Capital Markets Day Morton Salt Capital Markets Day Morton Salt

Capital Markets Day
Morton Salt
Mark Roberts
CEO of Morton Salt
Berlin, 8 December 2010
Experience growth.
Morton Salt
Corporate Overview
z The K+S salt presence in North America consists of
two highly efficient and profitable entities: Morton Salt
and International Salt Company (ISCO).
z Together with our sister company ISCO, we are the
North American market leader in consumer and
speciality salt, industrial salt, and de-icing salt.
z North America’s favourite consumer salt brands
“The Morton Umbrella Girl” & “Windsor Castle”.
z 6 rock salt mines, 7 solar evaporation facilities
and 10 vacuum pan operations as well as 62 salt
stockpiles and 61 distribution centres.
z Annual salt production capacity of 13.1 million
tonnes.
z 2,900 employees – Average tenure ~19 years.
z Headquartered in Chicago; founded in 1848.
December 2010
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Morton Salt
Business Overview
z The only North American salt producer with an evenly
Revenues by Market
balanced product & geographic portfolio.
2009
Ice
Control
31%
z The Consumer business is divided into three product
groups:
• Table and Speciality
• Water Softening
• Packaged Ice Melt
Consumer
46%
z The Ice Control business is divided fairly evenly between
the U.S. and Canada and services the markets from over
60 strategically placed stockpile sites.
z The Industrial business services dozens of end-use
markets and relies on Quality, Reliability and Service to
support our value proposition.
z The overall business is recession-resistant.
December 2010
Industrial
23%
Distribution of business into
three significant parts
provides a “three legged
stool”, unmatched by any
N.A. salt competitor.
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Morton Salt
Production Sites in North America
Lindbergh, AB
Regina, SK
Mines Seleine, QC
Manistee, MI
Pugwash, NS
Ojibway, ON
Windsor, ON
Silver Springs, NY
Perth Amboy, NJ
Fairport,OH
Grantsville, UT
Rittman, OH
Newark, CA
Long Beach, CA
Glendale, AZ
Hutchinson, KS
Production method
Rock salt (6)
Grand Saline, TX
Port Canaveral, FL
Weeks Island, LA
Inagua, BH
Solar evaporation salt (7)
Vacuum salt (10)
December 2010
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Morton Salt
Safety
z Morton Salt is the industry leader when it
Occupational Illness & Injury (OII) Rates*
comes to safety in the workplace.
1,9
z Our credo - “Nothing is more important to
1,8
Morton Salt than health and safety, not
production, not sales, not profits.”
1,7
1,6
z Morton is one of only seven companies with
1,5
Morton (YTD Oct.)
corporate OSHA VPP (Voluntary Protection
Program) status – an employee-led safety
initiative:
•
•
•
•
•
•
•
•
Morton Salt
Delta Airlines
General Electric
Dow Chemical
Jacobs Engineering Group, Inc.
Fluor Corporation
Parsons Corporation
The Washington Division of URS Corporation
N.A. Salt Industry (Jan-Jun)
Lost Time Injury (LTI) Rates*
0,35
0,34
0,33
0,32
0,31
0,30
0,29
Morton (YTD Oct.)
N.A. Salt Industry (Jan-Jun)
* per 200,000 working hours
December 2010
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Morton Salt
The Brand
The Morton brand is an American Icon
z The Morton Umbrella Girl is nearly 100 years
old.
z Virtually universal awareness (95%) among
American consumers.
z Evokes feelings of quality, trust and purity.
z 87% of consumers attribute high quality and
reliability to the brand.
z 75% of shoppers at a leading mass merchan-
diser prefer to buy System Saver II vs. 4% for
next leading brand.
Î
Provides a strong foundation for price
premium, product innovation and product
line extensions.
Sources: Morton Tracking Study Wave 3, DDB 2004; Water Softener Salt Channel
Assessment Report, Market Tools May, 2010.
December 2010
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Morton Salt
The Brand
The Morton brand is an American Icon
z The Morton Umbrella Girl is nearly 100 years
old.
z Virtually universal awareness (95%) among
American consumers.
z Evokes feelings of quality, trust and purity.
z 87% of consumers attribute high quality and
reliability to the brand.
z 75% of shoppers at a leading mass merchan-
diser prefer to buy System Saver II vs. 4% for
next leading brand.
Î
Provides a strong foundation for price
premium, product innovation and product
line extensions.
Sources: Morton Tracking Study Wave 3, DDB 2004; Water Softener Salt Channel
Assessment Report, Market Tools May, 2010.
December 2010
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Morton Salt
Consumer Products – Advertising & Promotion
z New, overarching ad/promotional campaign will further
build up the brand across all product lines.
z Utilize the Umbrella Girl & Morton name as a true
differentiator.
z Underlying theme – “She Makes Everything Better”.
z Unexpected events with The Girl will generate interest,
conversation, and buzz.
z Increased focus on social media space will help
connect with younger consumers.
z Integrated advertising, promotion, web and social
media will work harder to make The Girl relevant.
December 2010
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Morton Salt
Consumer Products: Clear Market Leader in
Table and Speciality Salts
Market Leader in Table & Speciality
z
Table & Speciality (Dollar shares)
Morton Salt with 35% share
• Morton is #1 in the high-growth / high-margin
sea salt category.
• Morton is #1 in the high-growth / high-margin
kosher salt category.
Shift towards higher profitability products
% of Sales Dollars
100%
80%
17%
3%
Round Cans
22%
14%
60%
40%
80%
Sea Salt
Kosher Salt
23%
24%
21%
22%
Other
16%
Cargill
4%
Morton Salt
35%
P/L
16%
MCCormick
30%
Source: The Nielsen Company, Grocery Channel,
4 wks ending, 10/9/10.
Salt for
chemical use 6%
64%
56%
54%
2009
2010e
2011e
20%
0%
2005
December 2010
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Morton Salt
Consumer Products: Clear Market Leader in
Water Softening
Market Leader in Water Softening
z Morton is the market leader in water
softening with 52% share of pellets.
Water Softening (Dollar shares)
P/L 6% Other 1%
Compass
4%
z Morton outperformed competition on all top
Morton Salt
52%
drivers of brand loyalty.
• Morton water softening salt commands 84%
loyalty.
Cargill
31%
• 73% of users agree that Morton is the
authority on water softening salt.
• 71% are satisfied that Morton has the most
advanced formula.
• 68% say that Morton is the leader and the
most popular brand.
Sources: 2008 McKinsey Study on Water Softening; AC Nielsen Homescan 2009 Share of Requirements;
Salt Institute C’10 Jan-June $ share; Morton estimate of competitive breakdown.
December 2010
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Morton Salt
Consumer Products: Packaged Ice Melt Growth
Ice Melters
Ice Melters (Dollar shares)
z Consumers prefer Morton branded ice melters
Other
19%
2 to 1 over other leading brands.
Morton Salt
25%
z Service is paramount – Morton awarded the
Walmart “Supplier Collaboration Award of the
Year” for service performance in ’09/’10 season.
z Great synergies with ISCO.
Cargill
12%
Scotwood
13%
Compass
31%
Morton Ice Melt Blend Volume Growth (tonnes)
%
145
GR
A
C
C'07
C'08
C'09
C'10 (plan)
Sources: Internal Estimates Based on BCG Analysis 2009 and The Nielsen Company Data; Understanding the
Purchase Dynamics of Ice Melting Products, DDB 2007
December 2010
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Morton Salt
Governmental De-icing Market – North America
The public safety and economic benefits of road salt use are clear.
z Winter weather congestion affects 70% of U.S. roadways.
z Roadway de-icing reduces crash frequency by 88.3 percent.
z De-icing decreases the average cost of each crash by 10 percent.
z During the first four hours after salt is applied, the direct road users’ benefits
(i.e. increased mobility, productivity & hourly worker compensation) are $6.50
for every $1.00 spent on direct maintenance costs for the operation.
z A one-day major snowstorm can cost a state $300-$700 million in both direct
and indirect costs (i.e. reduction in commerce & associated tax revenue).
Morton/ISCO – Even distribution of
volume between three key markets.
Long-term average ice control shipments
35%
Midwest
Canada
USEC
37%
28%
Sources: Marquette University and Global Insight Studies / Salt Institute
December 2010
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Morton Salt
Governmental De-icing Market – North America
z Morton & ISCO’s combined broad
production & stockpile footprint is
geographically attractive to high snowfall /
high population density markets.
z With the addition of SPL’s high capacity &
low fixed cost supply sources (from Chile
and Brazil), there is now ample capacity
to meet the near-term needs of a bulk
de-icing market which is growing at 1-2%
per year.
z The newly combined production footprint
will be re-balanced annually to meet the
anticipated seasonal market demand.
December 2010
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Morton Salt
Governmental De-icing Market – North America
Seasonal governmental ice control sales volumes compared with 9-year normalized volumes
%
50
40
30
21
20
10
10
11
10
7
0
-10
-7
-14
US East Coast
Midwest
Canada
Weighted Average
-16
-20
-22
-30
-40
-50
'01/'02
'02/'03
'03/'04
'04/'05
'05/'06
'06/'07
'07/'08
'08/'09
'09/'10
z The three North American regions served by K+S provide a nice winter business balance with a high
chance to balance each other out. No other North American salt company has the same presence.
z On the basis of the whole salt division, the European de-icing region adds even further diversification.
z Less overall volatility provides a more predictable cash flow.
z The broad K+S production network ensures supply in order to capitalize on the ‘up’ winter regions.
December 2010
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Morton Salt
Business Weather Intelligence
z Morton takes a unique, pro-active approach towards
the weather impact on business by partnering with
Planalytics.
• Provides timely, actionable insights into impending winter
96 Metro Areas
Snowfall
Comparison
• Facilitates production and logistics planning adjustments.
• Planalytics forecast accuracy up to 90% over 1-2 week view.
OCT
Accumulated Amounts
(Inches)
• Adds value to our product offering.
2007-2008 Monthly Snowfall
Normal Monthly Snowfall
Accumulated Season 2007-2008
Accumulated Normal Season
NOV
DEC
JAN
2008-2009 Monthly Snowfall
LR 2009-2010
Accumulated Season 2008-2009
LR 2009-2011
FEB
MAR
3000
1200
2500
1000
2000
800
1500
600
1000
400
500
200
0
Monthly Amounts (Inches)
Bar Graphs
weather demand patterns – 2-week view.
0
z Utilizing BWI
• Planalytics automated daily snow alerts provide projected
snowfall by day AND a detailed listing of when and how much
by customer location – driving replenishment orders.
• Alerts sent to our sales group and key customers who then
make decisions on pushing product to highest impact
locations.
• Increases sales, minimizes unsold inventory costs, speeds
replenishment, sets Morton apart from competition as superior
vendor.
December 2010
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Morton Salt
Industrial Products
Food Processing
Distributor
Chemical
Oil
Health Care
AG
Gov. Muni. & Inst.
Utilities
Salt Companies
Other
Detergent
Ice Melters
Paper
Hide Processing
Misc. Industries
Textile
z Diverse group of markets served.
z Focus on Quality, Reliability and
Service to support value proposition.
• Every industrial product produced at a
minimum of 2 plants.
• Broad production footprint provides unmatched
service levels.
z Highly skilled sales force, most with
technical degrees.
z Recently added Kosher salt capacity
will allow the Industrial sales team to
recapture market share previously shed
to support CPG growth.
Dendritic
Solar
Rock Pretzel
HG Blending
KCl
Kosher
z Morton offers the broadest industrial
salt product range in the salt industry.
December 2010
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Morton Salt
Industrial Products
z Industrial Products group focused on
obtaining a price premium for providing the
Quality, Reliability and Service that support
value proposition.
Industrial Products
300
2004 -2010e Gross Profit Contribution
2004 = 100%
%
250
z Future profitability will be bolstered by the
same shift to higher-margin sea salt and
kosher salt as seen in the consumer
business.
200
150
100
z Although dietary sodium reduction is a
pressing topic, many food processors have
already made formulation changes without
fanfare as low-sodium means “low-taste” to
consumers.
December 2010
50
0
2004
2005
2006
2007
2008
2009
2010e
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Morton Salt
Low Sodium Discussion
z Beyond providing flavour, salt plays a key role in
food – ensuring texture and preservative properties.
z The science behind the push for lowered dietary
sodium levels is mixed:
• USDA is contemplating a reduction in the recommended
daily sodium consumption levels from 2,300 mg/day to
1,500 mg/day.
• However, recent medical studies including one from the
Harvard School of Public Health (November 2011) suggest
that humans consume a very consistent level of sodium
regardless of the sodium content in processed foods.
z Regardless of the science, Morton is playing a pro-
active role in providing information and solutions,
both to industry and consumers.
• Morton is offering Potassium Chloride and Potassium
Chloride blends, and will continue to work with K+S KALI to
combine efforts in this area.
• Morton is offering “salt savvy” messaging on table salt
products – suggesting responsible salting while offering
product alternatives.
December 2010
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Morton Salt
Post-Closing Business Integration Issues
z Post-Closing Integration Steps & Projects
• Timely financial reporting in keeping with K+S & IFRS reporting standards.
• Inclusion of Morton into K+S scheduling and budgeting structures/processes.
z Business Integration
• Reorganization of roles/responsibilities between ISCO and Morton in North America.
• Identification and implementation of best practices between the various salt companies.
z Carve-Out of “non-salt“ activities
• Establishment of necessary legal entities as prerequisite for the transfer and ultimate
elimination of former Morton “non-salt“ activities.
• Return of shell company with environmenal risks to Dow Chemical, occurred on 1
November 2010.
z IT-Integration
• Integration of Morton into K+S IT platform will bring benefits.
• Easier flow of financial data for consolidation and budgeting purposes.
• Improved back-end reporting will provide more timely information for management of
Ongoing
business.
• Platform “go-live“ for Morton Canada expected mid-2011, Morton USA mid-2012.
December 2010
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Morton Salt
Business Synergies
Morton Salt valuation was made assuming no synergy savings; however, there are in
fact considerable and sustainable synergies.
z Quick wins.
• Joint purchase of Calcium Chloride.
• Morton supplying ISCO water softening and other specialities.
~ $4 million
• Morton (Inagua) supply to ISCO in winter ‘09/’10.
z Identified, in synergy realization phase.
• Optimization of logistics flow for U.S. East Coast.
• Earnings potential due to reorganization of salt in North America.
~ $5 million
z Earnings potential from other efficiency projects mid-term view.
• Best Practices (mining/technology).
• Procurement synergies (i.e. bags, pallets, ingredients).
• Energy (gas/coal).
~ $15-$20 million
• Transportation (truck / barge / container / vessel).
December 2010
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Morton Salt
Promising Outlook ahead within the K+S Group
z From a global perspective, Morton Salt broadens the geographic footprint of a weather-
impacted salt business.
z In keeping with the K+S Vision and Mission, Morton Salt will integrate its long-term
strategic plan into that of the Business Unit Salt.
z There are real, as yet unexplored synergy opportunities.
• Best practice sharing.
• Mining techniques.
• Safety programs.
• R&D - new product development.
• Food and Pharma grade KCl sales – leverage for Morton’s sales force & market knowledge.
• Health & Beauty market – leverage for Morton’s strong brand identity.
z K+S’ Salt business creates a strong North American platform and knowledge base from
which other growth opportunities can be launched. We have a high level of regional
competence in transportation, solution mining, regulatory issues, etc.
z The traditional Morton Brand has a bright future …
December 2010
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K+S Group
Forward-Looking Statements
This presentation contains facts and forecasts that relate to the future development of the K+S
Group and its companies. The forecasts are estimates that we have made on the basis of all the
information available to us at this moment in time. Should the assumptions underlying these forecasts prove not to be correct or should certain risks – such as those referred to in the recent Risk
Report – materialise, actual developments and events may deviate from current expectations. The
Company assumes no obligation to update the statements contained in this presentation, save for
the making of such disclosures as are required by the provisions of statute.
K+S Gruppe
K+S Group
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K+S Aktiengesellschaft
Bertha-von-Suttner-Straße 7
34131 Kassel | Germany
phone: +49 (0)561 / 9301-0
fax:
+49 (0)561 / 9301-1753
Investor Relations
phone:
fax:
email:
Internet:
+49 (0)561 / 9301-1100
+49 (0)561 / 9301-2425
investor-relations@k-plus-s.com
www.k-plus-s.com
Experience growth.
K+S Gruppe
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