The Mosaic Company (MOS) Earnings Call Transcript & Summary

Thank you. Thank you, everyone, for joining us for Mosaic. It's my great pleasure to host Joc O'Rourke and Rick McLellan for this. First, a few prepared remarks from Joc and Rick, and then we're going to go to Q&A. Now remember, the Q&A for all these sessions is done over Pigeonhole. So there's a link on your left-hand side, you can enter and a new browser will pop up, you enter your questions in Pigeonhole or you'll vote on the existing questions, and I will try to get to as many as I can. Also, at the end of the session, there is a Procensus poll that I would like you to fill out if you have the time. And so with that, we'll go to Joc. Thank you for joining us.

Well, thank you, Jonas, and hello, everybody. We appreciate -- certainly appreciate the opportunity to be here, albeit only in virtual sense. Today with me, as Jonas said, is Rick McLellan, who recently returned to the United States to become our SVP of Commercial, but he was in Brazil leading our Mosaic Fertilizantes business there in Brazil. So let me start by the obvious, making a note of our forward-looking statements. I would ask that you do read those. We will be making forward-looking statements as part of this presentation. And they come with the same risks as I'm sure you're all aware of. So let me start with Mosaic's strategy. As the world's leader in crop nutrients, we have the potential, we have the plans and we're ready to drive significant positive change for the company and our stakeholders in the years ahead. Today, I'm going to focus on the strategic path forward, which is designed to, as we say on the slide here, leverage our strengths, leverage our competitive position and our exceptional executional ability to deliver superior long-term value to all of our stakeholders. Now although our strategy continues to evolve based on the needs of our customers and the changing market dynamics around us, the end game has always remained the same, which is to build and sustain the most competitive, resilient, profitable and responsible company in our space. So as I look ahead, Mosaic is really well positioned for success. We're the world's leading producer -- integrated producer of concentrated phosphates and potash. We have long-lived, high-quality, low-cost assets across multiple countries. In North America alone, Mosaic has over a century of potash reserves. And in our North American business, we have probably 30 to 40 years of phosphate reserves. Peru and our Brazil business, probably over 100 years of phosphate rock reserves. So these assets, combined with our global distribution network and our long-term demand growth for fertilizer provide us with the position and a platform to generate significant value for all of our stakeholders. Now of course, potential needs to be paired with action. And here at Mosaic, this is the real value of our strategy. It is underpinned by our relentless drive to continuously improve our competitiveness and really move our business forward over the long term. I'm going to touch on a few of those key areas. Sorry, technical problems with the operator. If we start with our strategic actions over the last 5 or so years, our actions have been focused on maximizing the value of our core businesses, and then leveraging these strengths to grow the companies in ways that generate long-term sustainable value. We've made tremendous progress on this on a number of fronts. And you can see the number of these summarized on the screen. We have significantly reduced costs while increasing productivity across the enterprise. In fact, since 2015, North American -- sorry, North American cash cost of conversion is down by over 8%. North American potash costs are down by 7%. And if you look at this over a 10-year horizon, we've gone from over $130 of cost in our potash business, cash cost, down to around $70. We think that is a phenomenal improvement. SG&A, we've improved SG&A per ton by nearly 20%. So in every area of our business, we have been driving towards efficiency and really changing the game in terms of our competitiveness. We just completed the largest and most strategic acquisition in our history at -- by buying Vale Fertilizantes business. And when we put that into our own business, we significantly exceeded our synergy targets and delivered over $300 million of synergies by combining those businesses. We introduced new performance products with higher margins for Mosaic and for our customers. Our MicroEssentials continues to be a market leading, innovative product. It adds value to us, it adds value to our dealers and of course, adds value to the farmer. And over the last couple of years, we have grown MicroEssentials sales volumes by 50% and a lot of that in Brazil. We have accelerated the construction of our Esterhazy K3 mine and now we expect to be completely finished that mine by mid-2022. And that is ahead of schedule, ahead of budget and done extremely safely. So we think that's a great accomplishment. We have effectively executed on our financial goals as well. In this area, we've paid down our short-term debt. We had $700 million in short-term debt. We paid down that 2 years ahead of time, and our next debt repayment due is not until the end of 2021. So in all areas, we believe we have really driven the results that lead to better long-term performance. So these strategic moves really have fortified Mosaic's foundation. And so today, we're larger, we're stronger, we're safer, and we're a more efficient company than we've ever been at any time in our history. So the opportunity, though, is where do we move from here? What are the actions we need to do to drive a step change in our performance over the next number of years? And to accomplish this, we've identified 6 basic strategic priorities. And I'm going to walk through each of those, but together, we believe these have the potential to deliver the most value for all of our shareholders and stakeholders across a time year -- a 5-year time frame. What you don't see in here, though, and I want to point it out is you don't specifically see technology laid out in these priorities. And the reason we don't do that is we see technology and innovation as the enabler that works across the entire process and allows us to make the progress in a lot of these areas, and I'll come back to some of that as I talk about the specifics. So let's jump from the big picture and take a look at some of these in more detail. Let's start with the North American transformation. We've made tremendous progress across the company on our transformation, and we continue to pursue transformative actions that will really change the company in terms of its profitability and its competitiveness. Early this year, we announced that we were going to combine our potash and phosphate operating units into one unified management team. And doing so, we would reduce duplication, improve efficiency and really allow us to get the most out of the new technologies that are out there today. This integration is in progress now and we're approaching this work with an acquisitive mindset with the whole idea we want to maximize the value as we complete this. And some of the expected outcomes, we do expect improved efficiency and productivity. We expect better agility, better collaboration across the 2 businesses, reduced costs for synergy captures. We're looking at this just as if we had acquired our potash business and what synergies can we drive out of putting those 2 businesses together? And finally, how do we use digital technologies to improve the communications, the decision-making and everything to ensure our long-term success? At Esterhazy, our K3, the momentum really continues here. We have pulled that project forward twice now so that we ultimately will complete the project and eliminate brine inflow cost by 2022. And I'd like to really highlight a couple of things on this. The impact of this can't be understated. This is a real game changer from Mosaic, and it's going to set the standard for innovation and efficiency across the company and across the industry. This is the most automated and efficient underground mine out there. And what you see in the picture here, and I just want to highlight this, this is now a completely robotic miner, where all the conveyors that are normally manually put behind the miners are put in automatically. So the miner itself is self-driven. It uses sensors to trace the ore. And so it is moving forward mining without a person on it. And what that does is that it improves efficiency, it gets people away from the mining phase, which really improves the safety. And of course, we're not having to shut down the miner to put the conveyor in behind it because that's all being done by robotics now. So we used to have to shut down the miner 2 or 3 times a day to put the next level of conveyors in. That's all being done automatic. We're now nearing the completion of this multiyear effort. And when we're done, as I said earlier, this is going to really be the most efficient potash mine. I can't guarantee that it's going to be the lowest cost, but the Russian ruble may put their cost in a different position. But certainly, from a manpower per tonne or any of those measures, this is an extremely efficient mine. And in addition, when completed, this is going to completely eliminate brine inflow. We have been managing brine inflow now since 1985. At its peak, it was costing us $250 million a year. We're ramping that down to 0 by 2023. And again, we think that really changes the game for Esterhazy and, of course, for all of our potash business. In Florida, we're pursuing what we're calling next-gen mining and next-gen processing. We're leveraging what we've learned at the K3, using technology to automate processes. We're trying to improve the risk profiles and really the operational efficiency in all our phosphate operations. And I just want to highlight the convergence of technologies. We now have the external cameras. We have the communications technology that has really revolutionized in the last couple of years. We have the robotics. We have the distance-operating remote dozers, it's now possible. Operating remote pits is now possible. And so everything is starting to come together as one and a real push towards automating and running from 1 central control room, the whole of our mining operations. And soon, we'll be running all of our mining operations across Florida from 1 central control room. And then in the processing area, we're looking at how do we automate. If you think about now the self-driving cars or anything, how do we automate processes like sulfuric acid, such that we take the operator decision out of the equation and allow decision-making by a machine on a second-by-second or microsecond-by-microsecond basis. So you can see where all this technology is converging, and we should be able to get better planning, increase productivity and reduce bottlenecking. And one of the ones you don't think about is just better blending across all of these different lines to go into our plants. So real progress, real change. And some have asked us, how are you going to drive that next level of efficiency? This is exactly how we're doing it. I want to shift gears here and go from North America down to South America and talk a little bit about our Brazil business. I can't emphasize enough how much this Brazil business changes our footprint and changes our footprint in Brazil. Before we ever bought Vale Fertilizantes business, my comment has been, you have to be in Brazil to compete in Brazil. It's a different market, but it is probably the most attractive fertilizer market in the world that you can be involved in. Today, we are now positioning ourselves as the largest manufacturer and one of the largest distributors of fertilizers in this region. So this gives us a real first-mover advantage here. And we absolutely intend to take advantage of that, grow that business, move forward from here. And we've got over $300 million through the synergy program, and we're now targeting another $200 million of improvements as we move forward. So this is really allowing us to improve our capabilities, improve our logistics, improve our marketing strategy and really giving us direct access to the Brazilian farmer who is likely to be the one of the most important markets in the world. So similar to North America, we've got a number of digital transformation projects in progress as well. And we expect that to really capture the value in the next couple of years. In this, you can't -- in this business, you can't ignore product. And on this, our third strategic priority is to grow and strengthen our product portfolio. Our journey to generate higher-margin performance projects started with MicroEssentials. Now this -- we've had 12 years now of MicroEssentials. It has grown, as I said earlier, 50% in the last 4 or 5 years, growing exponentially in Brazil. That market is starting to really accept MicroEssentials. And while there's people trying to imitate our product, the very essence of the product means that we've got the background, we've got the agronomic data, we've got the technical salespeople that can teach people how to sell it, and we're carrying that on to not only the next-generation MicroEssentials, but all of our other portfolio of performance products, including Aspire, K-Mag, Pegasus, and all of those, adding to our already strong commodity products of potash and phosphates. The other thing we're doing today is we're exploring a number of new diverse opportunities that could expand our portfolio and really yield incremental benefit, not only for ourselves, but our customers. And so these efforts are being done in-house, but we're also looking at what are some of the smaller companies in the soil health areas that we can look at from a strategic long term, either a partnership or acquisition. So again, an area of strength, I think this -- MicroEssentials has been one of the most successful fertilizer products out there, and we hope to build on that success. Now the next piece that I just don't want to forget in this is driving functional collaboration and efficiency. Reducing our SG&A has been an important piece of our strategy. How do we deliver the service level we need at the lowest possible cost but recognizing we are a commodity business, and we have to rightsize every piece of our business for the fact that everything is about being low-cost and being efficient? So in this, we've definitely changed our look, and it really starts in places like Brazil. In North America, we set up what we call Mosaic Business Center, which was that first real drive of improvement cost. Now in Brazil, we've set up a major shared service center, which delivers all kinds of services, not function by function, but business process by business process. So we're identifying better business processes, automating them where we can, centralizing them and really driving the next level of efficiency. The other one I'd like to highlight today is, if you think about this, one of the things that's coming out of COVID-19 is a whole ability to work remotely and really change how we thought about our employee work place and frankly, the whole office in general. And so while our on-site operations had to be there to ensure response to COVID, or continue operations during COVID, our office-based staff became remote workers almost overnight. And what we learned here was just how quick and how agile we can be, and it doesn't always require going into an office every day. And so the learning there, I think, from our perspective is we talked about the technology and the communications technology, changing the game in the operations. But what we've learned here is it can also change the game in terms of our support staff. And so we've got a good track record of shared service. We now intend to take that to the next level and see coming out of this, how soon we come out of COVID being an even stronger and more agile company than we were coming in. Now our fifth piece and I don't want to miss this because this is critically important, the strength -- the financial strength of our company. The only way we're going to be successful on the long-term is if we maintain and focus on our financial strength and make sure that in the long term, we're ready for all of what a cycle can throw at us. So our strategy is designed to take a real disciplined approach and a balanced approach that first strengthens the business, which means we have to take the steps to make the company more competitive and more resilient. We have to effectively deliver results throughout the cycle. We have to be low cost. We have to drive the improvements in the business, and we have to maintain the business. So we have to, next, support our reliability. We have to sustain our assets. We have to make sure we protect the people. Now -- and then after that, what remains is really there to support our vision and our strategy, make sure we're well positioned to act on compelling opportunities when the strategic rationale is clear, particularly, at the bottom of the cycle. And then finally, what's left over -- not what's left over, but make sure the -- there is enough to reward our shareholders in a real way as well. And so those have kind of been our strategic priorities in terms of capital management. We think we've done a good job, particularly through this COVID virus period of maintaining great liquidity, focusing on our cash balance, focusing on strengthening our balance sheet. And in the long term, that's going to be one of our key things, while maintaining a great safe business and -- I mean make no mistake in, our business sustaining capital is required. Depreciation is real. It's a hostile environment. The business does need to use sustaining capital, and we don't want to ever not allow the business to run well on the long-term because we've been unable to maintain the assets [ book long way ]. And the final one I want to touch on our strategic priorities, the sixth strategic priority, is the critical value of acting responsibly. We're talking about this last, not because it's the least important, but because it really is ending up being the anchor that connects us between our strategy, our vision and our responsibility as citizens. I view this as more of a moral issue than necessarily just a license-to-operate issue. It's clearly an important license-to-operate issue, but I believe if you're not contributing to society, we're really not doing our part as a business. And so to that, we've set up our basic ESG strategy, looking at 4 key areas: people, environment, society and the company. So in all of those, we want to make sure we're great neighbors to the people who live around us, but we are being extremely responsible towards the environment, that we are doing a good job of looking after our employees and other people around us, that we are making sure that our people have a rewarding long-term good job. We make sure that from an environmental perspective, we're protecting greenhouse gas elimination and better energy utilization. And in Florida, what is critically important is our use of water. So in that, we are now shifting. So in the last 3 -- 5 years, we've had a goal of 10% water -- freshwater reduction, reduce greenhouse gases by 10% and reduce our water use by 10%. As we move forward, we've looked at it and said energy and greenhouse gases are essentially the same. But our next step for the next 5 years is we want to reduce our -- we want an aggressive target. We're looking at reducing our greenhouse gas emissions by 20%, and that means reducing our energy uses because the two just go hand-in-hand. And from a water perspective, looking at reducing it another 20% from a baseline. Now it's been difficult to set a perfect baseline. We didn't have the Brazil business until 2018. So some of our goal is to go back to a baseline of 2015, another start at 2018. But basically, we are looking at this very seriously. A lot of the goals only have quantitative -- qualitative goals because it's hard to set quantitative goals around a lot of it. But for instance, runoff, we're looking at how do we contribute to the overall cradle-to-grave use of fertilizers like phosphate. But in the end, the Board, the senior management and all of our employees take this responsibility very seriously. And one of the things I will say is I actually look -- quite look forward to sharing this as we progress. I think this is something that we should talk about. We should be setting realistic goals. These aren't net goals, these are absolute goals. So I'm not going to say I'm reducing greenhouse gases on a net basis and go plant 5 trees. I'm going to still plant the trees, but I'm talking about an absolute reduction of my -- of our greenhouse gas impact. So to summarize, from our perspective, we are controlling the things we can control. We're really performing and executing at a very high level of efficiency but we're driving transformational change across the enterprise. We're effectively managing all effective -- all pieces of our business within our control to prepare ourselves for whatever the market delivers us in the next while. We believe there's great potential in this market. We still are strong believers in the agricultural market, the long-term food market and the long-term need for food, and society is as strong as it ever was. And we believe we have really positioned ourselves for it. And my role as the CEO is to align the organization against those strategic priorities and make sure that our short-term decision making leads us to this better tomorrow and superior long-term value for all of our shareholders and all of our stakeholders. So I believe firmly that we're on the right path and I got to say, I'm very energized and optimistic about how the opportunity is looking at for Mosaic. So with that, I'd like to say thank you for all your time today. And I understand that we'll open it up for questions through Jonas. Thank you.

Thank you, Joc. Much appreciated. So let's go to questions.

Let me try to stop sharing here for you.

Here we go. Well, we do hope that you share, at least answers.

I just meant the presentation, sir.

Fair enough. So starting out at phosphate, arguably the most important product for you. Phosphate prices, they rallied early this year, and then they seem to be relatively sticky, although there was a little bit of an upswing this morning. But how would you characterize phosphate pricing today? Are we at marginal cost?

I would argue that from a cost perspective, we're probably at marginal cost and probably below cash costs for about half of the market, which is an unsustainable place to stay. In terms of this year, I think when we started talking about it at the start of the year, we expected the volume to start moving first and then prices would follow. And particularly, we had hopes and those have been fulfilled with a strong North American spring. That happened. But I think the moderator in all of this, if you will, or the governor has been the COVID-19 impact. And particularly there, it's been the sentiment change because of the impact on fuel and the use of fuel here in the U.S. I think that in itself put a damper on people's long-term projections for corn. We don't know that they'll necessarily play out as negatively as some thought. But it took a rather bullish market to a much more neutral market. So people were a little more cautious about what they were willing to buy. And we sold a good volume of fertilizers, both phosphate and potash this spring in North America. But I will say, we also took down most of the inventory. What we weren't probably able to do was lock up the price as easily as we would have had there not been this sentiment issue hanging over, which is, well, it's good for this season, but what is the fall price for corn going to look like when they harvest, and particularly, what's going to be the carryout at the end of the year if ethanol demand doesn't come back.

Okay. So at current prices, stripping margins, are you cash positive after paying sustaining capital in the Phosphate business?

We're probably about neutral after sustaining capital this year. We're certainly EBITDA positive. We're probably making about as much money in cash as our depreciation, and we try to keep our sustaining capital out of our depreciation. Although I will say this year, our capital is a little higher because this is the year where we have to complete about $75 million of RCRA, Resource Conservation Act, capital projects that we agreed to with the government to meet the hazardous waste guidelines that they sent.

Okay. Longer terms, OCP and Ma'aden, they have significant amount of phosphate production that could come online over the next 2 years. How do you expect that to evolve oil prices?

Well, so first of all, let's do them one at a time. Ma'aden, I think over the next 2 years, should be able to get their Ma'aden II up to 3 million tonnes. They've struggled with that project. And I say that carefully, but there has been a struggle with that project. A couple of things in terms of the equipment manufacturers and whatnot. Obviously, we're a partner to that project, but I expect they'll get that right in the next couple of years and take that 3 million tonnes. And that is another 1 million tonnes to the market. In terms of OCP, they've got about another 1 million tonnes in their debottlenecking they'll do. But the next step for both of them is actually major capital, major capital needs. The last 2 hubs at Jorf took, what, 5 or 6 years to complete. The Ma'aden project took 7 years to complete when they finally decided to go forward on it, which was a 5-year process in itself. So even if Ma'aden made a decision tomorrow to start Ma'aden III, you've probably got 5 to 7 years before that production would come to bear. And likewise, OCP, you probably have 3 to 5 years. So no matter what they do, my expectation is there will be a growth that will exceed new production over the next 5 years. That's our expectation. And then as that come -- that new production comes in, I would expect it's needed.

Okay. Switching over to potash. The China contract was weaker than we expected. And at least some commentary from Canpotex suggests disappointment. Brazil spot price kept falling, even though Brazil's ag economics look great. So can you give us some color on why potash was so weak this year despite Canpotex curtailments and everything?

I think it starts again with the North -- there's a demand shock that hit this year that hasn't really been there before. So '19 consumption of potash globally was significantly, what, a couple of million tonnes lower than it had been a year before. And there's probably 2 big ones there and 1 that's maybe controlled. The first one is the North American, last year North America. So a bad spring, a bad fall, probably 1 million tonnes less consumed potash in North America than had been previous. And then in Indonesia, Malaysia, you had the palm oil problem. And in China, really the U.S.-China trade war kind of led to some less consumption, I think, in China, followed by -- along with their swine fever -- African swine fever, led to probably a little less consumption in China. Those together was enough of a demand shock that I think the suppliers probably figured out too late. At the end of the year, they all -- all the suppliers pretty much curtailed. But I think by that time, there had already been too much in the market and people were being -- competing on a price basis. And then this spring, I think what's happened is that high inventory has led people to hold off on their purchasing decisions, which gave the Chinese a very strong position in the negotiations. And I'll make no qualms about it. I was very disappointed in the Chinese pricing on that contract. I don't think it represented the real supply and demand balance. I don't think it's particularly good for the market because it puts people at a price where China needs the potash. And I think it is not good for China if people are going to move their products to other markets. And what we've seen, of course, is the other markets have moved since that benchmark price. But once the China contract was done, I think Brazil moved up $20 or $30 the next day or the next week, certainly. And continues to be fairly solid. And I think you'll see now. Canpotex, I think, has told the world that they're sold out until July, which means not necessarily the price but certainly have commitments for their product. So they're sitting in a pretty good position from a demand perspective. The trick now is move those prices up to a more normalized fair price. And I think in this case, I think the -- all the suppliers are probably going to be trying to do that.

Okay. What do you think is a fair long-term price for potash? And how long will it take for markets to get there?

Well, if you'd asked me that a couple of years ago, I would have said $350, I don't know how easy $350 is to attain. $350 is the price at which I don't think you incent new production, but I think everybody who has a healthy margin can pay. They're sustaining capital. And if you need a little bit extra production, they can bring it in with Brownfield. But maybe that number is more like $300 right now, not $400, I don't -- or not $350, I don't know, but it's somewhere in there. And I think what does it take? We were back up at $290 in China over a 3-year period. So does it take another 3 years to get back to $300, probably. So a couple of good demand seasons are around the world, right?

Fair enough. And so are we now past the big spring season? And how should we think about price evolution for the next, call it, 6 months?

Well, so in North America -- Rick, I think you have the number, 88% corn planted, 60-some-percent beans planted?

Yes, that's right, Joc.

So we're really moving into the -- in terms of fertilizer, that means the fertilizer has been largely used in the most -- in the big Corn Belt. You're still going to have fertilizer use and sales in Western Canada and the Northern states. But the majority of the season is now, and if you're moving very quickly, probably mid-June to end of June towards preparing for the fall season. We would call summer fill. We'll be going through our turnaround, assuming that we can get the people to do the maintenance work that we have to do in our Potash business and in our Phosphate business. So that season's largely over. We -- I expect we'll start to see people interested in filling. There's been a bit of a lull in the phosphate market in the U.S., but I think that sneaks back up pretty quick. And potash should stay flat to moving up as we get into the summer fill. But you've got to think that U.S. is only 10 million of a 65 million tonne potash market and a 72 million tonne phosphate market. So one of the big markets that are moving now, Brazil, will start moving very soon for their main season. India, Pakistan, Bangladesh will start moving in terms of getting ready for their monsoon season and post monsoon planting. The -- in terms of China, in terms of potash, China and India will be also pulling hard. We're seeing a little bit of an improvement in the price of palm oil. So we hope to see a little more fall start coming up pretty steadily out of Indonesia, Malaysia. And of course, potash also will be moving into Brazil on a pretty steady clip for the next little while. So certainly, for the next 3 to 6 months, we expect that steady movement and with steady movement and lower inventory, we normally expect that comes with at least a moderate price improvement.

Okay. Switching to Brazil. So you've already taken out significant costs over the last couple of years. So how do you plan to capture another 200 million of value without negatively impacting the business itself?

Well, we've got a number of projects. The work that Rick did, and Rick can talk to that, I mean, we dealt with all of the things that were truly synergies first. The inefficiencies between the production and distribution business in terms of logistics, where trucks and trains and everything were being sold, how we went to market in terms of the production business. The Vale production business didn't really have a distribution business attached to it. So they were -- it's really difficult for them to decide when to sell. They were very reliant on the other distributors. Now we still sell with the other distributors, but we also have our own sell with the customer to allow for maintaining the ebbs and flows. And we think that adds real value. So there were some not only cost benefits, but some revenue benefits, things like the shared service center, which I talked about. A great opportunity. And we're going to continue to leverage that. We're now looking at a lot of operational synergies. Rick did the ones like we took literally hundreds and hundreds of people out of our [ pure ] operation. We changed the shift schedules to make them more efficient. Now we're looking at how do we automate some of the mining and milling processes, how do we make better decisions to improve mass recovery, how do we continue to leverage technology to improve our shared services. So there's a whole bunch of things. And even things like how do we improve our sale of gypsum, which might seem like a minor thing, but every time you can make $10 million, $15 million from what's a waste product, you do a great thing to improve the business.

Fair enough. You said in the prepared remarks that you need to be in Brazil to participate in the market. Are there other markets like this? Sort of what -- is there another Brazil out there?

Well, it's not easy to -- let's look at another market that's very similar. It's not easy to do business in Argentina without being in Argentina. But it is impossible to make money in Argentina if you're in Argentina. So there is a balance there. So we've decided in places like Argentina that our best bet is we sold our distribution business there. And we decided our best bet is to sell it at the port and not have the physical presence in Argentina. But there's no market as big -- I mean if you look at China and India, we have a distribution business in both of those countries. But it's nowhere near the opportunity for participation in those markets in the way there is in Brazil, if I were to be frank about it. And so we run a reasonable sized distribution business in those 2 countries. But they'll never grow to be what Brazil is just because the structure of those markets aren't as good. And in places like Argentina and Chile, a, they're too small to really be profitable and you can -- you're better to go through other players who can be more efficient.

Okay. Talk a little bit about cash. You mentioned shutting down K1 and K2, limiting brine management. Is there a cash cost associated with shutting down K1, K2?

Yes, there's certainly a closure cost with shutting those down in the end. We will keep K1 and we won't be closing K1 down from a final asset retirement when we end the year here. It will still be there. We'll still use it for people. We'll still use it [ for technique ]. There's a lot to maintain it. Where the costs will come out is we won't be maintaining 2 mines, we won't be maintaining 2 -- or sorry, we won't be maintaining 3 mines. We won't be maintaining the underground infrastructure at K1. We won't have a maintenance shop in K1. We won't be maintaining the equipment in K1. So what equipment is still usable we'll either move to K2 or some of it will go to surface and, hopefully, be able to move over to K3, some of it. So all the duplication stuff will stop, but we won't do the final closure. After we saw all mining, K1 and K2, we will have to close that mine down, which means we're going to have to take down the head frames, we're going to have to cap them and seal a lot for safety reasons. And make sure that the long-term is protected. And somewhat it'll cost us money. But I would suspect, even on a 1-year basis, the cost of closure on those is less than the inefficiency of running them. I don't know how to [ bring that on the final path ].

Okay. I guess, the follow-up was something you said earlier for the audience here. What's your target in terms of run off production?

In terms of what? I'm sorry.

Run off production? So the Florida reductions you were talking about?

Oh, you mean, the Florida business. Between the Florida business and the Canadian business, let's put the whole thing together. Bruce Bodine, who is now leading that combined group, has a target of $500 million of improvement over the next 5 years. So -- and now some of that is predetermined, which is your $60 million to $80 million of operating cost at K3 and $80 million of brine inflow. But we have projects across the business. We expect to save significant money on supply chain. We're going through a whole project of looking at how we can better optimize our supply chain. And if you think about supply chain, this is one that's always struck me is it costs us about $70 to get a tonne of ore up the shaft, turn into a ton of potash and get it into a railcar or get it to the warehouse to go into a railcar. It costs us another, on average, about another $70 to get it to a market. And so if you think about the opportunity there, there has to be a great opportunity in optimizing that $70 -- the second $70. So if you think about it in the $140 cash to get it to market, $70 of it is -- half of it is spent in supply chain. So we're really looking at that, how do we optimize our raw materials and phosphates? How do we automate and get to the next level? So $500 million is our target overall for that combined business in the next 5 years.

Okay. Once you're done with K3 and brine and everything, you earn a bit more cash, what do you think the odds are of the dividend going back up again?

I'd love to leave that to the Board and say that's a Board decision, but that's probably be copping out. Look, I think we can improve our dividend over time. And I think we've said it before, we would grow our dividend as we grow our earnings. I don't see us going back to the level of dividends we had pre-2015, if you will. But we will grow our dividend over time. We have to balance basically 3 uses of cash once we've paid for the basic balance sheet and stuff. And one is paying down some of the debt. We've said quite openly, we want to pay down about $1 billion more debt. We think the sustainable debt level is a lot closer to $3 billion net debt than $4 billion. So we'd like to pay down about $1 billion of debt. We don't want to get dividends so high that we would have to cut them in a trough. So we want to make sure they don't -- I think, Clint, maybe a year ago, put out some stuff on how we were thinking about long-term dividends. And that thinking hasn't changed. And then the other one is returning money to shareholders by buying back some of our shares. And I think that will come back in time when we have a little more -- a little stronger balance sheet than we have today, a little better debt ratio than we have today.

Okay. For the final question here as we're running out of time. So I'm reading this verbatim from the -- from an audience question here. You're running the business well and making the right strategic moves, yet the share price trades at 15-year lows. What's going to change that going forward?

Yes. You guys buying our shares more often? No. Look, I think the simple -- the last drop -- if we exclude the last drop, which really was this full COVID thing, and I think that comes back, I hope that comes back fairly rapidly. But if I go back to what needs to happen for us to get back to the 2019 share price, which peaked at somewhere in the $35, $37, it really is these markets and the markets -- we prepare ourselves as well as we can for those markets. What it requires is a little bit of help from those markets to start having the momentum. I think there's a lot of people, including the analysts, frankly, people like yourself can see the long-term value and I think a lot of the investors want to know, well, what's the right time to step in. Do I have to -- can I wait? And when you get setbacks like the last North American season or setbacks like the COVID has created this year with the biofuel uncertainty, I think it allows people to wait. But my expectation is the wait will end, and I think then the share price starts reflecting the long-term value of the enterprise. I'd like it to be tomorrow, but it's going to be hopefully soon.

Fair enough. And with that, we are out of time. Thank you very much.

Thank you, Jonas. Thank you, everyone, who is listening in. I can't see you, but I hope we were helpful.

Absolutely. Thank you.

Have a safe day, everyone. Stay isolated.

Likewise.

Bye-bye.