PotashCorp - 2013 Q1 Earnings


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PotashCorp - 2013 Q1 Earnings

  1. 1. PotashCorp.comQ1 2013ConferenceCallApril 25, 2013
  2. 2. Slide#2This 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 currently available, theymay prove to be incorrect. Several factors could cause actual results or events to differ materially from those expressed inthe forward-looking statements, including, but not limited to the following: 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; costsand 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 incredit and financial markets; the results of sales contract negotiations within major markets; economic and politicaluncertainty around the world; timing and impact of capital expenditures; risks associated with natural gas and other hedgingactivities; 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; adversedevelopments in new and pending legal proceedings or government investigations; acquisitions we may undertake; strikesor 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; andearnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates. Additionalrisks 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 ExchangeCommission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the dateof this release and the company disclaims any obligation to update or revise the forward-looking statements, whether as aresult of new information, future events or otherwise, except as required by law.Forward-looking Statements
  3. 3. Slide#3First-Quarter 2013 Highlights• Earnings of $0.63 per share1; exceeding the $0.56 per share earned in 2012• Gross margin of $0.9 billion; second-highest first-quarter total• Potash sales volume of 2.2 million tonnes – well above volumes in Q1 2012• Record first-quarter nitrogen gross margin of $271 million• Market value of investments $8.5 billion, or $10 per PotashCorp share21All references to per-share amounts pertain to diluted net income per share2As of market close on April 24, 2013Source: PotashCorp
  4. 4. Slide#4Gross Margin Increases Primarily on Strength in Potash SegmentQuarterly Gross Margin ComparisonPotash Highlights:• Strong demand in North America and offshore,particularly Brazil and China• Lower realizations following a reset of prices in late 2012• Lower costs due to increased production and absence ofhigher-cost Esterhazy tonnageNitrogen Highlights:• Strong demand coupled with supply challenges in keyproducing regions supported higher ammonia prices• Higher sales volumes due to Augusta expansion,Geismar restart and reduced Trinidad gas curtailmentsPhosphate Highlights:• Weaker prices, primarily for fertilizer productsSource: PotashCorp
  5. 5. Slide#52013F refers to the 2013/14 crop year. Consumption forecast based on historical trend line growth.Million TonnesWorld Grain and Oilseed Supply/DemandNeed For Historically Large Production Increase to Avoid Further ShortfallSource: USDA, PotashCorp2013 Production GrowthRate Scenarios6% (~ 3X Historical Growth Rate)4% (~ 2X Historical Growth Rate)
  6. 6. Slide#6Price Index (2010 Average = 100)Crop and Fertilizer Price RelationshipSignificant Economic Incentive for Increased Fertilizer UsageSource: Bloomberg, PotashCorp* Based on corn, soybean and wheat prices (weighted by global consumption)** Based on urea, DAP and KCl prices (weighted by global consumption)
  7. 7. Slide#7Source: Fertecon, CRU, Industry Publications, PotashCorpMillion Tonnes KClWorld Potash DemandConsumption Expected to Drive 2013 ShipmentsMarket 2012 2013FChina 10.6 ~11.5India 3.5 ~4.0Other Asia 7.5 ~8.3Latin America 9.5 ~10.2North America 7.9 ~9.5Other 12.0 ~12.5Total 51.0 55-57Estimated Shipments by Market**(million tonnes)* 2013F based on midpoint of estimated global shipment range** Estimates per PotashCorp
  8. 8. Source: PotashCorpAmmonia Capacity*Benefiting from Ammonia; New Capacity Adds Margin PotentialPotashCorp Nitrogen Profile2013 YTD Nitrogen Product Mix (Sales Volume)Million Tonnes$190 million expansion of our Lima, OH ammonia (+88,000 short tons/year)and urea capacity (+80,000 short tons/year) expected to be complete by late 2015Slide#8* All estimated capacity amounts as at beginning of year
  9. 9. Source: PotashCorp, Company FilingsPotashCorp Average Realized Sales PriceIndustrial and Feed Products Enhance Stability in PhosphatePotashCorp Phosphate ProfilePhosphate Product Mix (Sales Volume)US$/tonne* Based on 2013 YTD sales volumes** Mosaic’s percentage based on feed sales volume relative to total phosphatesales volume as publicly disclosed for the most recent four fiscal quartersSlide#9
  10. 10. Slide#10Source: Fertecon, CRU, IFA, Company Reports, PotashCorpPositioned to Respond to Expected Potash Demand GrowthPotashCorp’s OpportunityPercentage of New Operational Capability(2012-2016F)*Growth in Global Fertilizer ConsumptionEstimated Annual Increase (2012-2016)Percentage of Global Operational Capability(2016F)** Based on public filings and PotashCorp’s estimates of globaloperational capability
  11. 11. Slide#11Source: AMEC, Company Reports, PotashCorp1New Brunswick cost per tonne based on new 2MMT mine (net addition totals 1.2MMT).2PotashCorp project costs exclude infrastructure outside the plant gate; Assuming US$/CDN$ at par.3Based on 2MMT conventional greenfield mine constructed in Saskatchewan.4 Calculation of IRR assumes: PotashCorp average per tonne capital cost; 4 year construction timeline, 1 year ramp up and no potash production tax on incremental tonnes.US$ per TonneHigher-Cost, Low-Return Greenfield Potash Projects Could Be DeferredPotashCorp’s Opportunity1,231,2,433Internal Rate of Return (IRR) - PercentageEstimated Capital Cost of Greenfield Projects Estimated Return on Brownfield vs GreenfieldNegativeReturnNetback Scenarios
  12. 12. Source: Independent ConsultantsCumulative Industry Capacity Additions - Million Tonnes KClIndustry Consultants have Typically Overstated Capacity AdditionsPotash Capacity Forecast vs Actual AdditionsSlide#12
  13. 13. Slide#132013 Guidance*Second Quarter• Earnings per share: $0.70-$0.85Full Year• Earnings per share: $2.75-$3.25• Potash gross margin: $1.9-$2.4 billion• Potash shipments: 8.5-9.2 million tonnes• Phosphate and nitrogen gross margin: $1.4-$1.7 billion* Guidance as at April 25, 2013Source: PotashCorp
  14. 14. Slide#142013 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• Income from offshore investments***: $370-$400 million• Selling and administrative expenses: $240-$260 million• Finance costs: $100-130 million* Guidance as at April 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 investmentsSource: PotashCorp
  15. 15. There’s more online:PotashCorp.comVisit us onlineFacebook.com/PotashCorpFind us on FacebookTwitter.com/PotashCorpFollow us on TwitterThank you