PotashCorp - Credit Suisse Basic Materials Conference, September 2014

PotashCorp.com

Credit Suisse ConferenceSeptember 2014

Wayne BrownleeExecutive Vice President & CFO

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. The results or events set forth in 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 the 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; risks and uncertainties related to operating and workforce changes made in response to our industry and the markets we serve; changes in competitive pressures, including pricing pressures; risks and uncertainties related to our international operations and assets; fluctuations in supply and demand in the fertilizer, sulfur, transportation and petrochemical markets; costs and availability of transportation and distribution for our raw materials and products, including railcars and ocean freight; adverse or uncertain economic conditions and changes in credit and financial markets; the results of sales contract negotiations within major markets; unexpected geological or environmental conditions, including water inflows; 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; changes in currency and exchange rates; imprecision in reserve estimates; adverse developments in new and pending legal proceedings or government investigations; acquisitions we may undertake; increases in the price or reduced availability of the raw materials that we use; 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 expenditures; changes in, and the effects of, government policies and regulations; security risks related to our information technology systems; 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, 2013 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. Forward-looking statements are given only as at the date of this release 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.

Forward-looking Statements

Slide#2

PotashCorp Overview

World’s largest fertilizer producer by capacity; #1 in potash and among the largest in nitrogen and phosphate.

Global leader in potash; nutrient with highest margins and significant barriers to entry.

Canadian potash operations and strategic offshore investments position us to benefit from growth markets.

World-class nitrogen and phosphate businesses focused on historically more stable feed and industrial markets.

Slide#3

• Strong cash flow• Cash flow from operating activities of $3.2B in 2013• 94% complete decade-long CDN $8.3B potash expansion program

• Well positioned potash business• Low-cost supplier to key consuming regions

• Operational capability aligned with anticipated near-term demand

• Flexibility to significantly grow future sales volume

• Proven track record of returning capital to shareholders• Dividend increase of 950% since January 2011• Dividend yield of ~4%• Recently completed 5% repurchase authorization (Since 1999: $7.8B or 25%

of o/s)

PotashCorp Highlights

Slide#4

Fertilizer Fundamentals

Jan-

06

Aug-0

6

Mar

-07

Oct-0

7

May

-08

Dec-0

8

Jul-0

9

Mar

-10

Oct-1

0

May

-11

Dec-1

1

Jul-1

2

Feb-1

3

Sep-1

3

May

-14

0

50

100

150

200

250

300

350

400

450Crop Price Index* Fertilizer Price Index**

* Based on corn, soybean and wheat prices (weighted by global consumption).

** Based on urea, DAP and KCl prices (weighted by global consumption).

Price Index (2005 Average = 100)

Economic Incentives Remain in Place To Encourage Strong Consumption

Crop and Fertilizer Price Index

Source: Bloomberg

Jan-

06

Aug-0

6

Mar

-07

Sep-0

7

Apr-0

8

Nov-0

8

Jun-

09

Jan-

10

Aug-1

0

Mar

-11

Oct-1

1

May

-12

Nov-1

2

Jun-

13

Jan-

14

Aug-1

40

50

100

150

200

250

300

350

400

450Crop Price Index* Potash Price Index

Price Index (2005 Average = 100)

Slide#6

Jan-

10

Apr-1

0

Jun-

10

Sep-1

0

Dec-1

0

Mar

-11

May

-11

Aug-1

1

Nov-1

1

Feb-1

2

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Mar

-13

Jun-

13

Sep-1

3

Dec-1

3

Feb-1

4

May

-14

Aug-1

40.5

1.0

1.5 Potash relative to Urea Potash relative to DAP

* Prices for index calculated using 2010 average as base price.

Affordability Index Ratio*

Potash Continues to Provide Good Value For Farmers Relative to DAP and Urea

Fertilizer Price Ratio

Source: Bloomberg

Less Expensive

More Expensive

Slide#7

Source: Fertecon, CRU, IFA, Company Reports, PotashCorp

Operating Rate* - Percent

Record First-Half Demand Tests Global Operating Capability

World Potash Operating Rates

Slide#8

* Based on percentage of operational capability as per PotashCorp (estimated annual achievable production level).

FSU North America Other 0

20

40

60

80

100

Operating Rate* - Percent

First Half 2014 Regional Operating Rates*Global Operating Rates

1H-10

2H-10

1H-11

2H-11

1H-12

2H-12

1H-13

2H-13

1H-14

70

75

80

85

90

95

100

Source: Fertecon, CRU, IFA, PotashCorp

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014F

2015F

2016F

2017F

2018F

0

10

20

30

40

50

60

70

80 Shipments Shipment Range* Operational Capability

Million Tonnes KCl

Believe Capacity Overhang Overstated; Capability Historically in Excess of Demand

World Potash Supply and Demand

Midpoint of forecast shipment range based on ~2.5% annualized demand growth rate (1998-2018F).

Slide#9

PotashCorpOther North American ProducersOther World Producers

North American Producers % of New Capacity

(2013-2018F)

~70%

Potash Market Overview

Source: Fertecon, CRU, FAI, PotashCorp

2013-2018FCAGR

5-Year CAGR

10-Year CAGR

25-Year CAGR

-10%

-6%

-2%

2%

6%

10%

14%

18%

10 - 13%

-8.7%

2.8% 2.7%

Percent Annualized Consumption Growth

Market Could Become a Tailwind to Global Demand instead of a Headwind

Potash Market Overview – India

Key Factors to Watch

•Monsoon rains: after a slow start to Kharif season, moisture deficits and fertilizer sales have improved

•Pricing: farmers adjusting to higher retail potash prices; consumption trends improving

•Currency: will remain a variable that could impact importer margins

•Subsidy reform: majority government elected with strong record for promoting agricultural sector growth

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014F

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000Potash Fertilizer Consump-tion

Million Tonnes K2O Rs/Tonne

Slide#11

Source: Fertecon, CRU, China Grain Consultant, PotashCorp

2013-2018F CAGR

5-Year CAGR

10-Year CAGR

25-Year CAGR

0%

1%

2%

3%

4%

5%

6%

7%

8%

3 - 5%

1.3%

3.9%

6.1%

Conditions Support Return to Improved Demand Growth Rates

Potash Market Overview – China


•Affordability: favorable relationship between potash prices and domestic crop prices expected to continue

•Ag production: drought conditions in key grain producing regions could lead to decline in domestic crop supply

•Import mix: seaborne needs impacted by consumption growth, internal production constraints and rail imports

•Product mix: expected growth in demand for granular product (estimated at ~10 percent of consumption)

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014F

0

1

2

3

4

5

6

7

8

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4Potash Fertilizer ConsumptionCorn/MOP Price Ratio

Million Tonnes K2O Affordability IndexPercent Annualized Consumption Growth

Slide#12

Source: Fertecon, CRU, FAO, IFA, PotashCorp

2013-2018F CAGR

5-Year CAGR

10-Year CAGR

25-Year CAGR

0%

1%

2%

3%

4%

5%

6%

3 - 4%

3.2%3.6%

3.2%

Growth Expected to Remain Inline with Historical Trends

Potash Market Overview – Other Asia


•Affordability: palm oil prices have weakened but remain at supportive levels; potential short-term head wind

•Crop mix: growth in oil palm, sugar cane, fruits & vegetables are key drivers of potash demand

•Near-term pricing: tender season approaching (Oct/Nov); will likely give near-term direction to this market

23%

77%

Application Rate/Crop Mix

Changes

AcreageExpansion

Indonesia/Malaysia Potash Consumption Growth Factors*Percent Annualized Consumption Growth

Slide#13

* Based on 2002-2012 data

Source: Fertecon, CRU, FAO, IFA, PotashCorp

2013-2018F CAGR

5-Year CAGR

10-Year CAGR

25-Year CAGR

0%

1%

2%

3%

4%

5%

6%

3 - 5%

2.9% 3.1%

4.5%

While Acreage Expansion Could Slow, Demand Drivers Remain Supportive

Potash Market Overview – Latin America


•Acreage: lower crop margins could slow acreage expansion in Brazil, but unlikely to see levels decline

•Application rates: high application rates needed to sustain yields on nutrient deficient soils

•Crop mix: acreage of oil palm, sugar cane, fruits & vegetables increasing creating greater need for nutrients

45%

55%

Application Rate/Crop Mix

Changes

AcreageExpansion

Brazil Potash Consumption Growth Factors*Percent Annualized Consumption Growth

Slide#14

* Based on 2002-2012 data

Source: Fertecon, AAPFCO, USDA, PotashCorp

2013-2018FCAGR

5-Year CAGR

10-Year CAGR

25-Year CAGR

-2%

-1%

0%

1%

2%

3%

4%

1 - 3%

0.3%

-1.2%

0.0%

Strong Demand and Logistical Constraints Expected to Keep Granular Market Tight

Potash Market Overview – North America


•Affordability: cost expected to remain a small percentage of crop revenue; attractive relative to DAP and Urea

•Acreage: potential for lower cropped area in 2015 due to tighter crop margins

•Application rates: removal rates have significantly outpaced applications; expect record nutrient removal in ‘14

•Logistics: barge and rail system capacity expected to remain stressed through ‘15

PercentPercent Annualized Consumption Growth

Slide#15

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

E

2015

F0

102030405060708090

100

Nitrogen Phosphate Seed Chemical Other VC LandOther FC Potash

Average: ~3.5%

PotashCorp's Priorities and Advantages

PotashCorp’s RoadMap

Slide#17

Creating Superior Long-term Shareholder Value

Prioritize

Earnings

Growth

•Ensure potash capacity is available to capitalize on volume growth opportunities

•Focused, quick payback nitrogen brownfield opportunities

•Optimize cost structure in each nutrient to maintain flexibility and enhance competitive position

•Evaluate equity investments and determine best course of action for shareholders

Minimize

Earnings

Volatility

•Responsible management of potash capacity, including strategy of matching supply to demand

•Continue to target more stable feed and industrial markets as part of our N and P strategy

Return

Capital to

Shareholde

rs

•Review capital allocation and articulate priorities by year end

•Dividend growth expected to remain a core element

•Continue to optimize capital structure to maintain flexibility and minimize cost of capital

2013 2014F 2015F 2016F0

4

8

12

16

20Nameplate Capacity*

Potash Priorities and Advantages

Slide#18

Operational Flexibility

Growth Initiatives

Advantaged Competitive Position

Million Tonnes KCl

Responding to market demand to ensure staffing levels support supply needs

Maintain ability to restart idled operations to capture future demand growth

* Estimated capacity as per design specifications or completed Canpotex entitlement runs; does not necessarily represent operational capability.

** Estimated annual achievable production level at current staffing and operational readiness. Estimate does not include inventory-related shutdowns and unplanned downtime.

Source: PotashCorp


Slide#19


Growth Initiatives


Complete existing brownfield expansion projects at Rocanville and New Brunswick

Continue to develop new and existing potash markets

1. Canpotex: continue to develop new and existing markets; explore opportunities to enhance transportation and distribution opportunities and efficiencies

2. New Brunswick: utilize incremental capacity to better access logistically-advantaged and under-served regions

2014F 2015F 2016F0

2

4

6

8RocanvilleNew Brunswick

Operational Capability* - Million Tonnes KCl

* Estimated annual achievable production level at current staffing and operational readiness. Estimate does not include inventory-related shutdowns and unplanned downtime.

Source: PotashCorp

POT (SK)

POT (NB)


Slide#20

Operational Flexible

Growth Initiatives


US$ Per Tonne (FOB Mine*)

Protect low-cost position through operational and logistical efficiencies

Optimize production at lower-cost mines; utilize efficiencies to further enhance cost structure

Potash Industry Site Cost Profile*

* Site cost includes all cash operating costs, estimated per-tonne sustaining capital expenditures, royalties and taxes. Darker shaded bars represent CRU estimated mine site production costs at actual production levels; lighter shaded bars represent PotashCorp’s estimate of competitors cost range based on company reported data. Includes impact of PotashCorp’s announced changes for 2014 (upper end of range) and 2016 target (lower end of range). Competitive position dependent on end-market destination

** Cash costs refers to total cost of goods sold less depreciation and amortization. As compared to 2013 levels (not adjusted for inflation or changes to depreciation and amortization); target assumes successful ramp up of expansions at lower-cost facilities

2013Cash Cost**

2014 Cash Cost**

Target

2016Cash Cost**

Target

40

60

80

100

120

140 Cash-related Cost of Goods SoldDepreciation and Amortization

PotashCorp Per-Tonne Cost of Goods Sold

US$ per tonne

Source: CRU, Company Reports, PotashCorp

Trinidad Augusta Geismar Lima0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0Industrial Fertilizer

Nitrogen Priorities and Advantages

Slide#21


Growth Initiatives


Optimize product mix to maximize per tonne cash margins with focus on more stable, higher margin industrial markets

PotashCorp Sales by Nitrogen Plant

Million Tonnes Product – 2013

PotashCorp Gross Margin by Category

2009 2010 2011 2012 20130%

40%

80%

120%

160%

200%Industrial Fertilizer

Percentage of Five-year Average

Source: PotashCorp


Slide#22


Growth Initiatives


US$ Per Tonne (FOB Mine*)

Estimated Cost of New Ammonia Capacity*

PotashCorp Average Brownfield Cost

Competitor Average Cost**

0

200

400

600

800

1,000

1,200

1,400

1,600Cost Range

* Calculation based on projected costs per tonne of ammonia capacity and required infrastructure.** Based on publically available information for approved US brownfield and greenfield ammonia projects.*** All estimated capacity amounts as at beginning of year.**** Contributions based on 2013 per-tonne margins for anticipated capacity additions.

Use capital to fund quick payback, cost-advantaged brownfield projects

Ammonia Capacity***

Million Tonnes

2012 2013 2016E0.0

1.0

2.0

3.0

4.0

5.0

6.0Trinidad Augusta Lima Geismar

Augusta Ammonia:

+70Kt

Geismar Ammonia:

+500Kt

Lima Ammonia:

+100KtUrea Sol: 72Kt

Incremental Gross Margin from New Capacity****:~$155M/yr

Source: Company Reports, PotashCorp

Ukraine Port Plant

Russia - Yuzhnyy

Trinidad

Middle East

US Gulf Producer

US Midwest Producer

0 100 200 300 400 500 600

Cash Costs

Freight to US Gulf

Freight and Handling to US Midwest


Slide#23


Growth Initiatives


Continuous improvement initiatives to deliver greater returns

1. Improve cost, energy and labor efficiency through innovation, process improvements and procurement initiatives

2. Improve maintenance and reliability through best practices and standardization

US$ Per Tonne of Ammonia – 2014F

Source: Fertecon, PotashCorp

PotashCorp OCP** Mosaic* Agrium*0%

20%

40%

60%

80%

100%Feed & Industrial Fertilizer

Phosphate Priorities and Advantages

Slide#24

Flexibility to allocate production to less volatile, higher gross margin products

Finished Product Mix

Percentage

PotashCorp Gross Margin by Category

Percentage of Net Sales – 2013

Feed & Industrial Fertilizer0%

5%

10%

15%

20%

25%

30%

* Based on most recently reported 12-month sales volume totals as per publicly available data** Estimate per CRU. Excludes phosphate rock sales


Growth Initiatives


Source: Company Reports, PotashCorp

Phosphate Priorities and Advantages

Slide#25

Production - Million Tonnes (P2O5) 1. Invest in higher gross margin opportunities that leverage existing P2O5 capacity

2. Reduced workforce levels expected to improve cost structure; full impact by 2015

3. Leverage mining efficiencies (coarse ore recovery in Aurora) anticipated to lower rock costs

4. Optimizing sulfur sourcing points and freight terms to reduce delivered cost

Optimize P2O5 production portfolio and drive initiatives to deliver operational efficiencies

2013 2014E 2015E0.0

0.5

1.0

1.5

2.0

2.5 Aurora White Springs Geismar


Growth Initiatives


Source: PotashCorp

Creating Shareholder Value

Source: PotashCorp

2006

2007

2008

2009

2010

2011

2012

2013

2014F

2015E

2016E

0.0

0.5

1.0

1.5

2.0

2.5

PotashCorp Capital Spending**

Potash Expansion Spending Largely Complete; Return to Sustaining Levels by 2016

PotashCorp’s Opportunity

94%

6%

Completed Remaining

PotashCorp Potash Projects Estimated Capital Spending*

US$ Billions

Slide#27

* As at June 30, 2014. Includes both debottleneck and expansion spending.

** Cash additions to property, plant and equipment per cash flow statement (2006-2013); 2015E and 2016E do not include Major Repairs and Maintenance expenditures (estimated at ~$140M per year) or capitalized interest.

** As we adopted International Financial Reporting Standards (IFRS) with effect from January 1, 2010, information from 2006-2009 is presented on a previous Canadian generally accepted accounting principals (GAAP) basis. Accordingly, previous results may not be comparable to 2010 forward.

Q4-

10**

Q1-11

Q2-11

Q3-11

Q4-11

Q1-12

Q2-12

Q3-12

Q4-12

Q1-13

Q2-13

Q3-13

Q4-13

Q1-14

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.03

$0.35

Utilizing Strong Cash Flow to Enhance Long-term Shareholder Returns

PotashCorp’s Opportunity

* Dividends declared each quarter** $0.10 per share, adjusted for 3 for 1 stock split; rounded to nearest cent.

Source: Bloomberg, PotashCorp

POT AGU CF MOS IPI0%

1%

2%

3%

4%

5%

4.2%

3.3%

2.4%2.2%

0.0%

Percent Yield*

* Indicated yield percentage as per Bloomberg at September 11, 2014.

Dividend* per Share – US$

950% In

crease

Slide#28

There’s more online:

PotashCorp.comVisit us online

Facebook.com/PotashCorpFind us on Facebook

Twitter.com/PotashCorpFollow us on Twitter

Thank you

Click icon to add picture

Try Our Overview Site: www.potashcorp.com/overview

Looking For More Industry and Company Information?

Explore our Key Markets… Find Data on Key Crops… Learn about our Company

PotashCorp - Credit Suisse Basic Materials Conference, September 2014

Investor Relations

Transcript of PotashCorp - Credit Suisse Basic Materials Conference, September 2014