PotashCorp.com
Q4 2016 Conference CallJanuary 26, 2017
Forward-looking Statements
Slide #2
This presentation contains “forward-looking statements" (within the meaning of the US Private Securities Litigation Reform Act of 1995) or “forward-looking information”(within the meaning of applicable Canadian securities legislation) that relate to future events or our future performance. 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,” “forecast,” “may,”“anticipate,” “believe,” “intend,” “estimates,” “plans” and similar expressions. These statements are based on certain factors and assumptions as set forth in this document, including with respect to: foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, including the completion of the proposed merger of equals with Agrium, and effective tax rates. While we consider 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 forward-looking statements including, but not limited to, the following: our proposed merger of equals transaction with Agrium, including the failure to satisfy all required conditions, including required regulatory approvals, or to satisfy or obtain waivers with respect to all other closing conditions in a timely manner and on favorable terms or at all; the occurrence of any event, change or other circumstances that could give rise to the termination of the arrangement agreement; certain costs that we may incur in connection with the proposed merger of equals; certain restrictions in the arrangement agreement on our ability to take action outside the ordinary course of business without the consent of Agrium; the effect of the announcement of the proposed merger of equals on our ability to retain customers, suppliers and personnel and on our operating future business and operations generally; risks related to diversion of management time from ongoing business operations due to the proposed merger of equals; failure to realize the anticipated benefits of the proposed merger of equals and to successfully integrate Agrium and PotashCorp; the results of our impairment assessment regarding the carrying value of certain assets; the risk that our credit ratings may be downgraded or there may be adverse conditions in the credit markets; variations from our assumptions with respect to foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, and effective tax rates; fluctuations in supply and demand in the fertilizer, sulfur and petrochemical markets; changes in competitive pressures, including pricing pressures; risks and uncertainties related to any operating and workforce changes made in response to our industry and the markets we serve, including mine and inventory shutdowns; adverse or uncertain economic conditions and changes in credit and financial markets; economic and political uncertainty around the world; changes in capital markets; the results of sales contract negotiations; unexpected or adverse weather conditions; risks related to reputational loss; the occurrence of a major safety incident; inadequate insurance coverage for a significant liability; inability to obtain relevant permits for our operations; catastrophic events or malicious acts, including terrorism; certain complications that may arise in our mining process, including water inflows; risks and uncertainties related to our international operations and assets; our ownership of non-controlling equity interests in other companies; our prospects to reinvest capital in strategic opportunities and acquisitions; risks associated with natural gas and other hedging activities; security risks related to our information technology systems; imprecision in reserve estimates; costs and availability of transportation and distribution for our raw materials and products, including railcars and ocean freight; changes in, and the effects of, government policies and regulations; earnings and the decisions of taxing authorities which could affect our effective tax rates; increases in the price or reduced availability of the raw materials that we use; our ability to attract, develop, engage and retain skilled employees; strikes or other forms of work stoppage or slowdowns; rates of return on, and the risks associated with, our investments and capital expenditures; timing and impact of capital expenditures; the impact of further innovation; adverse developments in new and pending legal proceedings or government investigations; and violations of our governance and compliance policies. These risks and uncertainties are discussed in more detail under the headings “Risk Factors” and “Management’s Discussion and Analysis of Results and Operations and Financial Condition” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, the joint information circular of the company and Agrium, filed as Exhibit 99.1 to the company’s Current Report on Form 8-K dated October 6, 2016 and with Canadian provincial securities commissions, in connection with the proposed merger of equals with Agrium and in other documents and reports subsequently filed by us with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as of the date hereof and we disclaim any obligation to update or revise any forward-looking statements in this release, whether as a result of new information, future events or otherwise, except as required by law.
Performance
Key Highlights
• Fourth-quarter preliminary earnings of $0.07 per share1
• Full-year preliminary earnings of $0.40 per share
• Annual cash provided by operating activities of $1.3 billion
• Record second-half Canpotex2 shipments in 2016; fully committed for first-quarter 2017
• Initiated Rocanville ramp-up; expect potash company-wide cost of goods sold to decline by approximately $10 per tonne in 2017
• Market value of investments3 approximately $4.5 billion, or $5 per PotashCorp share4
• Undergoing an impairment assessment of the carrying value of certain assets, with a particular focus on phosphate; the impact of that review is not reflected in the preliminary results
1 All references to per-share amounts pertain to diluted net income per share2 Canpotex Limited, the offshore marketing company for PotashCorp and two other Saskatchewan potash producers3 Arab Potash Company, Israel Chemicals Ltd., Sinofert Holdings Limited, and Sociedad Quimica y Minera de Chile S.A.4 As of market close on January 25, 2017
Source: PotashCorp
Slide #4
Lower Gross Margin Due Primarily to Weaker Prices in All Three Nutrients
Quarterly Gross Margin Comparison (Q4-15 vs. Q4-16)
Q4 2015
Potash Nitrogen Phosphate Q42016
0
90
180
270
360
450
$386
$183
-$63
-$87
-$53
US$ Millions
Potash• Decline in spot prices in 1H16 and lower contract prices settled
in 2H16
• Strong engagement in offshore markets and higher North American sales volumes compared to historically low Q415
• Reduced per-tonne costs due to optimization of production to lower-cost mines and absence of inventory-related shutdowns and closure costs at Penobsquis
Nitrogen• Weaker benchmark prices and realizations due to impact of
lower global energy costs and increased supply
• Lower natural gas costs in Trinidad were the primary driver of reduced per-tonne costs
Phosphate• Lower realizations primarily due to weaker fertilizer pricing
• Sales volumes fell, primarily due to weaker demand for our feed and industrial products
• Reduced per-tonne costs due to lower sulfur and ammonia input costs
Source: PotashCorp
Slide #5
Lower Gross Margin Due Primarily to Weaker Prices in All Three Nutrients
Full-Year Gross Margin Comparison (2015 vs. 2016)
2015 Potash Nitrogen Phosphate 20160
500
1,000
1,500
2,000
2,500$2,269
$850
-$885
-$345-$189
US$ Millions
Potash• Decline in spot prices in 1H16 and lower contract prices
settled in 2H16
• Volumes down slightly due to delayed contracts and weaker 1H16 demand in offshore markets, partially offset by increased domestic shipments
• Lower costs due to the optimization of production to lower-cost mines and a weaker Canadian Dollar more than offsetting closure-related costs
Nitrogen• Weaker benchmark prices and realizations due to impact of
lower global energy costs and increased supply
• Increased sales volumes reflected a full year of increased production at our Lima facility
• Lower natural gas costs in Trinidad were the primary driver of reduced per-tonne costs
Phosphate• Lower realizations due primarily to weaker fertilizer
benchmark pricing
• Lower per-tonne costs due to lower sulfur and ammonia input costs
Source: PotashCorp
Slide #6
Source: PotashCorp
2017Q1 Q2
2016
Suspended potash operations at Picadilly, NB
2.0 mmt of nameplate capacity
Announced Inventory Shutdowns
at Allan & Lanigan
Q3
Reduced quarterly dividend
to $0.10/share
Reduced quarterly dividendto $0.25/share
Q4 Q1
2017
Rocanville Ramp-upExpect Canpotex allocation
increase for 2H 2017
Hammond Warehouse/ Distribution Centre
Completeenhancing US
distribution
Commitment to a Proactive Approach; Merger Expected to Close Mid-2017
Recent and Upcoming Event Timeline
Announced Merger of Equals with Agrium
Expect up to $500M in annual synergies
Shareholders overwhelmingly voted to approve
merger with Agrium
Q2 Q3
Slide #7
Merger Regulatory Review and
Integration Planning Processes
Expect to be complete in mid-2017
Announced Operational Changes & Inventory
Shutdownsmove to white potash
only at Cory
Outlook
Supportive Agriculture Fundamentals in Most Key Regions
• Farm consolidation supporting improved fertilization practices• Government reducing subsidized local prices, most notably for corn• Continued shift to high-value, nutrient-intensive crops
• Potential pull back in corn acres and increase in soybeans could be slight headwind for N and neutral for P & K• Tightening credit for highly-levered growers but strong fertilizer affordability supports application rates
• Strong crop margins due to FX weakness and local stock tightness • Acreage expansion to continue although at slower pace• Market adjusting to tightened credit availability
• Lower retail prices for N, P and K to benefit farmers• Better moisture conditions contributed to increased Rabi crop acreage and improved fertilizer demand
• Palm oil prices currently at very supportive levels • Plantations implement yield recovery programs following drought in 2016• Higher application rates key driver of fertilizer consumption growth
Selected Crop Prices
Source: CapIQ, BMI
$3.86
Corn (US$/bu)
$3.96
Futures3-Year Average
North America
LatinAmerica China India Other Asia
Soybean (US$/bu)
$10.25$10.46$0.20
$0.16
Sugar (US$/lbs)
$2,870
Palm Oil (MYR/mt)
$2,424
Regional Assessment
* As at January 24, 2017
Global Agriculture Backdrop
Dec’
17
Nov’
17
Oct’1
7
Nov’
17
Slide #9
Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-1780%
100%
120%
140%
160%
180%
* Based on corn, soybean and wheat prices (weighted by global consumption).
** Based on urea, DAP and KCl prices (weighted by global consumption).
Fertilizer Affordability IndexFertilizer Represents Good Value for Farmers
Source: Bloomberg, Fertilizer Week
Fertilizer Represents Good Value for Farmers
Crop Price Index* as a % of Fertilizer Price Index**
113% 141%Average Ratio (Crop Index as % of Fertilizer
Index)
Slide #10
Source: CRU, TFI, Company Reports, PotashCorp
Million Tonnes KCl
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2010 2014 2015 2016E20122011 2013
Estimated Distributor Inventory Change (Shipments less Consumption)Estimated Producer Inventory Change (Production less Sales)
Global Potash Inventory ChangesInventory Has Been Drawn Down at Both Producer and Distribution Level
Slide #11
Potash Shipments by Region
Source: Fertecon, CRU, Industry Publications, PotashCorp
Expect Demand of 61-64 Million Tonnes in 2017
14 15 16E 17F 14 15 16E 17F 14 15 16E 17F 14 15 16E 17F 14 15 16E 17F0
5
10
15
20
India
Note: Shaded bars represent shipment forecast range as of January 26, 2017.
4.2 – 4.7mmt• Lower nutrient retail prices and reduced inventory levels to support demand
Other Asia
8.8 – 9.3mmt• Demand supported by good crop economics and improved moisture conditions
North America
9.3 – 9.8mmt• Supportive nutrient prices and significant removal of nutrients following record crop expected to support demand
Latin America
11.5 – 12.0mmt• Agronomic need, favorable crop economics, and lower inventories expected to support demand growth
China
14.5 – 15.5mmt• Lower inventories and strong consumption expected to support demand growth
2017
H
ighl
ight
s
Million Tonnes KCl
Previous Record:6.3mmt (2010)
Previous Record:9.5mmt (2014)
Previous Record:11.1mmt (1997)
Previous Record:11.7mmt (2014)
Previous Record:15.8mmt (2015)
Slide #12
2017 Ammonia Capacity Changes* Million Tonnes
Source: CRU, Fertecon, Company Reports, PotashCorp
* Based on industry consultant estimates; capacity is prorated for start-up timing in 2017** Net of additions and permanent closures*** Based on industry consultant estimates
Global Nitrogen Market OverviewAdjusting to New US Capacity; Reduced Chinese Urea and FSU Ammonia Exports
Series1
-2
-1
0
1
2
3
4
5
6
7
8 L. AmericaAfricaRussia
Other Asia
US
China**
Middle East
Slide #13
Net Additions = +6.8 Mmt (~3%)
Black Sea Ammonia ExportsConstrained
~52%Current operating rate vs
typical average ~75%
Chinese operating rates*** at historical lows
~1.0Mmt
Estimated reduction in Black Sea exports
compared to previous 5-year high
Market Factors to Watch
2017 Phosphate Capacity Additions*Million Tonnes P2O5
Source: CRU, Katana, Profercy, PotashCorp
Global Phosphate Market OverviewAdjusting to New Capacity in Morocco & Saudi Arabia; Weak Near-term Indian Demand
Elevated Indian Inventory Levels to begin 2017
~65%Current operating rate vs
typical average ~77%
Chinese operating rates** at historical lows
~1.4Mmt
DAP inventory on hand (57% above trailing 3-year
average)
31% MoroccoOther
34%
34%
Saudi Arabia
Net Additions = +1.5 Mmt P2O5 (~3%) Market Factors to Watch
* Based on industry consultant estimates; capacity is prorated for start-up timing in 2017** Based on industry consultant estimates
Slide #14
2017 Guidance1
1 As at January 26, 20172 Does not include capitalized interest3 As a percentage of potash gross margin4 Includes income from dividends and share of equity earnings
Source: PotashCorp
Slide #15
Potash sales volumes 8.7-9.4 million tonnes
Potash gross margin $550-$800 million
Nitrogen and phosphate gross margin $150-$400 million
Capital expenditures 2 $600 million
Effective tax rate 17-20 percent
Provincial mining and other taxes 3 17-20 percent
Selling and administrative expenses $225-$235 million
Finance costs $220-$230 million
Income from equity investments 4 $145-$165 million
Annual foreign exchange rate assumption CDN$1.32 per US$
Annual EPS sensitivity to foreign exchange US$ strengthens vs. CDN$ by $0.02 = +$0.01 EPS
Annual EPS sensitivity to potash prices Increases by $20 per tonne = +$0.14 EPS
Annual earnings per share $0.35-$0.55
PotashCorp.com
PotashCorp.com
Contact Us
[email protected](306) 933-8500
Denita StannSenior VP, Investor & Public Relations
Jeff HolzmanSenior Director, Investor Relations & Sustainability
Ryan Shacklock Director, Investor Relations
Tim McMillanManager, Investor Relations
[email protected](306) 933-8849
Randy BurtonDirector, Public Relations & Communications
PotashCorp.com
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