How Wall Street Views Fertilizer Companies Doug Hoadley Vice President Investor Relations February, 2007

Transcription

1 The Mosaic Company How Wall Street Views Fertilizer Companies Doug Hoadley Vice President Investor Relations February,

2 Questions for Today Who is Wall Street? What is Investor Relations? Where are fertilizer stock prices headed? When will the ethanol cycle end? How does Wall Street determine stock price forecasts? 2

3 Investor Relations: What We Do IR is the interface between the company and the capital markets Stock Price = Company Performance + Management Credibility MISSION: Enhance Mosaic s market valuation and liquidity by: Effectively communicating Mosaic s strategies, objectives, & results to the investment community Providing input from shareholders to management

4 Stock Valuation Stock Price = Financial Performance + Perception Financial Performance (65%-85%) EBITDA Discounted Cash Flow EPS Perception (15%-35%) Management Strength Strategy Vision Growth potential 4

5 Market Capitalization Market Capitalization of Fertilizer stocks versus Selected S&P 500 Stocks Market Capitalization of Fertilizer stocks versus Selected S&P 500 Stocks 238bn 40.1bn 29.7bn 14.9bn 1.2bn 1.6bn 4.3bn 8.9bn TRA CF AGU MOS POT MON DOW MSFT Source:Bloomberg Fertilizer Stocks vs. Broader Stock Market: - Competes for investor attention with many larger, more stable industry groups - Limited liquidity, higher volatility requires higher returns 5 6

6 Fertilizer Companies Value As of January 25, Billion $ POT MOS YARA AGU CF TRA Shareholder Market Cap Debt 6

7 12/27/2006 1/10/2007 1/24/2007 MOS Stock Price Versus Peers Weekly Stock Close Prices Fiscal Year /13/2006 MOS POT AGU YAR-USD DJIA CF Increase/Decrease by % 5/31/2006 6/14/2006 6/28/2006 7/12/2006 7/26/2006 8/9/2006 8/23/2006 9/6/2006 9/20/ /4/ /18/ /1/ /15/ /29/2006

8 MOS Stock Price Versus Peers MOS POT AGU Monthly Stock Close Prices Since Inception 2.3 YAR-USD CF DJIA Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 8

9 Institutional Shareholders Institution Owned Agrium 65% Terra 90% PCS 73% MOS 97% CF 96% 9

10 Wall Street Headlines Recent Wall Street Analyst Headlines Perfect Storm for Corn Biofuels Power Sustained Strength in Fertilizer Speeding on Biofuel POT: Outlook Continues to Improve MOS: Levered to Global Ag Recovery Nitrogen Margins Surge as Rising Prices Decouple from Gas Costs MOS: Esterhazy Uncertainty Trumps Pricing Power 10

11 Why Wall Street Likes Fertilizer Ethanol/High corn prices Ag Cycle up for multi-year period Replacement for Energy as oil prices decline Tight S/D Balances for all 3 Nutrients Fertilizer volumes and price increasing 11

12 Merrill Lynch on Agrium Feb 01 Outlook better than ever The ag economies in Agrium's key markets are all surging from 10-yearhigh corn and/or wheat prices, likely leading to record results Massive but realistic earnings improvement in 2007 We estimate AGU's nitrogen volumes and prices in 2007 to increase 13% and 5% potash volumes should increase by more than 50% in Longer term outlook continues to improve global capacity use near historical peak levels, and will likely increase further during the next several years,. outlook for a multi-year up cycle in global fertilizer demand. 12

13 Wall Street Coverage Company Name MOS POT AGU TRA CF Merrill Lynch Don Carson x x x x JP Morgan Dave Silver x x x x Bank of America Marshall Reid x x x x BMO Capital Markets - Canada Edwin Chee x x x x x Citigroup Brian Yu x x x x x Goldman Sachs Edlain Rodriguez x x x UBS Jaret Anderson x x x x CIBC World Jacob Bout x x National Bank Financial Steve Laciak x x Credit Suisse Bill Young x x Greenwich Consultants Michael Judd x x x x x RBC Capital Markets Fai Lee x x 13

14 Wall Street Recommendations Company # of Analysts Buy Hold Sell Mosaic Potash Corp Agrium CF Industries Terra UAPH

15 Factors to Determine Stock s Value Earnings per Share (EPS) EV/EBITDA Discounted Cash Flow 15

16 EPS Definition Earnings Per Share (EPS) The Portion of a Company's Profit Allocated to Each Outstanding Share of Common Stock. To Calculate: Divide Net Earnings by the number of Outstanding Shares of Common Stock 16

17 EPS for Fertilizer Companies Company Earnings Shares EPS Agrium CF Mosaic Potash Corp Terra

18 Price Earnings Ratio 2007 Company Share Price EPS P/E Ratio Agrium CF Mosaic Potash Corp Terra

19 EBITDA Definition Earnings Before Interest Taxes Depreciation Amortization Cash Flow Proxy 19

20 EV Definition Enterprise Value (EV) An indication of how the market attributes value to a firm as a whole. To Calculate: Take the company s Market Capitalization (share price multiplied by outstanding shares) Add Debt (both long and short-term) And Subtract Cash and Investments 20

21 EV / EBITDA Ratio Company EV EBITDA EV/EBITDA Agrium 4, CF 1, Mosaic 11, Potash Corp 16,617 1, Terra 1,

22 Implied Valuation by Nutrient* EV/EBITDA Potash 13.0 Phosphate 7.0 Nitrogen 5.0 Retail 8.0 *Estimated nutrient value from company segment analysis 22

23 Mosaic Investor Concerns Phosphates Long Term Outlook (Saudi Project) 2007 Canpotex China Contract Brazil Outlook Ammonia Vulnerability Cash Flow Cargill s Ownership Intentions 23

24 Top Shareholders The Mosaic Company Top 20 Shareholders Rank Investor Name % of Float 24 Current Position Trend Turnover 1 Cargill, Inc. 285,759,772 Even Low 2 Hotchkis and Wiley Capital Management, LLC 12% 18,699,300 Increase Mod 3 Lord, Abbett & Co. LLC 11% 17,007,348 Decrease Mod 4 Fidelity Management & Research (US) 10% 15,862,212 Increase Mod 5 Orbis Investment Management Ltd. 7% 11,383,700 Increase High 6 Capital Research & Management Co. 7% 10,500,000 Increase Low 7 NWQ Investment Management Company, LLC 5% 8,027,537 Decrease Mod 8 Simplot (J R) 4% 6,557,500 Even Low 9 Shapiro Capital Management LLC 4% 5,950,108 Increase Mod 10 Sound Shore Management, Inc. 3% 4,337,484 Decrease Mod 11 ICC Capital Management, Inc. 2% 3,735,675 Even Low 12 SinoChem 2% 2,885,345 Increase Low 13 Barclays Global Investors, NA 2% 2,863,776 High High 14 Perkins, Wolf, McDonnell & Company, LLC 2% 2,738,582 Increase Low 15 Vanguard Group, Inc. 2% 2,731,090 Decrease High 16 Valley Forge Asset Management Corp. 2% 2,370,419 Even Mod 17 Water Street Capital, Inc. 1% 2,053,800 Increase Mod 18 OppenheimerFunds, Inc. 1% 1,830,142 Decrease Mod 19 Jennison Associates LLC 1% 1,814,000 Increase Mod Total 80%

25 Significant increases in corn used for ethanol Bil Bu U.S. Corn Used for Fuel Ethanol Production Source: USDA and Mosaic Crop Year Beginning September 1 Actual/Estimate Forecast Percent of Crop 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Each gallon of ethanol requires more than one-third of a bushel of corn (or one bushel of corn currently yields about 2.8 gallons of ethanol). So, the recent jump in ethanol output has required more bushels and a larger percentage of the U.S. corn crop. For example, corn used for ethanol production has increased from 700 million bushels in 2001/02 to a projected 2.2 billion bushels during the current crop year. The percentage of the corn crop ground into ethanol has increased from seven percent just five years ago to 20 percent in 2006/07. If forecasts for ethanol production are on target, corn processed into ethanol will increase about 900 million bushels to more than three billion bushels in 2007/08 and then climb to 5.5 billion bushels by 2014/15 and account for more than 35 percent of projected U.S. corn production. 25