Mosaic Company (MOS) — Q4 2017 Earnings Call Transcript

Thank you and welcome to our fourth quarter and full year 2017 earnings call. Presenting today will be Joc O'Rourke, President and Chief Executive Officer. We also have other members of the senior leadership team available to answer your questions after our prepared remarks. The presentation slides we are using during the call are available on our website at mosaicco.com. We will be making forward-looking statements during this conference call. The statements include, but are not limited to, statements about future financial and operating results. They are based on management's beliefs and expectations as of today's date and are subject to significant risks and uncertainties. Actual results may differ materially from projected results. Factors that could cause actual results to differ materially from those in the forward-looking statements are included in our press release issued yesterday, and in our reports filed with the Securities and Exchange Commission. We will also be presenting certain non-GAAP financial measures. Our fourth quarter press release and performance data attached as exhibits to the Form 8-K filing also contain important information on these non-GAAP measures. Now, I'd like to turn the call over to Joc.

Good morning. Thank you for joining our fourth quarter and full year 2017 earnings call. We are going to keep our prepared remarks at a high level today and allow plenty of time for your questions. Before we get into the results, I would like to take this time to welcome Tony Brausen, Interim CFO to his role. He has been helping me prepare for every earnings call since I became CEO and is a valuable member of our leadership team. Now let's move on to earnings, although we reported a GAAP net loss of $431 million, it does not reflect the strength of the underlying business. Reported results include a $458 million non-cash charge related to the new U.S. tax legislation. Going forward we expect the new legislation to provide cash benefits in excess of $200 million over the next five years. EBITDA in the quarter was $271 million, up 36% from a year ago. Mosaic enters the year with a strong quarter and significant momentum, driven by important strategic decisions, strong operating performance, and improving market conditions as we head into 2018. We would like you to take away three key messages today: first, we continue to expand our record of successful strategic actions to deliver shareholder value across the cycle. Second, with the acquisition in Brazil now complete, we are highly focused on achieving the savings target and business transformation we outlined in our last call. And third, business conditions improved markedly in 2017, and we expect momentum to continue this year. For the quarter, Mosaic reported a loss of $1.23 per share; excluding tax-related charges and other notable items, adjusted earnings were $0.34 per share on sales of $2.1 billion. For the year, the company reported a loss of $0.31 per share, with adjusted earnings net of notable item at $1.09 per share on sales of $7.4 billion. Our solid financial performance was driven by improving market conditions but also by our cost reduction initiatives. Last year we made important decisions to transform our business and those decisions are generating meaningful benefits. I'll review these quickly. We idled our Plant City phosphate facility in Florida demonstrating our commitment to optimizing production from our lowest cost facilities and removing 1.4 million tons of annual finished product from global supply. Phosphate prices rose in response, and our fourth quarter gross margin rate in the business unit expanded to $53 per ton from $34 a ton a year ago. In addition, the phosphates business also embarked on a major transformation effort that is expected to lead to reduced costs, improved processes, and further margin expansion. In the potash business, where the transformation is further along, costs remained near historical lows while we produced at high rates to meet record global demand, and we reduced our capital spending without compromising the safety of our people or the integrity of our assets. Taken together, these costs and capital-related decisions provided significant cash flow benefits and strengthened our ability to prosper. At the same time, we put capital to work to generate future returns. We also made good progress on our major strategic initiatives; our Esterhazy K3 complex is nearing completion, and we have produced the first meaningful tons of potash from the new facility. We expect Esterhazy to be amongst the lowest cost potash mines in the world, as over time K3 will allow us to eliminate brine management expenses. Our joint venture with Ma'aden, the phosphate complex, is ramping production providing us access to low-cost production and advantageous access to India and other Asian markets and, of course, we completed our largest acquisition ever, and we did so on terms that were renegotiated to benefit Mosaic by several hundred million dollars. The newly formed Mosaic Fertilizantes in Brazil and Paraguay makes Mosaic America's powerhouse with advantaged access to customers in key agricultural regions. Our team in Brazil is off and running working to transform the business and deliver the $275 million in total synergies we revealed last quarter. We expect to achieve at least $100 million of those synergies in this year alone, and that is after any costs to achieve them. In fact, we plan to exit the first quarter having already achieved $40 million of run rate synergies, and we will be booking a charge associated with the cost to achieve those in this quarter. Overall, we have made a great deal of progress in 2017, and we are not stopping there. We will continue to drive for efficiency improvements while maximizing the value of our asset portfolio all around the world. We have also continued to focus on our financial priorities, which begin with maintaining a strong financial foundation. In the fourth quarter of 2017, we issued $1.25 billion of debt to finance the cash portion of the Vale Fertilizantes acquisition. With our stronger business performance in 2017, the $411 million in cash from operations we generated during the quarter, and our improved outlook for 2018, we are already making progress towards our targeted leverage ratio of approximately two to two and a half times net debt to EBITDA. Under the renegotiated terms of the acquisition, we transferred just over $1 billion of cash, and we're also able to pay down $200 million of our outstanding term loan. During 2018, we expect to use our cash to pay down a total of at least $350 million, which is halfway to our original debt retirement goal of $700 million by the end of 2020. The overall message here is that we are on solid financial footing, and we are well on our way to making Mosaic efficient and highly competitive on a global scale regardless of the business conditions. Before I conclude, I want to provide a brief update on market conditions. Potash and phosphate prices have been low for several years, in large part because of expectations of significant new capacity. Now, as those new tons begin to come to market, prices have moved upward due to two primary forces. First, global potash and phosphate demand has continued to grow, and our market analysis team now expects another record year for global shipments of both products. Demand has been resilient due to positive economic factors. The second factor driving fertilizer prices higher is that new capacity has delivered fewer tons than expected. And those tons that are coming to market are being offset by higher cost production that has been idled or permanently stopped. Market fundamentals were quite strong for the first half of the year, and with the many actions we've taken to solidify the business, we believe our performance will continue to strengthen in 2018. We have simplified our guidance to better align with our new segments, and for the first time, we are providing annual earnings per share guidance. We expect annual adjusted earnings per share in the range of $1 to $1.50. The wide range at this early stage in the year reflects the inherent uncertainty and the timing and magnitude of changes in market prices for our products, which provides both opportunity and risk to our forecast. Our two primary areas of focus are first, ensuring that we continue to operate efficiently and second, capturing Mosaic’s synergies. We are also watching Brazilian reais and the Canadian dollar exchange rates given the impact they have on our profitability. Our industry and our company have enjoyed an enormous amount of change over the past several years. At Mosaic, we took advantage of market conditions as they changed, and we have made and are continuing to make structural improvements to strengthen the company for the long-term. One area that will not change: we will continue to operate responsibly with integrity and the highest degree of efficiency while maintaining our commitment to our many constituents. Our customers who serve those needs, shareholders, employees, our communities, non-government organizations, and the governments, because the sustainability and prosperity of this enterprise is important to all those constituent groups. I make this point because it is easy to lose sight of the big picture in challenging times. We have a vision that transcends day-to-day changes in the market, and we fully intend to bring that vision to fruition. Now we will take your questions. Operator?

Just wondering if you can give a little bit more detail on your expectations this year as they relate to the Fertilizantes assets and I guess just in terms of what production levels you are anticipating from a wholesale perspective, and as I look at the gross profit per ton that you've guided to, what that incorporates for synergies and maybe you could just help us understand and I know we don’t have the fourth quarter results yet in the pro formas, but what you think the base is of 2017 when you strip out some of the other sort of non-GAAP or one-off issues that the company had last year. I mean how should we be thinking about that year-over-year? Thanks.

Well, good morning Vincent, thanks for your question. So let me start by saying the expectations that we are guiding to are what we expect for the combined business of what is now Mosaic Fertilizantes, which is our distribution business and our wholesale or B2B businesses, and I am going to let Rick talk a little bit about volume expectations and what not, but let me start by saying we are very excited about where this business can go, Rick and I were there last two weeks ago, touring the sites and we just see so much opportunity there that we’re pretty excited. As we look at the places where we see those opportunities to add value, we believe we can drive real efficiencies across the mining, processing, and support functionalities, the normal synergy areas. The one we don’t talk much about, you don’t hear too much, are we see huge opportunities in our go-to-market strategy as well and what we can do there, I’ll give you a couple of examples here, and we’re also making I think really good progress towards the $275 million and, including in that, is we expect a $100 million of net benefits this year. So that’s net of any costs to achieve them. And we’ll be, as I mentioned in my earlier remarks, we will be actually having an allowance for that in the first quarter. But let me just give you a couple of good examples of where we’re going with that. First of all, we see a $24 million achievement already basically booked for this core first quarter on labor, we’re going to have about a $9.4 million benefit on equipment reduction and equipment optimization in the gypsum area, the rethinking about gypsum strategy will net us approximately $3 million to $3.5 million per year. And one that you won’t comment on are synergies, our rethinking of our strategy around pricing and marketing of seed will probably net us in the range of $20 million per year starting this year. So, we got a lot of things on the go, and I’m very confident that we’re going to hit our $100 million this year and our $275 million in the next. Before I give it over to Rick, I just want to remind you of one other thing, which is we renegotiated this deal at the end of last year and part of that was due to the underlying underperformance of the business in previous years. So, that allowed us to renegotiate and so the baseline is low, but we still expect very solid returns overall, over time. So, let me hand it over to Rick to just give you some ideas on production. Rick?

Yeah. Thanks, Joc. Good morning, Vincent. From our perspective here on the distribution side, we see our distribution business growing as the market grows, so the expectation is a 2% to 2.5% increase in the overall volume of tons here in Brazil. So, we see us following that path. We’re at a market share that we’re very comfortable with on the distribution side. On the production side, I think the target for us this year is around 4 million tons of PNK production. Last year, there were some issues with production here on the Vale Fertilizantes side, and we’re working to address them. The only thing that I would add to your comments about the changes that we're making and things that are going on is we've done something here with all of our employees in engaging them to identify areas that we can save. And to be honest, there are some pent-up changes that are bubbling up that really give us a lot of confidence in both the $100 million number for this year and $275 million for the future. Thanks John.

I think that's a great point that Rick makes, and one of the things that I was struck with, like say being there a couple of weeks ago, was we've been very clear with the employee base; big changes need to be made, but it seems certainly that they're very engaged and very onboard with making those changes. So, it's going very well, I think.

So, regarding the synergies for Fertilizantes, is it fair to say that these are both synergies and cost savings? It sounds like these are assets that maybe haven't had the right attention, and investments required maybe were a little bit neglected, and you're bringing a fresh viewpoint to drive some of these cost savings and then also have synergies with your distribution business there?

Yes, absolutely, and I think as we clarified at last quarter, we see this as approximately $125 million of what I would call traditional synergies; those are admin and what not that we just – because we are combining the two, we'll see a lower price probably for sulfur because of our buying power, and those are traditional synergies. Above and beyond that, we see about $150 million of what I would call operational disciplines and those real cost savings that we've implemented in our potash and phosphate businesses to date and so that's just bringing a whole new level of operational excellence to that business.

Hello, can you talk a little bit about your MicroEssentials business a little and specifically with the MAP prices going higher, how your margins are standing there, and what are the volumes?

I am going to hand that to Corrine, but I will say that our MicroEssentials business continues to perform very well. The one caveat I would give you though, depending on the MicroEssentials form, because we have about four of them, the margins may be slightly different depending on the product, but again it continues to go well; MAP prices are up, but MicroEssentials margins pretty much follow that. Corrine do you want to say a few words?

I think it is a good point that there are multiple different products that make up the MicroEssentials line of product. They have slightly different price differentials relative to MAP, depending on the nutrients analysis, and they have slightly different margins, and so the mix in any given quarter can have an impact on what that average differential is. But we are seeing no change in the overall market pricing of these products relative to MAP as we've seen increased prices, and as we get into the peak of the spring season, while we have increasing prices throughout the season because of the optimistic outlook for the overall market.

I'm trying to figure out the inclusion of the inflation distribution business into the Fertilizantes and in the context of the last four quarters you had about $170 million of gross margin in the distribution business. But if I'm looking at your pro forma, I get to about $170 million from the combined entity, and I'm just not sure if I'm misreading how to read the pro forma here or how should I think about the gross margin contributions from the standalone Fertilizantes business?

I'm going to have to hand to Tony Brausen to talk about the basis of what we've presented here and what that means from an SG&A perspective and what not and depreciation. Tony, do you want to give a little bit of a rundown on that for us?

There are a number of adjustments in the pro forma information for Mosaic Fertilizantes that may be skewing your assessment, and those include the fact that we have adjusted for IFRS to U.S. GAAP, we've adjusted for our accounting policy alignment, and most importantly, we've adjusted for our fixed asset values that we are expecting to record those assets at, so from a purchase price accounting standpoint we have to record them at fair value, and we have to depreciate them based on the expected remaining useful life. So, at this point in time, this pro forma information is preliminary because that information has been done at a very high level and is not yet finalized. We've also made adjustments to the SG&A allocation in the segments, so we're now allocating a portion of our corporate SG&A to the Mosaic Fertilizantes segment, and then another big change from what was previously international distribution is we've removed India and China from that segment and now that's reported in corporate and other. So what you see in the Mosaic Fertilizantes segment is just our Brazilian businesses, the combined distribution business along with the new business from Fertilizantes. And then lastly, as it relates to that pro forma information, another big factor is in the phosphate segment, and we're now including Miski Mayo as a fully consolidated business, so previously that was an equity earnings in equity investments, so it was reported just on one line in the income statement and now that's captured with sales cost to goods sold in margin in the phosphate segment, and that also has along with it depreciation, so that impacts the gross margin you'll see reported in the phosphate segment.

So, just summarizing that, I know there are a fair bit of moving pieces in this, and we will improve our disclosure on the business as we get more metrics and what not, so that you can really follow. But let me emphasize. This business did underperform in '17, we expect that will improve but it's going to take a little bit of time, and most of what we're accomplishing in '18 is going to be the movement of prices up and our own efforts to improve the business through the $100 million of value capture, so that's probably the easiest way to put it, and certainly, over the long term, we are still very confident that we're going to reach the numbers we talked about.

Joc, just one other factor I'll add in and that's the exchange rate for the Brazilian reais which is going to have a significant influence on the results of that segment as well, and as you can see in the materials provided with this call, that's about a $0.07 per share impact, for every 0.1 movement in the Brazilian reais, so that's a meaningful factor as well.

So, for the new Mosaic Fertilizantes segment, the volume guidance seems to imply much higher growth for the year than for the first quarter even when you adjust for the lost week in January, I think. Could you maybe discuss the seasonality to the volumes in that segment?

I am going to hand this to Rick in a couple of seconds, but obviously your first point is very relevant which we did not close at the start of the quarter, so there'll be less on a full quarter in the first quarter volume, but also the first quarter is traditionally a pretty quiet quarter in Brazil, so I'm going to let Rick talk a little bit more about the actual seasonality, but certainly that's your observation is correct.

And John, Joc is right that Q1 is traditionally a seasonally slow quarter. There is one item that impacted this, and it's based on product we had sold in the distribution side, for delivery in Q1 because farmers were getting ready to plant corn on some of their earliest harvested soybeans, they anticipated deliveries, so we had a 175,000 tons and up in last year, that's impacting volumes in the first quarter of this year. We see that coming back to us during the year, as I said, we'll grow with the market, and that's what makes Q1 look a little smaller than it has been in the past. But from our perspective, we feel really good about the quarters to come, and the biggest quarter will be the third quarter.

Can you break down the 10 million tonne volume forecast for the Fertilizante segment between the legacy distribution business, which has lower margins, and the phosphate and potash businesses that have margins around $50 per tonne? Also, do you think the legacy Fertilizantes phosphate production could reach the $50 per tonne range that you are expecting for your legacy Mosaic operations, and how long do you anticipate that will take?

Let me address that at a high level. First, we're anticipating about 4 million tonnes from the legacy Fertilizante business, and then approximately 6 million tonnes from our existing distribution business. The margins will be divided into three segments; the lowest margin will come from bulk commodity distribution. Our premium product margin is quite strong, and we see good margins even in distribution. The remaining margin will be derived from the Fertilizantes aspect or the B2B business, which is expected to have reasonable margins at this stage. I believe the highest margins will come from micro central, followed by B2B, with bulk commodities at the bottom. That outlines how it breaks down, and it corresponds with what was detailed in the pro forma, clearly showing the distribution.

Thank you. A question follow-up on Vale; you’ve said in the past that excluding your cost savings, you think that through the cycle EBITDA can average $300 million. Where were we in 2017, and how do you see that given your strong phosphate market outlook for 2018? And then just a follow-up on your market outlook; we saw a big pickup in demand, shipbuilding and potash in calendar 2017. What gives you confidence that these were actually pounds in the ground as opposed to kind of channel inventory accumulation that could steal from forward demand?

Okay. Don, thank you for the question. Let me start by saying I think the pro forma aren’t finished for the fourth quarter as you are well aware, but if we look at that, the EBITDA contribution from Vale Fertilizantes, I think in the first three quarters was pretty low because of low prices and the performance. So, as we look at 2017, most of the contribution, if we combine them in the pro forma, actually comes from our own distribution business. The second piece of your question, the inventory situation and where we see potash, I’m going to give Mike a handover you in a second, but let me answer your question on a high level which is I believe this is actually going to ground. We have not seen around the world a big buildup of inventory. Mike?

Yeah, thanks Joc. And good morning Don. Yeah, we’ve taken up our 2017 estimate of global shipment pretty significantly as a result of recently released statistics showing 65 million tons of MLP shipments in 2017. That’s a nearly 7% increase, we think that has on the ground in most geographies. If you look at the statistics from Brazil, they’re showing that on December 31, stocks were down 8%, they’re holding 1.5 months' worth of inventory relative to production. We know that in India the pipeline is very low, and same thing in China with the situation in Rhea, it’s been a big increase in NPK production and drawdown in our potash inventories at NPK plants. The one number that does jump out is that in North America, we had a very strong fall season, and we had a very good response to winter fill following the $20 price increase announcement. So, there I think we will pull some demand forward, but generally we think that channel inventories around the world are in pretty good shape, and that for 2018 we are forecasting about a 2.6% increase, or about a 1.7 million metric tonne increase in shipments again.

Thanks, good morning everyone. I was hoping you could provide a little bit more color on the $1-$1.50 earnings per share guidance for 2018 and some of the underlying assumptions that kind of bend to the high and low end of that range in the potash, phosphate and the Fertilizantes businesses. I know you've given a volume range, but any kind of calibration on kind of the pricing at the high end low end, and the margin assumptions that kind of would lead us to one end or the other would be very helpful, thank you.

Thanks Adam. Let me hand most of that over to Tony; I think he probably has the best handle on what goes into that guidance. Tony, do you want to just take that?

You bet. Adam, good morning. We are not planning to provide full year guidance on the margin or pricing level, and as you may remember, we didn't do that in the past either. Our aim in offering full year guidance alongside sales volume guidance is to focus on more strategic and long-term discussions. Now, let me share some details about the assumptions behind that guidance. Starting with the diluted share count, it has increased due to shares issued from the Vale Fertilizantes acquisition, now totaling about 386 million. During our conversation this morning, we indicated that we expect the tax rate to be in the low 20s for 2018. You should anticipate that interest expense will rise year over year because we issued debt late last year related to the Vale Fertilizantes acquisition. We expect interest expense to be up but still under $200 million. Regarding other operating expenses, we're referring to notable items that we report, and the $1.00 to $1.50 range is exclusive of any notable items. Therefore, you can expect the other operating expense line in your model to be typical, with no unusual items, likely around $40 million. We have provided SG&A guidance of 3.25 to 3.50 and have given the range of ton guidance as well, so I hope this information helps you assess the gross margin range from your perspective.

Thanks very much. As far as your Plant City phosphate production, do you plan to bring that up later in 2018 or in 2019? And if you don't bring it back up at all, do you have to write it down? And if you wrote it down, what would be the magnitude of the write-down?

Okay, thanks Jeff. Let me say we shut down Plant City, or sorry, we idled Plant City on the basis that we would assess the impact it had on softening the blow, let's say of new production coming online. You know, since we idled the plant, we have seen increased margin stripping margins of about $40 per ton. I believe part of this is directly attributable to our own actions here. And so, we expect to see a very improved conversion cost by focusing on our lower cost plants, particularly if we can run these higher rates over time. So, what I would say is we will reassess Plant City in the next six to eight months and say did it really have the impact we expected? Is there a market need that we really want to bring that back to satisfy, or do we believe that the market will be able to meet the needs of our customers without that plant and us be able to focus on the lower cost production? So, with that I'm going to hand it over to Tony because Tony probably has a feel for the overall DD&A for that plant.

As I recall the DD&A, I think it was in the $30 million neighborhood, perhaps $25 million somewhere in that range, Jeff. And I don’t have that fully committed to memory. And you asked also about an asset write-off: if we were to permanently close, yes there is certainly would be; I don’t have the net asset value of that operation committed to memory as well, but if that's important to you we can get that. But I would tell you any write-off, if there were a permanent closure decision, would be fully non-cash and would be reported as a notable item.

Well, there would be cash costs; let me highlight though is the closure cost and the actual closure of that site would need to be paid, so the assets would need to be expensed at that point.

So, China’s exposure was down in 2017. What's your outlook for 2018? And then last year you had expected shutdowns in China, which did not materialize at least in 2017. Any chance that the situation could change this year, and could we see shutdowns in 2018?

I'm going to hand this to Corrine and Mike to talk about a little bit. But let me start by saying there are some real factors in China that we talked about last year, and I think because of higher pricing, they maybe took longer to occur, and obviously that's a risk or opportunity this year if the prices are higher, China's actions may be different. But here are some of the factors I think that are really relevant at this stage: they definitely are running into higher environmental compliance costs which are driving costs higher. There are higher costs for some of the raw materials like ammonia again, mostly driven by environmental changes and the restrictions on the use of coal; fired ammonia plants or coal gasification plants. We have environmental shutdowns that are occurring because of pollution issues, and so these are becoming real issues. And then the last one is the idea of stockpiling for domestic security in the spring market. Those are all real factors that are going to affect China. But what I will say is our baseline assumptions for this year do not include a substantial change in Chinese export, so what we're predicting today is basically flat Chinese exports; now if that changes, that is all upside to our business case. Corrine?

Yes, I think that's a good recap Joc of what we're seeing today. The only additional thing that I would add is that we know that the January export numbers are about half of what they were last year in January. January is a small number, but we look on track for Q1 to start to see some reduction in those exports.

And what I would add, P.J., is I think you've to put that in the context of what's going on in the global phosphate market. I think as we mentioned on the last call, if you look at the increase in demand that we expect in 2018, which is about 1.2 million tonnes, look at the closure of Plant City which takes another 1.7 million, or 1.5 million tonnes out of the equation, that's a total of about 2.7 million tonnes that has to be filled with the incremental production coming from somewhere. We know that the Ma'aden Al-Shamal joint venture will ramp up; we know it produced about 450,000 tonnes last year; if it produces somewhere in that 2 million tonne mark, there are some tonnes there. OCP is ramping up its third hub and has announced that the fourth hub has been delayed, and if you just assume that there'll be 2 million to 2.5 million tonnes of incremental supply coming from those two sources, that basically implies that the market is balanced. So anything that happens in China with respect to reduction in supply simply tightens the market further. And I guess I would go back to an early comment. Exports from China actually increased last year when you look at the China customs statistics. In 2016, exports were about 9.5 million tonnes and actually were 10.1 million tonnes last year according to customs statistics; and basically, as such, the market needed those tonnes; and as Corrine points out, there are real changes taking place this year, and we will admit that we jumped the gun a bit last year and called it a little bit early, but the bottom line is we think there's a very good likelihood that exports do drop this year, and if that happens, that's just fuel on the fire in terms of the supply and demand balance.

Your raw thoughts on what you actually consolidate, can you comment on the key drivers that have resulted in the reduction in per tonne cost, your hesitation on how this will trend in '18, and also just any quick longer-term thoughts on rock trimming and production with Miski Mayo?

Sorry, I missed the piece on Miski Mayo; I didn't quite catch your question, Chris. Could you just re-ask that?

The end of the question was simply just any longer-term thoughts on rock production at Miski Mayo, that's all?

Yes, we had relatively low rock costs in the fourth quarter, thanks to the phosphate team's efforts to increase volumes and maintain low-cost operations. We expect this trend to continue as we focus on cost reduction and efficiency across all our mining activities. This provides a good indication of what we can anticipate, particularly in the first half of this year. Throughout the year, we plan to take a comprehensive approach to our rock strategy. With the idling of Plant City and the inclusion of Miski Mayo tons from the Vale Fertilizantes acquisition, we have an opportunity to rethink our optimization of rock. By doing so, we aim to identify the best options available. This relates to your second question about Miski Mayo. Currently, our objective for Miski Mayo is to minimize costs and enhance efficiencies, particularly after we consolidated it into a 2% joint venture. We will thoroughly evaluate our options there, and assessing the potential to increase production from Miski Mayo will be done over time.

What would your EPS guidance have looked like if you weren’t pro forma, and then maybe how are you thinking about the operations in the Brazilian mine going forward? Do you expect to meet those operational objectives?

First of all, I'm going to take your questions; the accretion and dilution question on Vale and look, what we see this year is with the improvements we've made, yes, I've gotten through them in further details, I'm not going to rehash that, but I think we are pretty much on track with where we thought we would be, and I actually think that probably the Vale this year will be, and it's hard to give an exact number, but it will be close to accretive this year or slightly accretive, but it's going to be in that range of fairly neutral on the 34 million extra shares. Sorry, I missed getting your second question there. I was just making sure I have that question correct. Your question on our Brazil potash mine now; the Brazil potash mine has a very local issue, and so it really depends on how well it can deliver efficiently to a local market, and at this stage it appears to be quite competitive in that local market. So, I would say it has a very good chance, with some improvements, that could be a good contributor. In terms of your other cost or your other question, as we ramp-up K3 we will continue to look at how do we serve our customers in the most efficient way possible now, so that's going to depend on volume requirements, it's going to depend on pricing and everything else, but we can assure you that we continuously look at each of our assets and say are they adding the real kind of value that we believe they should and are we doing the best for our customers in terms of optimization and we will continue that.

At your Investor Day you presented us the ramp over the next couple of years. I was curious if your goal is technically feasible or are there other reasons or other work you are doing that makes that ramp more measured than it could be if we were actually there to push more tonnes?

Look, certainly, let me first of all tell you the challenge, if you will, of developing a new mine. We get to the bottom of K3, which we did in February, and you have basically what amounts to a 6-meter or 20-foot hole you have to develop out from that; that takes years, not months, to get that done. At this stage we are dropping in our first raw miners now to underground, so we're starting to ramp up the rate at which we can develop and build out that mine, but we're doing it about as fast as we can. What will happen, though, is depending on the market, whether we do, we focus more on development or whether we focus more on bringing out tonnes depends a little bit on the market, and then obviously the trade-off being the ongoing costs of the K2 brine inflow, but this is why new tonnes are not coming in as fast to market.

Okay, with that, let me close off by a quick summary. We really finished the year with a strong quarter and significant momentum. This was driven not only by the market, but important strategic decisions we made, strong operating performance, and so as we head into 2018, it's hard not to be optimistic about where we're going. But just let me summarize: we continue to expand on our record of successful strategic actions to deliver real shareholder value across the cycle; with the acquisition in Brazil complete, we're now highly focused on achieving the savings targets and the business transformation we talked about and have outlined. Finally, with business conditions improving from 2017, we expect this momentum to continue into this year. So, with that, we're really excited about where this company is going in the next six to 12 months, and we hope you are as well. Thank you very much for your attention.