the mosaic company · 2020. 11. 11. · leverage mosaic's in -country capabilities to drive...
TRANSCRIPT
-
Date:
Analyst Presentation: Chapter 2Mosaic Fertilizantes
November 9, 2020
The Mosaic Company
-
Forward Looking Statements & Non-GAAP Financial MeasuresThis release contains forward-look ing statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statementsabout proposed or pending future transactions or strategic plans and other statements about future financial and operating results. Such statements are based upon the current beliefsand expectations of The Mosaic Company’s management and are subject to significant risks and uncertainties. These risks and uncertainties include, but are not limited to: the economicimpact and operating impacts of the coronavirus (Covid-19) pandemic, the potential drop in oil demand/production and its impact on the availability and price of sulfur, political andeconomic instability in Brazil or changes in government policy in Brazil, such as higher costs associated with the new mining rules or the implementation of new freight tables; thepredictability and volatility of, and customer expectations about, agriculture, fertilizer, raw material, energy and transportation markets that are subject to competitive and other pressuresand economic and credit market conditions; the level of inventories in the distribution channels for crop nutrients; the effect of future product innovations or development of newtechnologies on demand for our products; changes in foreigncurrency and exchange rates; international trade risks and other risks associated with Mosaic’s international operations andthose of joint ventures in which Mosaic participates, including the performance of the Wa’ad Al Shamal Phosphate Company (also known as MWSPC), the timely development andcommencement of operations of production facilities in the Kingdom of Saudi Arabia, and the future success of current plans for MWSPC and any future changes in those plans;difficulties with realization of the benefits of our long term natural gas based pricing ammonia supply agreement with CF Industries, Inc., including the risk that the cost savings initiallyanticipated from the agreement may not be fully realized over its term or that the price of natural gas or ammonia during the term are at levels at which the pricing is disadvantageous toMosaic; customer defaults; the effects of Mosaic’s decisions to exit business operations or locations; changes in government policy; changes in environmental and other governmentalregulation, including expansion of the types and extent of water resources regulated under federal law, carbon taxes or other greenhouse gas regulation, implementation of numericwater quality standards for the discharge of nutrients into Florida waterways or efforts to reduce the flow of excess nutrients into the Mississippi River basin, the Gulf of Mexico orelsewhere; further developments in judicial or administrative proceedings, or complaints that Mosaic’s operations are adversely impacting nearby farms, business operations orproperties; difficulties or delays in receiving, increased costs of or challenges to necessary governmental permits or approvals or increased financial assurance requirements; resolutionof global tax audit activity; the effectiveness of Mosaic’s processes for managing its strategic priorities; adverse weather conditions affecting operations in Central Florida, the MississippiRiver basin, the Gulf Coast of the United States, Canada or Brazil, and including potential hurricanes, excess heat, cold, snow, rainfall or drought; actual costs of various items differingfrom management’s current estimates, including, among others, asset retirement, environmental remediation, reclamation or other environmental regulation, Canadian resources taxesand royalties, or the costs of the MWSPC; reduction of Mosaic’s available cash and liquidity, and increased leverage, due to its use of cash and/or available debt capacity to fundfinancial assurance requirements and strategic investments; brine inflows at Mosaic’s Esterhazy, Saskatchewan, potash mine or other potash shaft mines; other accidents anddisruptions involving Mosaic’s operations, including potential mine fires, floods, explosions, seismic events, sinkholes or releases of hazardous or volatile chemicals; and risksassociated with cyber security, including reputational loss; as well as other risks and uncertainties reported from time to time in The Mosaic Company’s reports filed with the Securitiesand Exchange Commission. Actual results may differ from those set forth in the forward-looking statements.
This presentation includes the discussion of forward look ing EBITDA which is a non-GAAP financial measure. We are not providing quantitative reconciliation of forward look ing EBITDAbecause we are unable to predict with reasonable certainty our notable items without unreasonable effort. Historically, our notable items have included, but are not limited to, foreigncurrency transaction gain or loss, unrealized gain or loss on derivatives, acquisition-related fees, discrete tax items, contingencies and certain other gains or losses. These items areuncertain, depend on various factors, and couldhave a material impact on U.S. GAAP reported results for the guidance period.
2
-
Mosaic’s Strategic Priorities
North AmericaTransformationUncover and pursue new opportunities to improve the profitability and competitiveness of our Potash and Phosphates businesses
Drive Functional Collaboration and EfficiencyRethink and re-engineer outdated and inefficient processes, and continue to look for new ways to improve
South America Growth EngineLeverage Mosaic's in-country capabilities to drive additional growth and profitability
Grow and Strengthen Our Product PortfolioPursue diverse opportunities that make us stronger and that yield mutual benefits for Mosaic and our customers
Act Responsibly
Be a good corporate citizen and contribute to the vitality of the people and the communities around us
Optimize Operating Assets and Capital ManagementContinually assess, prioritize and allocate capital across the business and make decision that strengthen our balance sheet
-
4
North AmericaTransformation
Drive Functional Collaboration and Efficiency
South America Growth Engine
Grow and Strengthen Our Product Portfolio
Act Responsibly
Optimize Operating Assets and Capital Management
September 18, 2020
December 10, 2020
Today
February 25, 2021
-
Importance of Agriculture to Brazil
5
Commodity Global Production Brazil’s
Production Rank
Global Exports
Brazil’s Exports Rank
Fertilizer demand
Soybean 37% 1st 51% 1st 44%
Corn 9% 3rd 9% 2nd 15%
Sugar 16% 2nd 36% 1st 12%*
Ethanol 24% 2nd 28% 2nd 12%*
Coffee 37% 1st 29% 1st 5%
Cotton 11% 4th 20% 2nd 5%
Citrus 58% 1st 72% 1st 1%
Swine 4% 4th 9% 4th
Poultry 14% 2nd 36% 1st
Beef 17% 2nd 20% 1st
Brazil’s Global Position by CommodityAs of 2019
*Sugar and Ethanol combined
-100
-80
-60
-40
-20
0
20
40
60
80
100
20152000 20102005 2019
Brazil’s Trade BalanceUSD billion. As of 2019
AgricultureTotal Others
Source: BACEN, USDA, ANDA, Conab and MDIC
PresenterPresentation NotesBrazilian government encourages the agribusiness:Tax exemptions on products and services exportsConcessions of public railways and ports Infrastructure improvements such as the paving of the BR-163Annual Crop plan with government subsidized interest rates on loans (or credit) to farmers
-
100 97123 119 115 123
132 144 135149
163 166184 194
208 187
238 228242
258 269
Brazil: A Large, Growing Agricultural Market
6
32 34 3741 43 41 39 39 40 39 40 41 42
45 46 45 46 47 47 48 495 67
7 6 7 8 8 8 89 10
1112 12 13 15
14 1617 17
200720042000 2001 20132002 2003 2005 2006
4847
2008 20142009 2010
38
2011 2012
47
2015 2016 2017 2018
49
2019 2020E
40
5447
4448 5046
5157
62 6358 61
66 67
58
Summer Crop 2nd Crop
2.88% CAGR
5.05% CAGR
Source: CONAB
Planted Areamillions of hectares
Grains Productionmillion tonnes
PresenterPresentation NotesTalking points Trade BalanceBrazil’s important contribution to global agribusiness is unquestionable. It is the world’s largest producer and exporter of coffee, sugar, and orange juice, and is highly ranked in the production and export of soybean, corn, ethanol, pork, beef, and poultry chicken, as indicated by the table below. The results harvested today have their roots in colonial times. Today, agribusiness represents ~22% of Brazil’s GDP.Agribusiness exports totaled US$96.8 (R$388) billion last year. That amount represents 43.2 percent of Brazil's total exports, according to the Secretariat of Trade and International Relations of the Ministry of Agriculture, Livestock, and Supply.The data shows the sector's slight growth in the country's total exports. In 2018, its share had been 42.3 percent.The highlight was the trade in corn, meat, and cotton. Corn registered a record export volume, with 43.25 million tons. The previous record had been set in 2017, with 29.25 million tons.
-
Farm Economics Encourage Growth
7Source: CONAB, MBAgro, IMEA, Bacen, BVMF, CME GroupBarter Ratio methodology: Soybean price (CME Group price + premium at the ports) vs fertilizer price (Average MAP + MOP price – CFR Brazil)
810121416182022
Sep-20Jan-18 Sep-18 May-19 Jan-20
Barter RatioNumber of 60kg soybean bags/ 1 tonne of fertilizer
MORE affordable to farmers
100
150
0
200
50
350
250
300
400
450
2000 2005 2010 2015 2020E
Brazil’s Agribusiness RevenueBRL billion
CropsLivestock
0
30
60
90
120
16/17 17/18 19/2018/19
+40
+39
Soy ProfitabilityR$/60kg bags (Rondonopolis – MT)
CostPrice Margin
LESS affordable to farmers
PresenterPresentation NotesBrazil agribusiness has had very good results due to the very affordable ratio between ag commodities prices and ferts prices, bringing in advance the fertilizer purchase and pulling up farmer revenue
-
1618
19
23 23
20 21
2522 23
25
2830
3132
30
34 3436 36
38
200220012000 2003 2016200720062004 2005 2008 2009 2010 2011 2012 2013 2014 2015 2017 2018 2019 2020E
Leading to Strong Fertilizer Market
Historical Brazilian Fertilizer Demand
4.26% CAGR
Million tonnes
8
Potash and phosphate are key nutrients needed for Brazilian crops.Together, they represented 70% of Brazil’s fertilizer consumption in 2019.
Source: ANDA, Agroconsult
-
Fertilizer Demand by Brazilian State
69% of in-country Phosphate production
Only Potash producer in Brazil
24% of Brazilian market access(1)
Mosaic Fertilizantes Leadership
(1)Excludes Paraguay and Animal Feed
-
Fertilizer Demand by Brazilian State
69% of in-country Phosphate production
Only Potash producer in Brazil
24% of Brazilian market access(1)
Mosaic Fertilizantes Leadership
(1)Excludes Paraguay and Animal Feed
-
Overseas Supplier
Local Producers (B2B)
Mosaic Fertilizantes(as of 2019)
Production (B2B) Distribution (B2C)
Fertilizer Animal Feed Gypsum Fertilizer
Sales Volume 2.2 million tonnes(1) 0.5 million tonnes 4.4 million tonnes 6.3 million tonnes(2)
Market Share 6% 47% - 18%
Customers ~50 ~400 ~16 ~5,000
Shipments profile Big Bags: 2%Bulk: 98%Big Bags: 58%
Bulk: 42% Bulk: 100%Big bags: 75%
Bulk: 17%50kg bags: 8%
Product mix by nutrient N 0% P 89% K 11% - N 16% P 54% K 30%
Mosaic Fertilizantes Brazil
11
Brazil’s Fertilizers Market Structure
75%
5%20%
Blenders (B2C)END
USER55%
40% Dealers
(1)Excludes Intercompany volume(2)Includes Mosaic imported fertilizers sales to 3rd Party blenders, excludes Paraguay sales
-
Player Blend Facilities in Brazil Total Shipments (B2B+B2C) Market Access
16 8.5 24%
Yara 24 9.8 27%
Fertipar 18 6.9 19%
Eurochem-FTO* 8 3.3 9%
Heringer** 9 0.7 2%
Others(+100 players)
6.9 19%
Brazilian Competitors with Distribution
12
(1)Excludes Paraguay and Animal Feed(2)Heringer judicial reorganizaiton in 2019 – only active plants
Source: Mosaic estimates and SIACESP. As of 2019
(1) (1)
(2) (2) (2)
PresenterPresentation NotesMosaic, Yara and Fertipar are growing consistently. Tocantins (EuroChem) – plan to grow through acquisition & new construction. Nutrien – international player looking to Brazil and is growing through acquisition. Heringer has partially recovered its volume in 2020.
-
Grow Distribution
13
Platform for best practices
back office
DoubleMicroEssentials Volume to
2 million tonnes
MaximizeAsset Capacity
PursueOpportunities
BuildDigital Markets
Grow Faster Than the Market5-Year Fertilizer Market Growth CAGR ~2%(1)5-year Distribution CAGR target: 5% to 10%
(1)Source: MBAgro
-
Transform Production
14
Increased efficiency through appropriate investment
Selective investment to strengthen core assets, with focus on cash generation
Develop co-products markets
-
Transformation: Continuous Improvement
15
Mosaic Fertilizantes has been successfully using a formalized transformation process across the business over the past three years.
Transformation remains critical to reach 2023 targets.
Ideas Validation Planning Execution Measure
of ideas of ideas executedTHOUSANDS HUNDREDS
Transformation 1.0~$330mm in benefits
Transformation 2.0~$200mm in benefits
-
Mosaic Fertilizantes Transformation Progress
16
$100
$275$158
$330
20192018
Cummulative Target Actual
Transformation 1.0Adjusted EBITDA growth, in $mm
Target: $275mm by 2020Baseline: 2017
$50$120
$200
$100$150
$200
$200
$120
$50
2022E2020E 2021E
$100
$150
$200
Transformation 2.0Adjusted EBITDA growth, in $mm
Target: $200mm by 2022Baseline: 2019
Transformation 1.0 Success:Net annual synergies of $330mm achieved one year ahead of target
Transformation 2.0:New ideas are expected to generate more
than $200mm in synergies until 2022
Latest EstimatesCummulative Target
-
MOSAIC CONFIDENTIAL 17
• Increase production and efficiency at Uberaba through the implementation of advanced process controls and analytics.
Concentrates Process Control
Operations
• Increase mass recovery and reduce rock processing costs through: automation, advanced process control and new mineral processing technologies.
Mine Optimization Mass Recovery
Operations
• Reduce downtime and maintenance using advanced analytics.
Predictive Maintenance
Operations
Fleet and Diesel Management
• System improvements and new software to increase mining fleet efficiency
Operations
Key Initiatives in Progress
-
MOSAIC CONFIDENTIAL
Key Initiatives in Progress
18
• Utilizing a suite of tools to improve margins through quote management, data analytics and pricing guidance utilizing machine learning and artificial intelligence
Price Optimization Project
Commercial
• Lead generation (new customers) and digital marketing
• E-commerce pilot for small customers
Digital Customer Strategy
Commercial
• Improve truck waiting time through digital tools and automating process
Trucks 4.0
Commercial
• Develop BaSiCa product, which on top of incremental revenue, reduces water treatment cost in Uberaba.
• Increase co-products sales (gypsum, fluosilicic acid and sulfuric acid)
New Product/Markets
Commercial
PresenterPresentation NotesPrice Optimization Project - ‘suite of tools’ are:Configure, Price, Quote (CPQ) – standardize the process to calculate prices which should reduce errors, reduce the time to develop a quote and streamlines contract entry in to SAP.Profit Analyzer (PA) – has a series of out-of-the-box ‘algorithms’ that can be applied to the pricing data to identify opportunities to adjust prices to maximize profitability (allows price / volume trade-off analysis) Deal Price Guidance (DPG) – provides ‘suggestions’ on price levels (minimum through maximum price) to the sales team when they are developing the quote utilizing AI and machine learning
-
Phosphate Rock Cost
19
Phosphate Mining ($ in mm) 2020 2021 2022 2023Transformation EBITDA impact $34 $45 $56 $56Other initiatives EBITDA impact - $8 $9 $12Transformation Capex $12 $22 $11 -Other initiatives Capex - $9 $9 $7
Phosphate Rock Costs
2019
3Q2020
2021
2023
R$ 310
R$ 315
R$ 320
R$ 325
R$ 330
R$ 335
2018 2019 2020 2021 2022 2023 2024
Cas
h C
ost p
er T
onne
(R$)
Years
(1) Target as disclosed on 2019 Analyst Day is the same basis as the 2023 target(2) Target as disclosed on 2020 Analyst Presentation Chapter 1
(1)
(2)
PresenterPresentation Notes
-
Phosphate Conversion Cost
20
Phosphate Conversion ($ in mm) 2020 2021 2022 2023Transformation EBITDA impact $50 $67 $84 $84Other initiatives EBITDA impact - $1 $2 $2Transformation Capex $17 $5 $11 -Other initiatives Capex - $4 $4 $3
Phosphate Conversion Costs
2019 3Q2020
2021
2023
R$ 200
R$ 220
R$ 240
R$ 260
R$ 280
R$ 300
R$ 320
R$ 340
R$ 360
2018 2019 2020 2021 2022 2023 2024
Cas
h C
ost p
er T
onne
(R$)
Years
(1)
(2)
(1) Target as disclosed on 2019 Analyst Day is the same basis as the 2023 target.(2) Target as disclosed on 2020 Analyst Presentation Chapter 1
PresenterPresentation Notes
-
Combined Adjusted EBITDA(1) Growth
21
$0
$50
$100
$150
$200
$250
$300
$350
$400
2020 2021 2022 2023
Adjusted EBITDA(1) Benefits from Identified Initiatives*
Others
Distribution Growth
Transformation 2.0 - Others
Transformation 2.0 - Operations
Transformation 2.0 - Commercial
~$230~$220~$160
~$100
$ in millions
Growth CapEx ($ mm) 2021 2022 2023Transformation 2.0 $25 $20 -
Opportunity Growth $15 $15 $10
Total Growth Capex ($ mm) $40 $35 $10(1)See non GAAP financial measures* Relative to the 2019 base year
Foreign exchange rates and inflation
assumptions will impact realized EBITDA.
-
ESG and Issues Management
22
Ensuring tailings dams exceed new state and federal dam regulations
Community investment in Food, Water, Education and Local Development (Mosaic Institute)
ESG agenda reflecting Mosaic’s global priorities, with strong focus on Diversity
COVID-19: Emergency health and food relief to 80+ communities
-
Adjusted EBITDA* Growth
23
$0$100$200$300$400$500$600$700$800$900
$1,000
2020 2021 2022 2023
Expected Increase in EBITDA* from Identified Initiatives
Mosaic FertilizantesNorth America
~$700~$600
~$440
~$275(2)
$ in millions
Growth CapEx ($ mm) 2021 2022 2023North America(1) $215 $115 $70
Mosaic Fertilizantes $40 $35 $10
Total Growth Ex $255 $150 $80
(1) Includes Esterhazy K3 project capital(2) $225 million in prior disclosures on growth from 2019 plus $50 million incremental transformation in Mosaic Fertilizantes* See non GAAP financial measures
-
QUESTIONS?
PresenterPresentation NotesBefore opening for questions, like to thank each of you again for what we have accomplished this year – despite global pandemic and difficult, but improving, market conditions.I know many of you facing tremendous stress in personal lives – trying to balance work, family and health in ways that were unimaginable just 12 months ago. Also recognize that transforming business brings additional layers of change as we reshape who we are, how we operate and how we are organized. Want you to know that I understand and appreciate what you do for Mosaic each and every dayI’m incredibly proud to lead this company and couldn’t ask for a better global team So please accept my thanks, and like all of you, I look forward to a better, brighter future ahead. With that, let’s move to your questions. Sue, do we have any in the queue?
Analyst Presentation: Chapter 2�Mosaic FertilizantesForward Looking Statements & Non-GAAP Financial MeasuresMosaic’s Strategic PrioritiesSeptember 18, 2020Importance of Agriculture to BrazilBrazil: A Large, Growing Agricultural MarketFarm Economics Encourage GrowthLeading to Strong Fertilizer MarketFertilizer Demand by Brazilian StateFertilizer Demand by Brazilian StateMosaic Fertilizantes BrazilBrazilian Competitors with DistributionGrow DistributionTransform ProductionTransformation: Continuous ImprovementMosaic Fertilizantes Transformation ProgressKey Initiatives in ProgressKey Initiatives in ProgressPhosphate Rock CostPhosphate Conversion CostCombined Adjusted EBITDA(1) GrowthESG and Issues ManagementAdjusted EBITDA* GrowthSlide Number 24