PotashCorp - 2014 Q1 Earnings


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PotashCorp - 2014 Q1 Earnings

  1. 1. PotashCorp.com Q1 2014 Conference Call April 24, 2014
  2. 2. 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 often contain words such as “should,” “could,” “expect,” “may,” “anticipate,” “believe,” “intend,” “estimates,” “plans” and similar expressions. 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; risks and uncertainties related to operating and workforce changes made in response to our industry and the markets we serve; changes in competitive pressures, including pricing pressures; risks and uncertainties related to our international operations and assets; 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; adverse or uncertain economic conditions and changes in credit and financial markets; the results of sales contract negotiations within major markets; unexpected geological or environmental conditions, including water inflows; economic and political uncertainty around the world; risks associated with natural gas and other hedging activities; changes in capital markets; unexpected or adverse weather conditions; changes in currency and exchange rates; imprecision in reserve estimates; adverse developments in new and pending legal proceedings or government investigations; acquisitions we may undertake; increases in the price or reduced availability of the raw materials that we use; strikes or other forms of work stoppage or slowdowns; timing and impact of capital expenditures; rates of return on, and the risks associated with, our investments and capital expenditures; changes in, and the effects of, government policies and regulations; security risks related to our information technology systems; risks related to reputational loss; 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, 2013 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 release 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
  3. 3. First-Quarter 2014 Highlights • Earnings of $0.40 per share1; trailed the $0.63 per share earned in 2013 • Notable items in results included: • $69 million special dividend received from ICL ($0.06 per share) • $38 million impairment charge recorded on Sinofert investment ($0.04 per share) • Cash provided by operating activities of $539 million • Repurchased 11.7 million common shares at an average cost of $34 per share • Market value of investments $5.4 billion, or $6 per PotashCorp share2 1 All references to per-share amounts pertain to diluted net income per share 2 As of market close on April 23, 2014 Source: PotashCorp Slide#3
  4. 4. Gross Margin Decrease Due to Lower Prices Across All Nutrients Quarterly Gross Margin Comparison $867 $565 -$204 -$32 -$66 0 100 200 300 400 500 600 700 800 900 1,000 Q1 2013 GM Potash Nitrogen Phosphate Q1 2014 GM US$ Millions Potash Highlights: • Improved potash demand led to slightly higher sales volumes despite ongoing rail constraints • Average realizations were below those of the first quarter last year, reflecting pricing weakness through the second half of 2013 Nitrogen Highlights: • Increased sales volumes and lower per-tonne costs more than offset by decline in average realized prices for all products Phosphate Highlights: • Lower sales volumes and average realized prices for fertilizer products • Weather-related production issues and other accounting charges negatively impacted costs Source: PotashCorp Slide#4
  5. 5. 0 2 4 6 8 10 12 14 16 18 20 Sugar Palm Oil Wheat Corn Soybeans Source: Bloomberg, PotashCorp Agricultural Fundamentals Underlying Support for Robust Fertilizer Demand Slide#5 Percentage Price Change: Jan 1 – Apr 21, 2014 Fertilizer Affordability Index 0 50 100 150 200 250 300 350 400 450 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Crop Price Index* Fertilizer Price Index** * Based on corn, soybean and wheat prices (weighted by global consumption). ** Based on urea, DAP and KCl prices (weighted by global consumption).
  6. 6. Source: Fertecon, CRU, Industry Publications, PotashCorp World Potash Demand Potential for Record or Near-record Global Shipments 2014 Forecast per PotashCorp Slide#6 0 2 4 6 8 10 12 14 China India Other Asia Latin America North America 2013 2014F Record Million Tonnes KCl Potash Shipments by Major Market Global Potash Shipments by Half 10 15 20 25 30 1H 2012 1H 2013 1H 2014F 2H 2012 2H 2013 2H 2014F Million Tonnes KCl
  7. 7. Source: Fertecon, CRU, PotashCorp 50 55 60 65 70 75 80 85 90 95 100 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014F Percent* Expected to Rise on Increased Demand and Reduced Operational Capability Global Potash Operating Rate * Based on percentage of operational capability (estimated annual achievable production level). 2014F based on mid-point of PotashCorp’s demand forecast range of 55-57 MMT. Historical Average (20 year) Slide#7
  8. 8. Source: Fertilizer Week, PotashCorp Select Global Potash Spot Prices Prices Have Strengthened in All Spot Markets Since the End of 2013 Slide#8 0% 2% 4% 6% 8% 10% 12% Potash granular CFR Brazil Potash standard CFR SE Asia Potash granular FOB US Midwest Percentage Change: Jan 1 – Apr 17, 2014 250 300 350 400 450 500 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Brazil CFR (US$/MT) US Midwest Del (US$/ST) SE Asia CFR (US$/MT) US$
  9. 9. 49.2% PotashCorp Other Canpotex Members Source: Company Reports, PotashCorp Increasing Canpotex Entitlement in Second Half PotashCorp’s Opportunity Percentage of Canpotex Entitlement >53% PotashCorp Other Canpotex Members First-half 2014 Second-half 2014 (Estimate)* Slide#9 * Based on PotashCorp preliminary results.
  10. 10. Source: USDA, PotashCorp Potash Further Improvement Expected in Each Nutrient Per-tonne Cost of Goods Sold 0 50 100 150 200 2012 2013 2014F Shaded area refers to forecast range for 2014. US$ per tonne Nitrogen 0 50 100 150 200 250 300 2012 2013 2014F US$ per tonne Phosphate 0 50 100 150 200 250 300 350 400 450 2012 2013 2014F US$ per tonne Slide#10
  11. 11. 2014 Guidance* Second Quarter • Earnings per share: $0.40-$0.45 Full Year • Earnings per share: $1.50-$1.80 • Potash gross margin: $1.1-$1.3 billion • Potash sales volumes: 8.3-8.7 million tonnes • Nitrogen and phosphate gross margin: $1.0-$1.2 billion * Guidance as at April 24, 2014 Source: PotashCorp Slide#11
  12. 12. 2014 Guidance* Full Year • Capital expenditures**: ~$1.1 billion • Annual effective tax rate: 26-28 percent • Provincial mining and other taxes: 16-18 percent of total potash gross margin • Income from offshore investments***: $230-$240 million • Selling and administrative expenses: $225-$235 million • Finance costs: $165-$175 million * Guidance as at April 24, 2014 ** Does not include capitalized interest *** Represents share of earnings in equity-accounted investees and dividend income from available-for-sale investments Source: PotashCorp Slide#12
  13. 13. 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