SASKATOON Jan 28, 2016 (Thomson StreetEvents) -- Edited Transcript of Potash Corporation of Saskatchewan Inc earnings conference call or presentation Thursday, January 28, 2016 at 6:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Denita Stann Potash Corporation of Saskatchewan Inc. - VP IR & Public Relations * Jochen Tilk Potash Corporation of Saskatchewan Inc. - President and CEO * Stephen Dowdle Potash Corporation of Saskatchewan Inc. - President PCS Sales ================================================================================ Conference Call Participants ================================================================================ * Ben Isaacson Scotiabank - Analyst * Jeffrey Zekauskas JPMorgan - Analyst * Mark Connelly CLSA Limited - Analyst * Andrew Wong RBC Capital Markets - Analyst * Chris Parkinson Credit Suisse - Analyst * Jacob Bout CIBC World Markets - Analyst * Adam Samuelson Goldman Sachs - Analyst * Michael Piken Cleveland Research Company - Analyst * Jonas Oxgaard Bernstein - Analyst * Joel Jackson BMO Capital Markets - Analyst * Don Carson Susquehanna Financial Group / SIG - Analyst * Matthew Korn Barclays Capital - Analyst * Steve Hanson Raymond James & Associates, Inc. - Analyst * John Roberts UBS - Analyst * Steve Byrne BofA Merrill Lynch - Analyst * Sandy Klugman Vertical Research Partners - Analyst * PJ Juvekar Citigroup - Analyst * Fai Lee Odlum Brown - Analyst * Charles Neivert Cowen and Company - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the PotashCorp fourth-quarter earnings conference call. (Operator Instructions) I would like to remind everyone that this conference call is being recorded on Thursday, January 28, 2016 at 1:00 PM Eastern. I now turn the conference over to Denita Stann, Vice President, Investor and Public Relations. Please go ahead. -------------------------------------------------------------------------------- Denita Stann, Potash Corporation of Saskatchewan Inc. - VP IR & Public Relations [2] -------------------------------------------------------------------------------- Thanks, Anastasia. Good afternoon, everyone, and thank you for joining us. Welcome to our fourth-quarter and year-end earnings call. In the room with us today we have Jochen Tilk, our President and CEO; Wayne Brownlee, our Executive Vice President and Chief Financial Officer; Stephen Dowdle, President of PCS Sales; Mark Fracchia, President of PCS Potash; Raef Sully, President of PCS Nitrogen and Phosphate; and Joe Podwika, Senior Vice President and General Counsel. I would like to welcome all those who are listening in and remind people that we are live on our website. I would also like to remind everyone that today's call may include forward-looking statements. These statements are given as of the date of this call and involve risks and uncertainties. A number of factors and assumptions were applied in the formulation of these statements and actual results could differ materially. For additional information with respect to forward-looking statements, factors, and assumptions, we direct you to our news release and our most recent Form 10-K. Also, today's news release, which is posted on our website, includes a reconciliation of certain Non-IFRS financial measures to the most directly comparable IFRS measures. I'll now turn the call over to Jochen Tilk for some comments and then we'll go to questions. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [3] -------------------------------------------------------------------------------- Thank you very much, Denita. Good afternoon and thank you for joining our call. We appreciate the opportunity to discuss our fourth quarter and annual performance and what we see ahead for our Company. Let me just talk about our results. Weaker fertilizer prices characterized 2015 and contributed to lower quarterly and full-year earnings of $0.24 and $1.52 per share. Declining ammonia, urea, and UAN prices had the largest impact. Importantly, and perhaps to a degree unnoticed, global potash demand remained relatively strong in the face of broader uncertainty. Global shipments of approximately 60 million tonnes were the second-highest total on record, a reminder that even with less-than-ideal economic conditions, food production and soil fertility remain a priority for farmers. While demand was strong, prices were less resiliant. The decline was most visible in granular markets, with prices declining more than 30% over the course of the year. Though [softening] occurred throughout 2015, the decline was most evident later in the year as we entered a seasonally slower period. As we saw this impact and consistent with our strategy, we advanced the closure of Penobsquis and took inventory shutdowns at our Saskatchewan mines during the fourth quarter, which contributed to lower sales volumes. In potash gross margin of $183 million for the quarter and $1.3 billion for the year declined on lower sales volume and realized prices. A weaker Canadian dollar benefited our cost position, but the accelerated closure of Penobsquis and the inventory-related shutdowns late in 2015 pushed fourth-quarter cost of goods sold higher than the same quarter last year. In nitrogen, lower energy prices and increased global supply resulted in weaker realizations for most products compared to 2015. As a result, our gross margin for both the fourth quarter and the year declined significantly from last year's robust totals. In phosphate, gross margin for the quarter was down slightly from 2014, but improved on an annual basis as stronger pricing, especially for our liquid fertilizer products, more than offset reduced sales volumes and slightly higher costs. Now I would like to talk about our earnings outlook. We entered 2016 amidst a subdued environment. That said, we do not expect a repeat of the uncertainty and erosion that occurred last year. Even with more modest expectations for global economic growth, our outlook for potash remains positive and we anticipate global potash shipments will be in the range of 59 million to 62 million tonnes. We expect North American shipments will increase this year with supportive farm economics and distributors looking to replenish low inventories. While engagement with customers has been modest so far, we also know that the season for fertilizer application is right around the corner. Crop economics are also expected to improve demand in Latin America, although persistent challenges like credit availability in Brazil, are expected to keep growth relatively modest. The market that garners most attention this time of the year is China. While current inventory levels are expected to reduce annual shipments from 2015's record levels, we continue to see strong consumption trends and the need for contract settlements to meet spring planting requirements. Assuming a more normal monsoon season in India this year, we see growth from 2015 shipment levels that declined due to last year's weak monsoon. We believe growth in this market will continue, even without meaningful subsidy change, as farmers benefit from improved fertilizer affordability and continue to adopt compound fertilizers with high potassium content. Lastly, demand in Southeast Asia is expected to grow modestly in 2016, as improved palm oil economics and substantial economic needs underpin consumption. While demand has been quieter during the recent seasonal [lull], we know that field applications coinside with a number of our key markets, including the US, China, and Brazil. So we fully expect traction in the months to come. For 2016, we forecast our potash sales volumes will be between 8.3 million and 9.1 million tonnes. While we anticipate a more stable environment for prices, the sharp decline to the second half of 2015 will weigh on our average realizations as we enter the year. As a result, our gross margin is forecast in the range of $0.8 billion to $1.1 billion. In nitrogen, lower energy costs and increased global supply are expected to suppress prices. Improved operating rates at our US facilities and our recently completed Lima expansion are expected to increase our sales volumes in 2016. Despite an improved cost position from lower natural gas prices and higher sales volumes, we expect that weaker price environment will translate to lower gross margin. Our focus on more stable feed, industrial, and liquid fertilizer markets is expected to mitigate some of the impact of a weaker phosphate environment in 2016. We remain committed to improving reliability to our facilities and expect improved production and lower cost to support gross margin at levels similar to 2015. Combined with forecast nitrogen and phosphate gross margin of $0.7 billion to $0.9 billion. Taking these expectations together, we see earnings of $0.90 to $1.20 per share in 2016, with first-quarter earnings of $0.10 to $0.20 per share, which includes severance and transition costs related to the subsequent suspension of production at Piccadilly, as well as some potash demand being deferred to the second quarter. Let me talk a little bit about our strategy. 2015 reaffirmed that we must be mindful of the impact of global factors we cannot control, such as exchange rates and access to credit. Yet it also reaffirmed that the things we do control, like enhancing our competitive position, adhering to time-tested potash strategy, and maintaining a sound balance sheet not only help us weather the storm but strengthen us for the future. We already have some of the highest quality, most efficient assets in the industry, and we're focused on enhancing our competitive position. We shifted production to our lowest-cost facilities as an important step in optimizing our portfolio. Recently took the difficult but necessary step of accelerating our Penobsquis mine closure and suspending our Piccadilly potash operations in New Brunswick. Shifting production to Saskatchewan, we lower our cost of goods sold by about $40 million to $50 million per year and reduce our capital expenditures to $185 million over the next 24 months. Importantly, it also aligns with our long-held strategy of matching supply to demand. Rocanville is also an integral part of our optimization plan. We advanced the final phase of expansion plans in 2015, and we will be completing the head frame conversion and expect to ramp up to full capability later this year. As our largest and most efficient operation, Rocanville is expected to further reduce our per-tonne operating cost in 2017. For context, we estimate our per-tonne cash cost of goods sold at Rocanville to be $40 to $45 per tonne at today's exchange rate. It also signifies the completion of our expansion program. Going forward, our total annual sustaining capital expenditures are expected to be between $600 million and $800 million per year. In the context of the current market environment, our Board and management team have completed a thoughtful analysis of market and earnings expectations relative to our capital allocation priorities. While we remain confident in our proven business model and believe that current market uncertainty will subside, given the reality of rising global crop demand and the precise timing of improved conditions, and the precise timing of improved conditions is never easy to predict. In this environment, we believe a prudent approach, one that balances competing interests of our many stakeholders including equity and debt holders, is the right one. We are committed to a strong balance sheet and investment-grade credit rating, but also believe in retaining a competitive dividend. In balancing these objectives, we have decided to reduce our quarterly dividend by 34%. We believe this level, which represents a payout ratio of close to 100% of 2016 earnings remains highly competitive, but also protecting the long-term financial health and financial flexibility of the Company. Looking forward, it can be difficult to look beyond near-term headwinds that may continue in 2016, but our long-term confidence is underpinned by food demand, the quality of our assets, and our strong market position. This global mandate will largely be met in the coming years for improvements in crop productivity, a challenge that can't be achieved without the products we produce. We believe that we are uniquely positioned to respond in any market conditions. Our focus has been navigating recent challenges but more importantly to strengthen our Company for the future by A, supporting our potash business model; B, enhancing our best-in-class assets; and C, protecting our long-term financial health and flexibility to capture future opportunities. We believe that the steps that we have taken, including the difficult decisions to suspend our New Brunswick operations and realign our dividend are consistent with these objectives, and will best position the Company and its many stakeholders for the future. Thank you for your time and we look forward to taking your questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen we will now conduct a question-and-answer session. (Operator Instructions) Ben Isaacson, Scotiabank. -------------------------------------------------------------------------------- Ben Isaacson, Scotiabank - Analyst [2] -------------------------------------------------------------------------------- Great, thank you very much. My question is on your dividend. You talked about in your press release the dividend going to approximately 100% payout ratio for 2016. Jochen, can you talk a little bit about whether or not that limits your flexibility in terms of being opportunistic with respect to buy backs or consolidation opportunities, at least without the use of debt and/or non-core asset sales? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [3] -------------------------------------------------------------------------------- Thank you, Ben. Yes, as you correctly repeated, that payout ratio would be approximately 100% in 2016 this year. And to your question whether that limits our flexibility, the answer is not really, because that's exactly the way we looked at it. We looked at everything from ensuring that our balance sheet remains healthy in terms of credit rating. We looked at it certainly from a sustainability of that payout ratio and the dividend, and we looked at it from a point of remaining flexible enough that we can contemplate other opportunities. And we still have a fair amount of room, because we remain confident in the upside of our business, so as we're mindful of the current economic conditions, we certainly remain confident that there will be traction and that we can see the upside opportunity down the road. -------------------------------------------------------------------------------- Ben Isaacson, Scotiabank - Analyst [4] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [5] -------------------------------------------------------------------------------- Thank you, Ben. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- Jeff Zekauskas, JPMorgan. -------------------------------------------------------------------------------- Jeffrey Zekauskas, JPMorgan - Analyst [7] -------------------------------------------------------------------------------- Thanks very much. In your materials, you said that you expect potash demand next year to be 59 million to 62 million tonnes. What about first-quarter demand for the industry? Do you expect it to be above 15 million tonnes or below? Do you expect it to be a relatively strong quarter or a weak quarter or can't you tell? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [8] -------------------------------------------------------------------------------- Yes. So I will give you the general review, Jeff, and then my colleague, Stephen is well armed with the level of detail that we can probably follow-up on. But, we essentially look at a relatively flat carry forward from 2015 and 2016. So the difference really is we expect a little stronger US and a little more modest demand in China because of our inventories and then South America. The rest of it is relatively flat. First quarter obviously is very, very seasonal, and the traction depends on when the weather is ready for planting in the US. And that wouldn't be fundamentally different in other parts of the world. So the timing of that is not predictable, and you will have noticed that in the Q1 guidance for 2016, we say 10 to 20, and we qualify that with some deferred sales, which is really the seasonal impact. That's the high-level picture, and Stephen, if you can put some resolution on that please. -------------------------------------------------------------------------------- Stephen Dowdle, Potash Corporation of Saskatchewan Inc. - President PCS Sales [9] -------------------------------------------------------------------------------- Yes, I think one of the factors that determine the volumes in the first quarter, China always plays a role in that because typically it's during a time when a new contract is being negotiated. And this year, what we expect to happen is that negotiation will be concluded in a relatively later period compared to other years. The main reason for that being that Chinese New Year is quite early this year. It was clear, I think to the Chinese, that with the market being the way it is that this negotiation would not be a quick negotiation. And to make sure that they had enough potash in place for the start of the spring planting season, they continued to import product very heavy during the fourth quarter. In fact, we just got data here this morning that China imported 1.3 million tonnes in December, bringing their 2015 net imports to exceed 9 million tonnes for the first time. And our estimate of shipments in China are over 15.5 million tonnes during 2015, so it speaks to quite robust demand growth in China. And yes, some of that certainly was in anticipation of a settlement after Chinese New Year, which is certainly what we expect. But I think that comments that Jochen made with regards to our underlying optimism about demand in 2016 is quite strong. 2015 looks like it was the second-best year for potash demand. And we expect basically in all markets, and China might be one of the markets with a question mark because a lot of the ultimate demand in 2016 in China will be determined by the timing of a settlement. But we expect in almost -- in most other major markets that we'll see improved demand in 2016 compared to 2015. But the first quarter will be a slower quarter and that largely will be influenced by the timing of a China settlement. -------------------------------------------------------------------------------- Jeffrey Zekauskas, JPMorgan - Analyst [10] -------------------------------------------------------------------------------- Thank you very much. That's a very thorough answer. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Mark Connelly, CLSA. -------------------------------------------------------------------------------- Mark Connelly, CLSA Limited - Analyst [12] -------------------------------------------------------------------------------- Thank you. Jochen, there isn't a lot of evidence that lower prices helped demand much this year. It just seems like there's always something else offsetting whatever elasticity benefit. So do your estimates for the coming year assume that there is any significant benefit from elasticity? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [13] -------------------------------------------------------------------------------- Good morning, Mark. Not really. I think it is really a carryover from this year in what we'd experienced. As you say correctly, we look at fertilizer price, certainly potash prices toward Q4 of 2015, and affordability is obvious. And you look at some expectation of elasticity, but then the headwinds that we saw in Brazil exchange rate and in other parts of the world, credit seem to offset some of that. But our assumption right now is that there is a carry forward of the same or similar demand with some of the nuances that Stephen described and that fertilizer are very affordable, but demand will be fairly consistent with what we saw. -------------------------------------------------------------------------------- Mark Connelly, CLSA Limited - Analyst [14] -------------------------------------------------------------------------------- Okay, that's helpful. Thank you. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Andrew Wong, RBC Capital Markets. -------------------------------------------------------------------------------- Andrew Wong, RBC Capital Markets - Analyst [16] -------------------------------------------------------------------------------- Hi, thanks for taking my question. I just wanted to ask about the dividend again. So regarding the dividend payout ratio, it's close to 100% this year. CapEx drops off next year a little bit, so that gives you a little bit more breathing room. But the payout ratio is still quite high. Could you talk about your confidence around the dividend sustainability longer term? And does this reflect your view that maybe your nutrient prices are at least flat lining and potentially improving in the future from this point forward? Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [17] -------------------------------------------------------------------------------- Thanks. Thanks for the question. Let me just add -- put two parts to that response. One is process and then why we think that was the right decision. In the process, we spend a fair amount of time, as I implied in my speech, and led by our team here with the Board in reflecting. And our objective was, as I said before, to protect our balance sheet, but also ensuring that the decision taken leads to a sustainable dividend and clearly one that we can carry through over the years. And that is supported by just where our balance sheet is right now. As I said, capital is coming off. I think we've taken some very constructive steps toward reducing our cost, consolidating our production portfolio in potash, but it also -- and that's important and also reflects our confidence in the business. We took a conservative look at the next couple of months and took that decision, but we also wanted to be sure that we don't erode our confidence in the business. So, it's a combination of I think a very prudent and very consistent step that gives us a fair amount of breathing room, but also maintaining a payout ratio that produces a sustainable dividend and is underpinned by the confidence of the business. -------------------------------------------------------------------------------- Andrew Wong, RBC Capital Markets - Analyst [18] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- Yonah Weisz, HSBC. Your line is open. -------------------------------------------------------------------------------- Denita Stann, Potash Corporation of Saskatchewan Inc. - VP IR & Public Relations [20] -------------------------------------------------------------------------------- Anastasia, maybe we will try the next caller, thanks. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- Chris Parkinson, Credit Suisse. -------------------------------------------------------------------------------- Chris Parkinson, Credit Suisse - Analyst [22] -------------------------------------------------------------------------------- Perfect, thank you very much. How should we think about your respective production rates of your mines post Rocanville's [campus ex run] during the second half of 2016? It is safe to say that you'll continue to run that mine all-out while calibrating Allan quarry around that in order to minimize per-unit costs? Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [23] -------------------------------------------------------------------------------- Thank you, Chris. Good afternoon. Yes, that would be the correct assumption. We will run our Rocanville mine to the extent that we can maximize the benefit. As I said, we expect our cost there to be $45 a tonne, that would be our most efficient operation. And then we would balance the others in Saskatchewan according to our sales predictions. -------------------------------------------------------------------------------- Chris Parkinson, Credit Suisse - Analyst [24] -------------------------------------------------------------------------------- Perfect, thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [25] -------------------------------------------------------------------------------- Thank you, Chris. -------------------------------------------------------------------------------- Operator [26] -------------------------------------------------------------------------------- Jacob Bout, CIBC. -------------------------------------------------------------------------------- Jacob Bout, CIBC World Markets - Analyst [27] -------------------------------------------------------------------------------- Maybe just a follow-on on that question and a question about your operating costs with the potash division. So in an environment of 8.3 million to 9 million tonnes of potash sales volumes, is it possible to get your potash operations down to $80 a tonne? And then how should we think about cost ramping down as Rocanville ramps up? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [28] -------------------------------------------------------------------------------- Yes, thank you very much, Jacob. We're actually looking at the number, and I'm not going to say it because we haven't stated one. So, I will only refer to that directionally. The one that we did share was the $40 to $45 and you know our cost that we published. It's a little impacted this quarter because of the inventory shutdowns we took in some of the costs related to the Penobsquis closure. But going forward, it will be merged, obviously, with the -- and this would be post Rocanville ramp-up, with the benefit of the lower cost of Rocanville and then the Saskatchewan portfolio. So directionally, we're going toward that run, but we're not going to give a fixed number at this point in time. -------------------------------------------------------------------------------- Jacob Bout, CIBC World Markets - Analyst [29] -------------------------------------------------------------------------------- Great. Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [30] -------------------------------------------------------------------------------- Thank you, Jacob. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Adam Samuelson, Goldman Sachs. -------------------------------------------------------------------------------- Adam Samuelson, Goldman Sachs - Analyst [32] -------------------------------------------------------------------------------- Thanks, good afternoon. Maybe try to take the dividend question a little bit differently. In the past, Jochen, the Company has articulated a $200 FOB mine Saskatchewan potash price on 10 million tonnes, sales were 10 million tonnes of potash. And $1.2 billion of nitrogen and phosphate gross profit is where the dividend payout at the prior level was sustainable. Would like to get a better sense of where you think that those sensitivities lie today? And specifically on the nitrogen side, and maybe comment on how your nitrogen market outlook has evolved in the last 90 days, given some very sharp falls in ammonia, urea, and UAN prices? Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [33] -------------------------------------------------------------------------------- Thanks very much. Really good question, and I think you answered it actually, because you pointed out that nitrogen is different and has come off. And really the biggest difference I can say in some of the previous testament where we put out the sensitivity toward the dividend is nitrogen. And we have looked at that and realized that in our 2016 guidance. And that led us to look at that obviously in aggregate together, so that's where the difference lies. In terms of the outlook at nitrogen, very broadly before I turn it over to Stephen, we've seen, obviously, much lower input costs. The more competitive environment, there's more production coming on and a fairly prolific pipeline internationally. And that certainly differentiates the year on -- particularly on ammonia. So that has an impact, and we don't see big changes happening, and so we took that into consideration. Stephen? -------------------------------------------------------------------------------- Stephen Dowdle, Potash Corporation of Saskatchewan Inc. - President PCS Sales [34] -------------------------------------------------------------------------------- I think the only other comment I would add is -- and we've seen this happen in the markets on numerous occasions, that when you have a bit of a step change, and this year we are going to see a bit of a step change in nitrogen, and that's with North American capacity coming on. In anticipation, the market reacts even before the reality, because what will happen is that there is going to be a disruption in trade flows and trade patterns. They're going to have to be realigned. And the market is anticipating this, and this is part of the weakness that we see. Of course it's being supported by lower energy costs and that definitely contributes to it. But also there is the market psychology that is already starting to adjust to changing trade flows and trade patterns. -------------------------------------------------------------------------------- Adam Samuelson, Goldman Sachs - Analyst [35] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [36] -------------------------------------------------------------------------------- Thanks very much. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- Michael Piken, Cleveland Research Company. -------------------------------------------------------------------------------- Michael Piken, Cleveland Research Company - Analyst [38] -------------------------------------------------------------------------------- Good morning. I just wanted to touch base a little bit more in terms of the trade flows to Brazil. And specifically, with the shutdown of Piccadilly, what that might mean for your agreement with Heringer and whether those tonnes would then go through Canpotex. Or if they are still unique to yours and how that would work from a transportation and cost perspective? Thanks. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [39] -------------------------------------------------------------------------------- Thank you, Mike, and good morning. The answer is yes. Those tonnes would go through Canpotex. And last year, some of those tonnes have come through Canpotex, so that is not a new set up, it is just that they will come exclusively from Canpotex with that change. In terms of pattern, whether the tonnes are shipped to the west or the east port, the Port of St. John in the east is a port that is now available to Canpotex. And depending on, I think, availability and what is most beneficial, they will make that choice. But it can go either direction. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Jonas Oxgaard, Bernstein. -------------------------------------------------------------------------------- Jonas Oxgaard , Bernstein - Analyst [41] -------------------------------------------------------------------------------- Good morning. So when I'm looking at your guided gross margin in potash and your volumes, I back into a price of about $250 for the year. So first question is that about where you are? But the follow-up question is why $250? Can you tell me a little bit about the assumption that goes into that and how you see the evolution over the year? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [42] -------------------------------------------------------------------------------- Maybe you can just, so I get the reference correctly, if you could just repeat the question a little bit in terms of how you -- what number you back calculated? -------------------------------------------------------------------------------- Jonas Oxgaard , Bernstein - Analyst [43] -------------------------------------------------------------------------------- Well, if you guided to your gross margin in the potash segment, you guided to how much volume you intend -- you're thinking you're going to ship. And you know your cost structure roughly. You can back into what price you need to realize to get that gross margin, and we end up with about $250 per tonne realized to you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [44] -------------------------------------------------------------------------------- Yes, thanks for the question, Jonas. So we can't reconcile your math, and we don't disclose the price that we've used. So that's where the discrepancy -- and we normally don't say that. So we can't confirm that, but we also don't say the number that of the potash price that we use. -------------------------------------------------------------------------------- Jonas Oxgaard , Bernstein - Analyst [45] -------------------------------------------------------------------------------- Okay. Can you talk about how you think the price evolution will look over the year? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [46] -------------------------------------------------------------------------------- Yes, that we like to know that, we obviously don't have a crystal ball, but let's talk about how we think the year will play out directionally. So the first big milestone I think we all agree is the contract negotiations in China, the settlement, and there is a question of timing and the number. We don't know when the timing is. We expect it to be after the Chinese New Year, which is early February, so somewhere after middle of February, and then we don't know. In terms of price, we don't know that either, but you can imagine what the discussion might be given on where spots in Southeast Asia, and that's a known figure. What we see is that there will be traction throughout the year, and the traction that we foresee is really when the season kicks in because it is a seasonal business and on the volumes that we predict. And what happens at that point, we can't, we don't know. But that's where we have our confidence in the business. -------------------------------------------------------------------------------- Jonas Oxgaard , Bernstein - Analyst [47] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [48] -------------------------------------------------------------------------------- Sorry, I will let Stephen add a few more words to timing and that. -------------------------------------------------------------------------------- Stephen Dowdle, Potash Corporation of Saskatchewan Inc. - President PCS Sales [49] -------------------------------------------------------------------------------- Obviously the market and prices are impossible to predict, but what we can see is that we've been through a period of disengagement, and really that happened during the fourth quarter and will continue at some point into the first quarter. But we are going to get into a period of engagement here, and there is a scenario unfolding here that the catalyst that is going to bring people to engage the market will be a combination of seasonality that you can't wait any longer and also getting some price clarity. And certainly a China contract will provide some price clarity to the market. But underlying all of this is strong demand. So we are very confident that we are going to get good engagement in the market. It's just a matter of time, and there certainly is a scenario unfolding that that engagement could occur in all major markets at the same time. -------------------------------------------------------------------------------- Jonas Oxgaard , Bernstein - Analyst [50] -------------------------------------------------------------------------------- Okay, very good, thank you. And Jochen, I don't know if you knew this, but if you take a big lump of potash and you put enough pressure on it, it'll actually turn into a crystal ball. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [51] -------------------------------------------------------------------------------- We will try that right away. We've got lots of potash clumps here, so that's for sure. Thank you, Jonas. -------------------------------------------------------------------------------- Jonas Oxgaard , Bernstein - Analyst [52] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [53] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- Joel Jackson, BMO. -------------------------------------------------------------------------------- Joel Jackson, BMO Capital Markets - Analyst [55] -------------------------------------------------------------------------------- Okay, I'm going to follow that, okay. So Jochen, I'm going to ask a question you've been asked a lot repeatedly the last year-and-a-half, and I just want to get your latest thoughts. So if potash demand globally maintains this oscillating restocking, de-stocking, restocking, de-stocking, flattish range here, with the new supply coming on from competitors, are you willing, as a Company here, to get to lower -- to sell lower and lower potash volumes to balance the market? And at what utilization rate does that not make sense anymore? Because you are saying that you reset your dividend here to the certain level of $1 share based on the idea that you expect to rebound from here? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [56] -------------------------------------------------------------------------------- Thanks, Joel, and good afternoon. So clearly on the strategy, and I think we're specific is that we will continue in the -- our long-term and proven strategy to match demand -- to match supply to demand. So we feel that is the right position going forward. In terms of new production coming online, we think there's -- it will take some time. We don't think that's imminent and we believe that growth that we fully expect in the years to come will balance that. So we actually think that we're in a good position. We made some consolidations, optimizations from a cost and from a production perspective. We think that supply that is slated to come on will come anytime and that growth will actually balance that and that we have the right strategy for that. So the answer to your question is yes. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- Don Carson, Susquehanna Financial. -------------------------------------------------------------------------------- Don Carson, Susquehanna Financial Group / SIG - Analyst [58] -------------------------------------------------------------------------------- Yes, Jochen, just want to clarify a few things. So when Rocanville is up and running, would you anticipate that you would do a permanent closure of some of the smaller Saskatchewan mines, similar to what you've done in New Brunswick? And then secondly just on price, I'm not sure I heard your answer, but do you think that the current spot price, whether it's granular in North America or Brazil or spot in Southeast Asia have stabilized and that contract pricing will be based off of those stabilized spot prices? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [59] -------------------------------------------------------------------------------- Good morning, Don. No we do not anticipate the closure of one of our Saskatchewan operations. In fact, when we look at our mid- to long-term run rates, we think we can very well balance how they work together. So the answer to that is no, we do not anticipate it. The answer to your second question is whether or not potash prices have found its floor and there's traction. Again, it goes back to the crystal ball thing, but we certainly hope so because the whole matter of traction by demand is something that we feel confident about. And Stephen described the slow engagement today in some of the countries. I said that in my remarks, but when you look at the three countries that combined use more than 50% of the world's potash, China, Brazil, and the US, all three of them, as I said, represent more than 50%, all three of them have been pretty slow for various reasons. But yet there is a coinciding [peak of] application that happens. And on the expectation of similar demand compared to last year, that traction will kick in and it is that momentum that will define directionally where price will go. -------------------------------------------------------------------------------- Don Carson, Susquehanna Financial Group / SIG - Analyst [60] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [61] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- Matthew Korn, Barclays. -------------------------------------------------------------------------------- Matthew Korn, Barclays Capital - Analyst [63] -------------------------------------------------------------------------------- Hello, everyone, thanks for taking my call. So I will change lanes a little bit here. The -- looking at the USDA's projections, they're expecting corn stock policy in the US to pick up slightly. It would appear though there might be some risk based on the slower face of exports, same FX in emerging markets phenomenon that you're seeing also in the nutrients space. Global corn stalks to use appear to be trending up from levels about as high as we've seen for years. And most whom I speak to on the inputs side think we're going to see higher corn acres this year. I want to know are you concerned at all about any crack in grain and oilseed prices if weather turns out to be somewhat normal into the spring? And how much of the risk is that, that that could create an additional knock-down effect on NPK prices? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [64] -------------------------------------------------------------------------------- Thank you, Matthew, really good question. We talk about that quite a bit, and as Stephen will point out and he will take over in a second on this, we had three bumper crops in a row, three years so exceptional. And when you look back historically, that is an aberration. Not suggesting anything going forward, but we did see and we are seeing an impact on the weather pattern more perhaps than we have in last year's. We agree on your assessment of corn acreage and certainly exchange rates and so on, but the end of the day, much of that depends really on the quality and the volume of the crop and the impact on prices. So with that, I'll -- Stephen, if you want to add more color to that. -------------------------------------------------------------------------------- Stephen Dowdle, Potash Corporation of Saskatchewan Inc. - President PCS Sales [65] -------------------------------------------------------------------------------- Well, on a -- in the US, which of course is -- the corn crop is very important to fertilizer consumption in North America, the stocks to use ratio is at a level around 13%, and certainly supportive of corn prices that do incent growers to use inputs. And as you point out, as the USDA points out, even see a slight expansion in expected corn acres this year. So the underlying economics of corn right now are they are pretty healthy. We have had, as Jochen just mentioned, three very strong corn crops period. We also know that we're in a different kind of a season right now with El Nino weather patterns having a strong influence in many parts of the world. And whether this portends a fourth record crop in a row or whether this breaks that streak or not, that's something that people are wondering about as well. We know that we don't produce record crops year after year after year after year, and it doesn't take, right now, a significant impact one way or the other that would have an influence on that stocks to use ratio. Globally, it's pretty steady. We've seen about a 1% increase in the stocks to use ratio year over year for corn. So we're not really anticipating from just that supply side. One thing that we have seen and we have seen this something that does occur year after year after year is that there is growth in consumption, and that's something -- growth in consumption of these grains, and that's something that we expect to continue this year. -------------------------------------------------------------------------------- Matthew Korn, Barclays Capital - Analyst [66] -------------------------------------------------------------------------------- Alright, appreciate the thoughts, gentlemen. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [67] -------------------------------------------------------------------------------- Thanks, Matthew. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- Steve Hanson, Raymond James. -------------------------------------------------------------------------------- Steve Hanson, Raymond James & Associates, Inc. - Analyst [69] -------------------------------------------------------------------------------- Yes, good morning, everyone. Just as a follow-up to the discussion on the St. Johns terminal being folded into Canpotex's capabilities, and I suppose a clear willingness to make some hard decisions about your operating facility and optimization. Just curious whether you guys are contemplating any larger strategic shifts in the markets that you service globally, with the objective of really optimizing your logistical and distribution costs, and/or perhaps even just intensifying the efforts from the end markets that you deem most critical going forward? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [70] -------------------------------------------------------------------------------- Yes, thanks for the question, Steve. Not sure if I understood all components, but I think your question is whether or not we will optimize the logistics. And naturally, obviously, this is really a question for Canpotex but I'll speak on behalf. The addition of an east port for Canpotex is really a question whether or not it is more economic to shift to the west through our Vancouver or Oregon port, or whether it is more economic to shift to the east. And that depends on destination. So there are crops of the world that would certainly suggest we should go through the east, and there are parts that would suggest to go through the west. And that is a function not only of distance but also of oil prices and the cost of rail, the cost of shipping, and so on. And that is all being worked out, obviously with the objective to optimize and get the greatest cost benefit of making those choices. In terms of beyond of a major strategic shift, I would say no. I think we have a very proven model, one that PotashCorp and Canpotex has demonstrated over the years. So there's opportunity, there's always opportunity to improve, but I wouldn't qualify it as a major shift. -------------------------------------------------------------------------------- Steve Hanson, Raymond James & Associates, Inc. - Analyst [71] -------------------------------------------------------------------------------- Okay, fair enough. Appreciate the time. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [72] -------------------------------------------------------------------------------- Thanks, Steve. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- John Roberts, UBS. -------------------------------------------------------------------------------- John Roberts, UBS - Analyst [74] -------------------------------------------------------------------------------- Thanks for taking my call. Jochen, you recently made a comment that you would be interested in increasing your positioning your JVs. Was that comment made in the context of something nearer term or do you think the current industry conditions might move things nearer term? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [75] -------------------------------------------------------------------------------- Thanks, John. I'd say this was a generic comment in the question are you interested in M&A. I think the answer tends to be not just (inaudible), but yes, of course, we're always interested, but it depends. And there really is in the context of that, if an opportunity arises, we'll always look at it and it was not specific on any of them and it wasn't meant to suggest any timing on it. -------------------------------------------------------------------------------- John Roberts, UBS - Analyst [76] -------------------------------------------------------------------------------- And the comment just made about corn profitability being relatively good, could you extend that comment to the emerging markets like Latin America, where I think the cash crop margins have improved significantly with the depreciated currencies. But is the financing issues, the ability of the farmer to access, working capital still a major issue there? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [77] -------------------------------------------------------------------------------- Well, in Brazil, it definitely was, but things have improved. So -- and this is mostly for the distributions and the fluctuation in currency. And the shifting valuation of inventories really was one of the biggest issues, and distributors have adjusted to that, whether it's just from hedging or pegging fertilizer prices on a more frequent basis on a daily basis. Stephen, any further comments on? -------------------------------------------------------------------------------- Stephen Dowdle, Potash Corporation of Saskatchewan Inc. - President PCS Sales [78] -------------------------------------------------------------------------------- When you look at what happened in Brazil last year, it was the second best year in terms of just looking, let's say from potash imports. If you look at all the turmoil that that country was going through, and the agricultural sector was really a bit of a shining light in the country. But needless to say, credit issues were really top of mind and is one of the reasons why shipments slow down towards the end of the year in a fourth quarter and have started off the year on a slow pace. That's part of the disengagement of the market that we spoke to earlier. But looking forward, what we see and what we expect in Brazil, and this is some of the other Latin American countries as well that are also producing crops for export, is that we do expect that underlying demand is still going to be very strong. And we're not calling for significant growth in Brazil this year, because we don't know exactly how all these headwinds are going to play out. But we do expect it's going to be right now, on a worst-case scenario, flat this year, and most likely, we will see some growth in 2016. -------------------------------------------------------------------------------- John Roberts, UBS - Analyst [79] -------------------------------------------------------------------------------- Great, thank you. Good answer. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [80] -------------------------------------------------------------------------------- Thanks, John. -------------------------------------------------------------------------------- Operator [81] -------------------------------------------------------------------------------- Steve Byrne, Bank of America. -------------------------------------------------------------------------------- Steve Byrne, BofA Merrill Lynch - Analyst [82] -------------------------------------------------------------------------------- Yes, thank you. Stephen, I believe I heard you earlier in your remarks increase your estimate of total Chinese imports and domestic production of potash up to 15.5 million tonnes, if I heard you right. Is that roughly 5 million tonnes up from where was just a few years ago? And if so, is that reflective of increased application rates or what's your confidence that that's sustainable versus just a big inventory build? -------------------------------------------------------------------------------- Stephen Dowdle, Potash Corporation of Saskatchewan Inc. - President PCS Sales [83] -------------------------------------------------------------------------------- Actually, the number -- our estimate is really 15.8 million tonnes for 2015. That's net imports of 9.1 million tonnes, and then with the domestic production. The growth is coming from a combination of things, but when you consider that over half of the potash that's been used in China is being used on higher value crops like vegetables and fruits, that's really been one of the drivers of the growth in consumption. We've had a long-held view that China was going to be a 20 million tonne potash market, and that would be something that would be consistent with the agronomic need. And what we would say today is that China will be a 20-plus million tonne market to satisfy the agronomic needs. And those cash crops are largely or have been -- the growth in those crops, the growth in demand for those crops has been largely a function of the growth in the Chinese economy and the growth of the middle class and the greater disposable income. But we're also seeing in the rest of -- the broader agriculture, and particularly for the grains, whether it be rice, corn, soybeans, wheat, we're seeing the Chinese place greater emphasis on balanced fertilization. The way that they're doing that is they -- you've seen the compound fertilizer sector grow tremendously just in the last five, six, seven years. And that has really fueled growth in potash demand because you don't build a compound plant and just make N and P, you make NPK and you need the potash for that, and that's really been a big supporter of potash demand growth in China. -------------------------------------------------------------------------------- Steve Byrne, BofA Merrill Lynch - Analyst [84] -------------------------------------------------------------------------------- Thank you, that's very helpful. Can you just comment on how close you see pricing right now in various markets to marginal cost of production for some of the marginal players? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [85] -------------------------------------------------------------------------------- We don't know everyone's marginal cost, particular given that most competitors have multiple assets, multiple operations, multiple mines, so we can't really answer that in terms of how close it is. Not sure if -- we can talk about the markets and some of the cost environments there, and then you'd have to reconcile it against your assumption of where other producers are. -------------------------------------------------------------------------------- Steve Byrne, BofA Merrill Lynch - Analyst [86] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [87] -------------------------------------------------------------------------------- Thanks. -------------------------------------------------------------------------------- Operator [88] -------------------------------------------------------------------------------- Sandy Klugman, Vertical Research Partners. -------------------------------------------------------------------------------- Sandy Klugman, Vertical Research Partners - Analyst [89] -------------------------------------------------------------------------------- Good afternoon. So you're projecting that global potash shipments will be flat to slightly higher in 2016, but the low end of your Company guidance reflects a 5% year-over-year decline. If I am interpreting that correctly and that dynamic does play out, where do you see some of this lost share potentially going? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [90] -------------------------------------------------------------------------------- In terms of geography or? -------------------------------------------------------------------------------- Sandy Klugman, Vertical Research Partners - Analyst [91] -------------------------------------------------------------------------------- I guess geography or producer. In the event that you are down 5%, do you see global shipments coming in below the 59 million to 62 million metric tonne range? -------------------------------------------------------------------------------- Stephen Dowdle, Potash Corporation of Saskatchewan Inc. - President PCS Sales [92] -------------------------------------------------------------------------------- No. Not really. I think when we look around at the markets, we have seen, for example, we saw Brazil decline in 2015 from a record year in 2014. We saw North America off approximately 2 million tonnes in 2015. We saw growth in China, as we talked about. When we look at these large markets and we're projecting into this year, we see that we're going to have a recovery year in North America. We think that Brazil, as I say at worst maybe flattish, but we do think that we're going to see growth in Brazil. And when we look at Southeast Asia, and of course it is the oil palm industry the drive that market and CPO prices have remained very strong, that's been an area that was significantly impacted by El Nino. The USDA has projected flat CPO production in Indonesia, and that's the first time that's happened in a decade. So we expect 2016 to be -- demand in 2016 to be supported by supportive CPO prices, which is what we see right now. We know that India had a substandard monsoon in 2015, and given the expectation that you would have a normal monsoon in 2016, we expect to see some recovery in Brazil. So our outlook overall is not for a decrease in demand in 2016, but we think the conditions are going to be supported for even growth in demand this year. -------------------------------------------------------------------------------- Sandy Klugman, Vertical Research Partners - Analyst [93] -------------------------------------------------------------------------------- Okay. And then just as a follow-up, if 2016 earnings exceed your current expectations, where might we expect to see some of the excess capital that would have gone to the prior higher dividend allocated? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [94] -------------------------------------------------------------------------------- It's 100% payout ratio in 2016. So we obviously balanced it. And it's really the adjustment, as we've looked at our projections for 2016 and most of the difference is really is nitrogen. So it really is an adjustment to market conditions for 2016. -------------------------------------------------------------------------------- Sandy Klugman, Vertical Research Partners - Analyst [95] -------------------------------------------------------------------------------- Okay, the question was really if your earnings exceed your expectations if the environment improves materially in 2016 and you have excess cash flow that would have gone to a higher dividend, how should we think about the capital allocation priorities? Would it just increase your liquidity buffer or are there other uses? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [96] -------------------------------------------------------------------------------- I think, John, that would be a great problem to have. -------------------------------------------------------------------------------- Sandy Klugman, Vertical Research Partners - Analyst [97] -------------------------------------------------------------------------------- That's fair. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [98] -------------------------------------------------------------------------------- We'll most certainly look at the best way to do that. I fully get the question, but if that happens, I think we'll all be very content and find a good way of allocating the capital in a way that creates the best value for our shareholders. -------------------------------------------------------------------------------- Sandy Klugman, Vertical Research Partners - Analyst [99] -------------------------------------------------------------------------------- Okay I think it's a high quality problem to have, that's a fair answer. Thank you. Thanks, John. -------------------------------------------------------------------------------- Operator [100] -------------------------------------------------------------------------------- PJ Juvekar, Citi. -------------------------------------------------------------------------------- PJ Juvekar, Citigroup - Analyst [101] -------------------------------------------------------------------------------- Yes, hi, good afternoon. Jochen, you are choosing to stick with price [over] volume strategy. And I thought that given that your mining background, why not run like a miner to the full extent? And I am sure you've thought about it, so maybe you can explain that strategy. And just related to that, can you talk about Russian ruble devaluation, given that Russia's running full out to maximize their production? Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [102] -------------------------------------------------------------------------------- Thanks, PJ, and good afternoon. I'll start with the back end. We don't talk about our competitors, and it wouldn't be appropriate to talk about them or even suggest what they do or -- so I'll clearly stay away from that. The question on our own assessment is we have a very, very cost competitive, high-quality set of asset of mines that we consider best in class. We believe the ability to balance supply and demand, which we can, is and has been the best strategy. And we'll look at that from an S&D, supply-and-demand perspective, how we project growth, how we project what we think supply in the future will be, then on that basis, we determine that to be the best strategy for us. -------------------------------------------------------------------------------- PJ Juvekar, Citigroup - Analyst [103] -------------------------------------------------------------------------------- Thank you. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [104] -------------------------------------------------------------------------------- Thanks, PJ -------------------------------------------------------------------------------- Operator [105] -------------------------------------------------------------------------------- Fai Lee, Odlum Brown. -------------------------------------------------------------------------------- Fai Lee, Odlum Brown - Analyst [106] -------------------------------------------------------------------------------- Thanks. Jochen, one could argue the Board should have cut the dividend by more than 34% in place of your emphasis on share buybacks, just given the current share, your positive long-term outlook. And the 6.5% yield still seems very generous in the context of what other companies are paying out. Could you elaborate on why this didn't happen? -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [107] -------------------------------------------------------------------------------- Yes, Fai, thanks for the question. I don't want to get into all the detail of the discussion, but I can tell you that it was a very, very thorough analysis. And we've looked at all options. We've assessed ups and downs and risk. And on that basis, we concluded that was the best outcome. And we've done it on a balanced approach, because we still want to be sure that we have a sustainable dividend that's consistent with A, the current market conditions, but also our expectations, and we believe that was the best for our stakeholders and that includes shareholders, debt holders, and certainly employees as well. So on balance, on that balanced approach, we found that to be the right level of alignment. -------------------------------------------------------------------------------- Denita Stann, Potash Corporation of Saskatchewan Inc. - VP IR & Public Relations [108] -------------------------------------------------------------------------------- Anastasia, we have time for just one more question. -------------------------------------------------------------------------------- Operator [109] -------------------------------------------------------------------------------- Our last question comes from Charles Neivert at Cowen and Co. -------------------------------------------------------------------------------- Charles Neivert, Cowen and Company - Analyst [110] -------------------------------------------------------------------------------- Good afternoon, guys, thanks. This is long-range thinking, but legacy is not that all far away. Are you guys thinking about how you're going to handle that once it comes around? I'd be surprised if you aren't developing some strategy around that new addition when it shows up. I'm assuming late 2017, early 2018, but it's never too early to prepare. -------------------------------------------------------------------------------- Jochen Tilk, Potash Corporation of Saskatchewan Inc. - President and CEO [111] -------------------------------------------------------------------------------- Charlie, thanks. We are obviously aware of it. We don't know what the timing is exactly. It think that's what is in the public domain. Again by then, markets will have grown, and we think that our current strategy is -- takes that into account. We have time to see that come through, and by then markets will have grown and that the balance is still within the range of what we think is supportive of our strategy. -------------------------------------------------------------------------------- Denita Stann, Potash Corporation of Saskatchewan Inc. - VP IR & Public Relations [112] -------------------------------------------------------------------------------- Thanks, Charlie, and thank you, everybody, today for joining us. If you have any further questions, please don't hesitate to give us a call at the office this afternoon. Thank you. -------------------------------------------------------------------------------- Operator [113] -------------------------------------------------------------------------------- This concludes today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.
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