5 crucial things the mosaic company management wants you to know
TRANSCRIPT
5 Crucial Things The Mosaic Company Management Wants
You to Know
Image source: The Mosaic Company
#1 Outlook for 2016
Upbeat about nutrient markets
despite headwinds
Source: Mosaic
What management said “Unlike hard commodities, we do not see a
structural imbalance in agriculture. So we have a positive outlook for the 2016 global shipments in both potash and phosphates.”
CEO and President, James O’Rourke
Shipments forecast
Source: Mosaic Investor Presentation, February 2016
Why the optimismMosaic projects record global phosphate but
lower potash shipments in 2016. PotashCorp is more optimistic, projecting potash shipments to be down 2% to up 3% this year.
Factors driving demand: The need to replenish soils with nutrientsGreater affordability for farmers because of lower
fertilizer pricesLow energy (input) costs
#2 Strong operational performance
Growth on track despite challenges
What management said “It is important to note that Mosaic
remains solidly profitable and free cash flow positive despite the very tough markets.”
James O’Rourke
Growing profits in challenging times
Source: Mosaic Investor Presentation, February 2016
Key statistics for 2015
Net income: $1 billionOperating cash flow: $1.8 billionFree cash flow: 800 millionCash and cash equivalent: $1.3 billionDebt-to-equity ratio: 40%
#3 Maintaining margins
Aggressive cost cutting underway
Photo credit: www.gotcredit.com
What management said “We are well ahead of schedule on our
initiative to generate $500 million of cost savings by 2018. For the full year, we expect margins to be similar to last year.”
James O’Rourke
Efforts paying offCost savings in 2015:
Potash cash cost of production declined 16% per tonne Phosphate rock cash production cost hit near five-year
lowsSelling, general, and administrative expenses declined
6%
In 2015, Mosaic’s gross and operating margins were 19% and 14%, respectively.
#4 A smart move
CF phosphate acquisition a success
Source: Mosaic Analyst Day Presentation, March 2015
What management said “The CF phosphate acquisition has
exceeded our expectations. Those facilities generated excellent margins for the first 18 months we owned them.”
James O’Rourke
Adding value to Mosaic Mosaic acquired CF
Industries’ phosphate business for $1.4 billion in 2014.
Thanks to the acquisition, Mosaic’s phosphate sales volumes increased to 9.4 million tonnes in 2015 from 8.3 million tonnes in 2013.
#5 Regarding capital allocation
Balancing growth with shareholder returns
Photo credit: LendingMemo.com
What management said “[W]e will continue to balance between
repurchasing our shares and looking for opportunities out there, and if there is something that is extraordinarily compelling it's something that we could act on.”
Richard Mack, Executive Vice President and CFO
A balanced approach
*2013 through 2015. Source: Mosaic Investor Presentation, February 2016
Rewarding shareholders Mosaic increased its annual dividend by
10% and repurchased shares worth $698 million in 2015.
Management is confident that strong cash flows should enable it to pay “reasonable and fair” dividend while balancing repurchases and growth opportunities going forward.
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