Global and Brazilian Fertilizer Market Company Overview November, 2010 1
Index Global and Brazilian Fertilizer Market...05 Company Overview...16 2
Global and Brazilian Fertilizer Market 3
(millions of tons by Nutrient - NPK) World Fertilizer Consumption by Nutrient N P₂O₅ K₂O Σ 158.0 1.1% Σ 159.8 5.8% Σ 169.1 Σ 187.3 99.0 101.7 103.9 111.7 32.0 36.0 38.6 43.7 27.0 22.1 26.6 31.9 2008 2009 2010 2014 Growth of 1.1% in 2009, compared to a 6% drop in 2008 due to the global crisis Expected growth of 5.8% in 2010 IFA projects CAGR of 3.2% in world fertilizer consumption from 2009 to 2014 Source : Heffer, IFA, June 2010 4
mm tons CAGR (1990-2009) World Markets and CAGR of Leading Markets, 2009 World s Leading Fertilizer Markets (1) CAGR of Leading Markets Brazil 5.7% Indonesia 2.5% Pakistan 2.5% France 1.8% 60.0 50.0 7.9% 11.0% 9.0% 7.0% US 11.3% India 16.2% Others 29% China 31% 40.0 30.0 20.0 10.0 3.4% 4.3% -0.2% 5.0% 3.0% 1.0% -1.0% -3.0% -5.0% 0.0 China India US Brazil 1990 2009 CAGR -7.0% Brazil is the 4 th largest fertilizer market in the world and is growing above the global average Note:(1) In nutrients consumption / Source: IFA/ANDA 5
( In thousands of tons ) Evolution of the Brazilian Fertilizer Market CAGR of Brazilian GDP from 1995 to 2009: 2.77% CAGR of agricultural GDP from 1995 to 2009: 2.48% 24.6 22.8 22.8 22.4 22.5 19.1 20.2 21.0 16.3 17.0 13.8 14.6 13.6 12.2 10.8 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Plated Grain NPK Area Production 1995 33.7 10.8 69.0 1996 34.7 12.2 74.9 1997 34.6 13.8 75.4 1998 36.7 14.6 82.9 1999 37.8 13.6 84.4 2000 37.5 16.3 100.1 2001 40.0 17.0 98.2 2002 43.9 19.1 124.8 2003 48.0 22.8 120.2 2004 48.8 22.8 113.6 2005 46.4 20.2 118.0 2006 45.5 21.0 134.6 2007 47.3 24.6 146.5 2008 47.6 22.4 134.6 2009 47.9 22.5 144.2 Source : Anda / IBGE / Agroconsult 6
(in thousands of tons) The Brazilian Market projection 24.6 22.4 22.4 23.0 23.9 24.7 25.7 26.8 28.0 29.1 30.0 31.1 32.1 33.2 Source: Anda E Estimate 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E Heringer s estimate for 2010 is 23.5 million metric tons The CAGR of 3.6% from 2009 to 2020 is based on the volume estimated by the National Fertilizer Association (ANDA) and it is in line with the projected world growth 7
1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Technology Applied to Fertilizer Use in Brazil 1,800 1,600 1,400 1,200 1,000 800 Harvest 69/70 = 100 *PLANTED AREA/ha (CAGR 2%) *AGRI-PRODUCTION (CAGR 5%) FERTILIZERS (CAGR 7%) 600 400 200 0 CAGR of planted area was 2% from 1969 to 2009, while CAGR of agricultural production was 5% The 7% CAGR in fertilizer consumption shows this input s contribution to environmental preservation, combined with significant gain in agricultural productivity *Planted area in hectares of soybean, corn, beans (grains), paddy rice, wheat (grains), herbaceous cotton (seeds), sorghum (grains), oats (grains), barley (grains), triticale (grains), sunflower (grains), rye (grains). *Agricultural production of the following crops: soybean, corn, beans (grains), paddy rice, wheat (grains), herbaceous cotton (seeds), sorghum (grains), oats (grains), barley (grains), triticale (grains), sunflower (grains), rye (grains). Source: Agroconsult 8
Estimated Area (millions of hectares) Estimated Area (millions of ha) Amazon Forest 350 Legal Reserve 55 City, lake, river and wet lands 20 Others 54 Reforest 5 Sub-total 484 NORTH MIDWEST NORTHWEST Pasture 215 Annual Crops 47 Permanent Crops 15 Available Area for Agriculture 90 Sub-total 367 SOUTHEAST Total 851 SOUTH Source: FAO, IBGE; EMBRAPA Study: Alcance territorial das áres de conservação + terras indegenas (Territorial extension of protected areas + indigenous lands) by Dr. Evaristo Eduardo de Miranda, head of EMBRAPA Monitoring via Satellite); Agroconsult 9
Brazilian Fertilizer Market, 2009 In 2009, Brazil imported 64% of the raw materials for its fertilizer mixes In line with the Brazilian market, Heringer imported 61% of fertilizers in 2009 36% 27% 62% 17% 64% Petrobras Fosfértil 73% fussr 1 Bulgaria Netherlands US Venezuela Argentina South Korea HERINGER Fosfértil Copebrás Vale Mosaic Galvani Others 38% US Morocco Tunisia fussr 1 Others Vale 83% fussr 1 Canada Israel Germany Others Total NPK N P K Imported Local Note: 1 fussr: Former USSR / Source : ANDA 10
Brazilian Fertilizer Production Chain Increased integration and concentration of fertilizer producers Basic Raw Material Fertilizer Production Final Product Phosphate Rock (P) Natural Gas (N) Potassium (K) Phosphorus (P) Nitrogen (N) Potassium (K) Mixtures and Distributors (NPK) Vale Fert. Copebras Galvani Petrobras Vale Fert. Heringer Vale Fert. Copebras Galvani Yara Roulier Others Vale Fert. Petrobras Vale Fert. Bunge Heringer Mosaic Fertipar Yara ADM Others 11
Major Players in the NPK Market 1995 2008 YARA 17% Serrana 11% Trevo 14% Fertibras 3% IAP 7% MOSAIC 11% Solorico 7% Manah 10% Fertiza 4% COPAS HERINGER 6% 4% OTHERS 30% MOSAIC 11% / 12% YARA 11% / 12% FERTIPAR 11% / 12% ADM 5% / 6% HERINGER 14% OTHERS 14% / 19% BUNGE 28% / 30% BUNGE 32% Takenaka 4% 2009 = 17.5 9M10 = 17.9% Heringer s unique sales network and its focus on the retail segment are important drivers of its market consolidation Source: Heringer 12
Production Cycle in Brazil CROPS Soybean JAN FEB MAR APR MAY JUN Harvest JUL AUG SEPT OCT NOV DEC Plantation Sugarcane Coffee Sugarcane Summer and Spring Crops Plantation North East Harvest Plantation/Coverage Harvest Mid-South Harvest Sugarcane Summer Crop Platation Plantation/Coverage North East Harvest Corn Winter Crop Plantation Harvest Winter Crop Harvest Plantation Cotton (Mato Grosso) Winter Crop Plantation / Coverage Crop Harvest Winter Crop Harvest Crop Plantation Production cycle of the five main crops with the highest fertilizer consumption in Brazil 13
Brazil: Important Agribusiness Player Brazil as a % of World Production, 2009 Brazil as a % of World Exports, 2009 1 st 1 st 61% 1 st 36% 2 nd 1 st 27% 24% 4 th 5 th 7% 5% 87% 1 st 2 nd 29% 32% 1 st 48% 3 rd 5 th 9% 6% Orange Juice Coffee Soybean - Grain Sugar Corn Cotton Orange Juice Coffee Soybean - Grain Sugar Corn Cotton Brazil is one of the largest producers/exporters of agricultural products, and has one of the lowest production costs worldwide Fonte: USDA/ Agroconsult 14
Company Overview 15
Vision, Mission and Values of the Company Vision To be recognized as the best plant nutrition company and a benchmark in the dissemination of the proper and effective use of agricultural technology. Mission Providing farmers with the best plant nutrition solutions, backed by service excellence, pioneering products and exemplary quality, meeting the expectations of our clients, shareholders and employees and promoting efficient, profitable and sustainable agricultural activities. Values Respect for people Respect for and compliance with established agreements Commitment to truth and fairness Respect for current laws, cultures and customs Clear and honest communications Commitment to the environment Freedom with responsibility Innovation and creativity 16
in thousand of tonnes in thousand of tonnes Evolution of Brazilian Market and Heringer 3.7% Heringer Market Share 17.5% 1H10 = 19.0% 0.4 0.7 0.8 1.0 1.1 1.5 1.5 1.7 2.1 2.2 2.0 2.5 3.3 3.2 3.9 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 10.8 12.2 13.8 14.6 13.6 16.3 17.0 19.1 22.8 22.8 20.2 21.0 24.6 22.4 22.5 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Anda 17
Fertilizers Delivered by Crop Brazil - 2008 Brazil - 2009 Reforest 3% Reforest 2% Sugarcane 13% Coffee 6% Others 25% Sugarcane 14% Coffee 7% Others 26% Corn 20% Soybean 33% Corn 16% Soybean 35% Crop diversity enables the continuous growth of agribusiness in Brazil Source: LSPA IBGE/CEPE AGRO and ANDA 18
Fertilizers Delivered by Crop - Heringer Heringer - 2008 Heringer - 2009 Reforest 8% Reforest 5% Coffee 16% Others 21% Coffee 20% Others 21% Sugarcane 17% Corn 18% Soybean 20% Sugarcane 16% Corn 17% Soybean 21% Heringer offers solutions for many different crops, minimizing the volatility associated with local climates and other specific conditions, such as price cyclicality and pests Source: LSPA IBGE/CEPE AGRO e ANDA 19
Sales by Segment 2008 2009 Cooperatives 6% Resale 7% Cooperatives 6% Resale 6% Individuals 40% Companies 47% Individuals 50% Companies 38% Individuals/Companies = 87% of volume Individual/Companies = 88% of volume Focus on the retail segment is important for increasing profitability and mitigating risks In 2009, we sold to 3,745 municipalities, 67% of the total in Brazil 20
Client Base Evolution +13.7% +29.3% 31,057 35,306 45,653 2007 2008 2009 Continuous growth of the Client Base 21
Mixing Units and Production Capacity 19 units located in the main consumer markets, installed mixing capacity of 5.7 million tons 1 Sulfuric Acid and Single Super Phosphate (SSP) Unit NORTH NORTHWEST Rosário do Catete Camaçari Rondonópolis Anápolis Legend Mixing Units SSP Unit MIDWEST Dourados Rio Verde Uberaba Iguatama Três Corações Manhuaçu Bebedouro Catalão Ourinhos Paulínia Porto Alegre Rio Grande Paranaguá São João do Manhuaçu SOUTH Viana SOUTHEAST 22
Financial Highlights 2006 2007 2008 2009 Volume (Tons/thousand) 2,503.4 3,265.0 3,190.0 3,933.0 Net Income (R$ thousand) 1,425,969 2,260,839 3,524,559 3,192,314 EBITDA (R$ thousand) 58,606 83,266 90,113 36,913 EBITDA Margin 4.1% 3.7% 2.6% 1.2% The sharp drop in raw material prices since September 2008 caused a loss in inventories, pressuring industry margins The market s 9% contraction in 2008 and the slight 0.2% growth in 2009 contributed to reducing the industry s margins Strong exchange variations in 2008 and 2009 also affected the fertilizer industry s results 23
Brazilian Fertilizer Market - Seasonality Higher volume in the second half of 2010 in comparison with recent years 38% 51% 37% 36% 62% 49% 63% 64% 2007 2008 2009 2010E 1 st Half 2 nd Half Source: Anda/ Company s Estimate 24