Bank of America Merrill Lynch Global Agriculture Conference - Jochen Tilk President & CEO
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Bank of America Merrill Lynch Global Agriculture Conference Jochen Tilk President & CEO
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 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
predict. The results or events set forth in forward-looking
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 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; changes in competitive pressures, including pricing pressures; costs and availability
of transportation and distribution for our raw materials and products, including railcars and ocean freight; risks and uncertainties related to
operating and workforce changes made in response to our industry and the markets we serve; risks and uncertainties related to our international
operations and assets; failure to prevent or respond to a major safety incident; 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; risks
associated with natural gas and other hedging activities; changes in capital markets; unexpected or adverse weather conditions; catastrophic
events or malicious acts, including terrorism; changes in currency and exchange rates; imprecision in reserve estimates; adverse developments
in new and pending legal proceedings or government investigations; our prospects to reinvest capital in strategic opportunities and acquisitions;
our ownership of non–controlling equity interests in other companies; the impact of further technological innovation; increases in the price or
reduced availability of the raw materials that we use; security risks related to our information technology systems; 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
p
expenditures; ; changes
g in,, and the effects of,, government
g policies
p and regulations;
g ; certain complications
p that may
y arise in our mining
gpprocess,,
including water inflows; our ability to attract, retain, develop and engage skilled employees; 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, 2014 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. As a result of these and other factors,
there is no assurance that any of the events, circumstances or results anticipated by forward-looking statements included in this presentation will
occur or, if they do, of what impact they will have on our business, our performance, the results of our operations and our financial condition.
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
PotashCorp Overview
1
Bank of America Merrill Lynch Global Agriculture Conference
PotashCorp Overview
World’s largest fertilizer producer by capacity; Canadian p
potash operations
p and strategic
g offshore
#1 in potash and among the largest in nitrogen investments position us to benefit from growth
and phosphate. markets.
World-class nitrogen and phosphate businesses
Potash advantages include high margins and
focused on historically more stable feed and
significant barriers to entry.
industrial markets.
Slide#4
Strategic Focus
Positioning for growth, while remaining low cost:
• Nearly complete CDN$8.4B expansion program, providing significant opportunity for future growth
Potash • Operational capability for 2015 (10.9mmt) aligned with near-term demand + flexibility to meet surges
• Lower-cost producer; achieved $17/tonne* reduction in 2014 with further cost savings expected by 2016
Optimizing existing operations:
Nitrogen • Focused on improving operational reliability
• Phase one of Lima expansion finished; working towards completion in late 2015
Improving gross margin opportunity:
Phosphate • Focused on improving operational reliability
• Margin improvement opportunities identified and being implemented
Maximizing shareholder value:
Investments • Significant cash flow generation potential ($2.6B** in 2014)
& Capital • Current dividend yield of more than 4%, including increase of ~9 percent in January 2015
Allocation
• Reviewing capital allocation strategy, including assessment of equity investments and other opportunities
* Cash cost savings per tonne, excluding foreign exchange and royalty impacts
* * Cash flow from operating activities
Source: PotashCorp
Slide#5
2
Bank of America Merrill Lynch Global Agriculture Conference
PotashCorp Earnings Profile
Growth Expected to be Driven by Potash
Earnings Per Share Gross Margin Breakdown Gross Margin %
US$ Percentage Net Sales – 5 Year Avg.
4 70
60 63%
3
50
42%
2015F* 40
58% 41%
2
30
20
1 21%
Potash 10
Nitrogen & Phosphate
0 0
2007 2009 2011 2013 2015F Potash Nitrogen Phosphate
*Assumes midpoint of gross margin guidance ranges for
potash and nitrogen/phosphate
Source: PotashCorp
Slide#6
Nutrient Highlights and Other Opportunities
3
Bank of America Merrill Lynch Global Agriculture Conference
World Potash Production and Demand
Strong Demand Growth in 2014; Supply a Constraint
Million Tonnes KCl
2014 Highlights
80 Shi
Shipments
t Shi
Shipment
t Range*
R * P d ti
Production
1 Strong demand growth
1.
70 • Agronomics and affordability drive consumption
growth in key markets
60 • Distributor inventories replenished in certain markets
from very low levels at the beginning of 2014
50
• Global shipments reach record level of >61mmt
40 2.
2 Supply constraints emerge
• Operating capability, not demand, appeared to be the
30
constraining factor in 2014
20 • Global production of ~60mmt reflected operating
challenges for a number of producers
10 • Operating capability expected to increase only
modestly in 2015 as increases in Canada partially
0 offset by estimated curtailments in Russia and US
1999 2003 2007 2011 2015F 2019F
• Producer inventories also at low levels
* Midpoint of forecast shipment range based on ~2.5% annualized demand growth rate (1999-2019F).
Source: Fertecon, CRU, IFA, PotashCorp
Slide#8
Potash Market Outlook
2015 Demand Expected to Remain Strong; PotashCorp Well Positioned To Respond
2014 2015F PotashCorp Opportunities
Market (mmt – KCl) (mmt – KCl)
1 Increased operational flexibility
1.
North America 10.7 9.5 - 10.0 • POT shipments estimated at 9.2-9.7mmt
• Increased operational capability to 10.9mmt
Latin America 11.5 10.8 - 11.3 (+1.9mmt) to meet potential surges in demand
• New Brunswick facility ramping up; enhanced
flexibility to serve Latin and North American markets
Other Asia 8.8 8.3 - 8.7
2 North American distribution capability
1.
• Increasing PCS Sales railcar fleet to better serve
China 13.7 12.5 - 13.0
North American market
• Completing new 120K ton warehouse at the
India 4.4 4.5 - 4.8 Hammond, Indiana distribution facility
1.
3 Canpotex well
well-positioned
positioned
Other 12.8 12.5 - 13.0 • Supply challenges in other regions present
opportunities for growth
Total 61.9 58-60 • New MOU in China allows for customer growth and
diversity
• Expanding port facility in Portland to increase future
shipping capability
Source: Fertecon, CRU, Industry Publications, PotashCorp
Slide#9
4
Bank of America Merrill Lynch Global Agriculture Conference
PotashCorp Operational Capability
Focused on Aligning Operational Capability with Demand Growth
Million tonnes KCl Incremental Capability
20
3 11. Rocanville
2
• Tonnes:+2.7mmt
16 17.2 • Timeframe: Planned ramp-up by 2016
1 • Capital: Within project estimates
12
22. Other SK Mines
• Tonnes: +2.9mmt
10.9
• Timeframe: 3-12 months (from decision point)
8 • Capital: Minimal (
Regional Ammonia Profile
Production Outages in Key Regions Impacted 2014; Factor to Watch in 2015
Million Tonnes - NH3 (2014)
2015 Highlights
7
Production 1 Potential for fewer supply related outages
1.
6 Curtailed Capacity • Regional production issues expected to persist
5 • Lower energy prices could lead to increased
production in Europe and South East Asia
4 2 US production expected to remain advantaged
2.
• Lower gas costs expected to persist for medium term
3
• Transportation challenges and costs of ammonia
exports expected to help insulate US market
2
3 Trinidad gas challenges
3.
1
• Unlikely to improve significantly from 2014 levels
0 • Potential for new gas fields to come online as year
Ukraine Trinidad Pakistan Egypt Algeria Libya progresses
Source: PotashCorp
Slide#12
Ammonia Production
Focused on Reliability, Trinidad Gas Position and Disciplined Growth Opportunities
Million Tonnes Operational Priorities
5.0
1 Focus on operational reliability
1.
• Achieved record sales in 2014 driven by high
4.0 operating rates; working to further enhance
2 Improve Trinidad gas situation
2.
3.0 • Gas availability has limited ammonia production in
recent years and is expected to impact 2015;
working to minimize future impacts
2.0
3.
3 Successful execution of Lima expansion
• On time and budget; expect incremental 100Kmt of
1.0 ammonia capacity for 2016
4 Assess other US opportunities
1.
0.0 • Reviewing other high-IRR brownfield projects;
2014 2015F Lima Trinidad Existing
Expansion Gas Potential exploring other low-cost opportunities
(2016F) (Longer-term)
Source: PotashCorp
Slide#13
6
Bank of America Merrill Lynch Global Agriculture Conference
Phosphate Industry Production Profile
PotashCorp Production Significantly More Diverse
Global Phosphoric Acid Use* (2014) PotashCorp Sales By Category** (2015F)
Feed &
Industrial
10%
Feed &
Industrial
39%
61% Fertilizer
90%
Fertilizer
* Based on phosphoric acid directed to each product category ** Based on PotashCorp forecasted sales volumes
Source: CRU, IFA, PotashCorp
Slide#14
Phosphate Gross Margin
Focused on Reducing Costs and Leveraging Production Flexibility
US$ - Per Tonne 2015 Highlights
350
1 Optimizing product mix
1.
300
• Plan to increase proportion of sales volumes to feed
and industrial products in 2015
250
• Feed and industrial gross margin premium of 77%
relative to fertilizer (five-year average)
200
2 Operational improvements progressing
2.
150 • Improved mining conditions and recovery techniques
at Aurora expected to help reduce rock costs
100 • Process enhancements and procurement initiatives
expected to improve reliability and costs
50 3 Non-routine costs expected to be lower
3.
• Accelerated
A l t dd depreciation
i ti off ~$48M
$48M related
l t d tto
0 Suwannee River chemical plant taken in 2014
2013 GM ARO* & Suwannee Other 2014 GM
Water Closure Factors • Significant ARO charges in 2014 due to changing
Treatment interest rate and asset life expectations
* Asset retirement obligations
Source: PotashCorp
Slide#15
7
Bank of America Merrill Lynch Global Agriculture Conference
PotashCorp’s Opportunity
Capital Spending Declining; Dividend Increased ~9 Percent in January 2015
PotashCorp Capital Spending* Dividend Yield
US$ Billions Percent Yield***
25
2.5 5%
4.1%
2.0 4%
1.5 3% 2.9%
2.0% 1.9%
1.0 2%
0.5 1%
0 0%
0.0%
0.0 0%
2008 2010 2012 2014 2016E 2018E
POT AGU CF MOS IPI
Current Estimate**
* Cash additions to property, plant and equipment per cash flow statement (2008-2014); 2015F-2018E includes Major Repairs and Maintenance expenditures. As we
adopted International Financial Reporting Standards (IFRS) with effect from January 1, 2010, information from 2008-2009 is presented on a previous Canadian generally
accepted accounting principals (GAAP) basis. Accordingly, previous results may not be comparable to 2010 forward.
** Includes sustaining capital estimates and current remaining spending on existing opportunity projects
*** Indicated yield percentage as per Bloomberg at February 19, 2015.
Source: PotashCorp
Slide#16
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
8
Bank of America Merrill Lynch Global Agriculture ConferenceLooking For More Industry and Company Information?
Try Our Overview Site: www.potashcorp.com/overview
Explore our Key Markets… Find Data on Key Crops… Learn about our Company
9
Bank of America Merrill Lynch Global Agriculture ConferenceYou can also read
