. PotashCorp Annual Ammonia CapacityIncreasing Capacity in 2012 and 2013 Will Add Gross Margin Potential Million Tonnes 4.5 Trinidad Augusta Lima Geismar 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2011 2012F 2013F As of October 30, 2012 Source: PotashCorp
  20. 20. Nitrogen Product Pricing and Product Mix PotashCorp Benefiting From Current Ammonia Pricing Spot Price 2012 YTD Nitrogen Product Mix US$/tonne Ammonia Urea Solutions/NA/AN Urea (FOB NOLA) Ammonia (CFR Tampa)800700600 37%500 40%400300200100 23% 0 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 As of October 30, 2012 Source: IPNI, DTN, USDA, Bloomberg, PotashCorp
  21. 21. Cash Flow Opportunity
  22. 22. Cash Flow From Operating Activities* (Q3 YTD)Generating Strong Operating Cash Flow Despite Lower Potash Sales US$ Millions 3,000 2,500 2,000 1,500 1,000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 As of October 30, 2012 * See selected Non-IFRS Financial Measures and Reconciliations in our 10-Q at www.potashcorp.com Source: PotashCorp
  23. 23. PotashCorp Capital SpendingMajor Potash Expansion Program Over 80 Percent Complete US$ Millions 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 Source: PotashCorp
  24. 24. Future Cash Flow PrioritiesFocused on Using Free Cash Flow to Drive Long-Term Shareholder Value2012 2013 2014 2015 2016 Potential: Dividend Increases / Share Buybacks / M&A Potash Projects (announced brownfields) Nitrogen Projects (announced brownfields) Source: PotashCorp
  25. 25. PotashCorp Dividend Per Share*Dividend More Than Six-Times That of January 2011 Level US$ Per Share $0.25 $0.21 $0.20 $0.15 $0.14 $0.14 $0.10 $0.07 $0.07 $0.07 $0.07 $0.05 $0.03 $0.00 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 * Dividends declared each quarter As of October 30, 2012 Source: Bloomberg
  26. 26. Historical Cash Flow DeploymentFocused on Using Free Cash Flow to Drive Long-Term Shareholder Value Equity Investments Opportunity Capital $7.6 Billion since 2003 $2.0 Billion since 1998 Current Market Value2 = $8.9 billion 5-Year Average CFR1 = 24.3% Contributions from Investments3 = $2.2 billion Share Repurchases Dividend Payments $6.3 Billion since 1999 $1.2 Billion since 2002 Average purchase price = $26/share Now 6x higher than January 2011 dividend Current share price2 = $39/share 1 CFR = Cash Flow Return (see selected Non-IFRS Financial Measures and Reconciliations in our Annual Report available at www.potashcorp.com) 2 As at November 12, 2012 3 Proceeds from investments include dividends and share of equity earnings from original purchase date to Sept 30, 2012 Source: PotashCorp
  27. 27. Thank youThere’s more online: PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter

×