Mosaic Company (The) (MOS)

MOS 
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The Mosaic (MOS)

Q4 2011 Earnings Call

July 19, 2011 10:00 am ET

Executives

James Prokopanko - Chief Executive Officer, President, Director and Member of Executive Committee

James O'Rourke - Executive Vice President of Operations

Laura Gagnon - VP, IR

Lawrence Stranghoener - Chief Financial Officer and Executive Vice President

Michael Rahm -

Analysts

Lindsay Drucker Mann - Goldman Sachs

Horst Hueniken - Stifel, Nicolaus & Co., Inc.

Ben Isaacson - Scotia Capital Inc.

Vincent Andrews - Morgan Stanley

David Begleiter - Deutsche Bank AG

Elaine Yip - Crédit Suisse AG

Donald Carson - Susquehanna Financial Group, LLLP

Jeffrey Zekauskas - JP Morgan Chase & Co

Mark Connelly - Credit Agricole Securities (USA) Inc.

David Silver - BofA Merrill Lynch

Mark Gulley - Ticonderoga Securities LLC

Edlain Rodriguez - Gleacher & Company, Inc.

P.J. Juvekar - Citigroup Inc

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Mosaic Company's Fiscal 2011 Fourth Quarter Earnings Conference Call. [Operator Instructions] Your host for today's call is Laura Gagnon, Vice President, Investor Relations of the Mosaic Company. Ms. Gagnon?

Laura Gagnon

Thank you, and welcome to our fourth quarter earnings call. With us today are Jim Prokopanko, President and Chief Executive Officer; and Larry Stranghoener, Executive Vice President and Chief Financial Officer; and other members of the senior leadership team. After my introductory comments, Jim will share our views on the market followed by a discussion on Mosaic's strong positioning and initiatives that allow us to capitalize on the opportunities presented. Then, Larry will summarize our fourth quarter results and financial guidance.

The presentation slides we are using during the call are available on our website at mosaicco.com.

We will be making forward-looking statements during this conference call. These statements include, but are not limited to, statements about future financial and operating results. They are based upon management’s beliefs and expectations as of today’s date, July 19, 2011, and are subject to significant risks and uncertainties.

Actual results may differ materially from those projected in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release issued yesterday and in our reports filed with the Securities and Exchange Commission.

Now I'd like to turn it over to Jim.

James Prokopanko

Thanks, Laura, and welcome, all. Over the 30 years of my career in agriculture, the visibility, understanding and appreciation for what this industry provides to the world has increased dramatically.

Fiscal 2011 marks the highest net earnings in the history of Mosaic. Our performance in fiscal 2011 clearly demonstrated our company-wide commitment to success. For Mosaic, 2011 was a year of progress on many fronts as we continued investing to maintain our industry-leading stature, aggressively pursued operational excellence initiatives and positioned ourselves to enhance our shareholder value through strong cash generation and efficient capital allocation.

We capped off the year with one of the most dramatic changes since the founding of the company with the exit of Cargill as a majority shareholder. Though there are still steps to complete, we believe the additional flexibility this transaction provides will allow us to maximize the value of this business and lead to higher returns for shareholders.

Moving to Slide 4. As we look ahead to fiscal 2012 and beyond, we see a fabulous long-term story. In spite of the ups and downs of commodity markets, the food security challenge is not going away. The crop nutrients we provide are a vital ingredient required to help meet the world's growing demand for grains and oilseeds. Over the past few months, agricultural markets have been very volatile.

We expect grain and oilseed markets to remain tight and highly sensitive to weather and political developments. Our overall assessment for agriculture commodities is for greater upside pricing than downside. In spite of this near-term volatility, the long-term trends hold. The world requires record yields and harvested area to maintain inventories at secure levels.

Crop nutrients are necessary to the deliver the required yields. And as a result, we see continued strong demand for crop nutrients for this foreseeable future. In the near term, we expect very good North American fall application and South American spring planting seasons. We are essentially sold out of potash and phosphate for the next several months.

For Potash, we estimate global MOP shipments will climb to a record 55 million to 58 million tonnes in calendar 2011. Shipments are forecast to grow to between 70 million and 73 million tonnes by 2020 or 3% to 3.5% annually. Even with significant brownfield expansion tonnes expected to come online over the next 10 years, we expect demand growth to absorb the additional supply resulting in historically high global operating rates.

We estimate global phosphate shipments will reach a record 60 million to 62 million tonnes in calendar 2011. Over the next decade, phosphate shipments are expected to grow to between 75 million and 79 million tonnes by 2020 or 2.5% to 3% annually.

In Phosphate, several factors have served to strengthen the market. The implementation of a new export tariff regime in China has reduced exports significantly below last year's level. In addition, political uncertainty has reduced supplies from Tunisia and Syria, and the market is watching how quickly Ma'aden ramps up production.

Challenges at our South Fort Meade mine add additional supply concerns. These near-term uncertainties reinforce the need for additional supply to meet long-term demand growth. Our projections indicate global operating rates over the next decade will increase slightly and remain at healthy levels.

Key growth regions for crop nutrients demand will continue to be Asia and Latin America, especially China, India and Brazil. To meet these projected increases, potash and phosphate producers will need to produce at high rates and deliver significant new capacity.

Read the rest of this transcript for free on seekingalpha.com