Akrati Johari, Steven Kahan, Prashant Tiwari, and Yana Zalukina

Presented, December 8, 2009

Mosaic (MOS) belongs to Agricultural Chemical Manufacturing industry

In the U.S. – about 700 companies with combined annual revenue of $30 billion

Highly concentrated industry:◦ 8 largest phosphate fertilizer producers generate 90% of

revenues in the segment Demand for agri-chemicals depends mainly on demand for

various crops, and thus crop prices.

http://www.hoovers.com/chemical-manufacturing---agricultural-/--ID__161--/freeuk-ind-fr-profile-basic.xhtml

Headquarters: Plymouth, MN Industry: Agricultural Chemicals World's largest phosphate producer: makes

agricultural fertilizer out of potash and phosphate 13% share of global phosphate and potash

production and 58% & 40% share of American production, respectively

http://finance.yahoo.com/q/pr?s=MOS

Three segments: Phosphates, Potash, and Offshore. ◦ Phosphates

Produces and sells phosphate crop nutrients for use in crop nutrients and feed phosphate for animal feed ingredients

◦ Potash Produces and sells potash for use as fertilizers and animal

feed ingredients, as well as in industrial applications Potash is also used for de-icing and as a water softener

regenerant◦ Offshore

Mosaic used to produce nitrogen fertilizer until selling its interest in Saskferco Products ULC at a $673.4 million gain in fiscal 2009. This was always a relatively small part of the company’s business.

http://www.wikinvest.com/stock/Mosaic_Company_(MOS)

Mosaic's temporary decline in phosphate profitability was due to unfavorable pricing of sulfur and ammonia, which should be viewed as an abnormal

occurrence. http://www.wikinvest.com/image/MOS_opincbreakdown.gif (accessed Dec. 7, 2009).

STRENGTHS WEAKNESSES

Foreign operationsEconomies of scaleMOS & POT – duopolies in fertilizer market – price controlHigh barriers to entry and industry is capital-intensive

Subject to financial assurance requirements as part of the routine business operations -> increases costs & liquidity requirements.Crop nutrient business is seasonal -results in carrying significant amounts of inventory & NWCInability to predict future seasonal crop nutrient demand accuratelyLocation of international assets in countries with volatile conditions

OPPORTUNITIES THREATS

Increase in demand for biofuels (require corn fertilizers)Increased demand for food but low farm acreage leads to increase in demand for fertilizersModerate drought conditions will increase demand for Mosaic’s products

Lower relative value of the US dollarLower gas pricesCompetitors announced plans to expand capacity of phosphate production over next few yearsSEC investigation for breaching Antitrust LegislationUnder investigation by the Environmental Protection Agency and the Department of Justice for its role in unlawful pollution in Florida

Mosaic acquired Esterhazy, Saskatchewan potash mine in late 2006

"This successful expansion, both in terms of the cost and additional capacity, underscores our strong commitment to cost-effectively grow our Potash business”

Jim Prokopanko, CEO Mosaic plans to add approximately 200,000 metric tonnes

of incremental capacity at its Colonsay, Saskatchewan mine by 2010.

Mosaic has few competitors since the fertilizer industry has significant barriers to entry and economies of scale. It would cost from $1.6-$2.5B for a new company to enter the industry. A company would need five to seven years of development time to build mines and factories, build rail and gas lines, and purchase rail cars and storage before it could even begin making a profit from Potash or Phosphates.

Mosaic primarily competes: ◦ Potash Corporation of Saskatchewan (POT)◦ Agrium (AGU)

http://www.wikinvest.com/ (Accessed December 5, 2009

http://www.wikinvest.com/ (Accessed December 5, 2009

Leading Fertilizer Producers 2008 Financial Comparison

Company Revenue Net Incom

e

Profit Margi

n

Operating

Margin

Potash Corporation of Saskatchewan (POT)

$9.4 B $3.5 B 37.00% 49.07%

Mosaic Company $9.8 B $2.1 B 21.232% 28.60%

Agrium (AGU) $10.3 B $1.3 B 12.87% 19.34%

http://www.wikinvest.com/ (Accessed December 5

Company ROE Profit

Margin Asset

Turnover

Financial leverage

Mosaic Co. (MOS) 15.58% 17.03% 0.84 1.16

Potash Corporation of Saskatchewan (POT)

27.43% 34.48% 0.94 1.38

Agrium (AGU) 10.49% 4.78% 1.28 1.39

http://finance.yahoo.com/ (Accessed December 5

http://finance.yahoo.com/ (Accessed December 5, 2009

Data for 2008 are actual and data for 2009-2020 are price forecasts

Forecasts prepared on June 3, 2009 by World Bank. (http://web.worldbank.org)

2008 2009 2010 2011 2015 2020

DAP, $/mt

967.2 350.0 300.0 310.0 360.0 400.0

Potash, $/mt

570.1 750.0 400.0 300.0 255.0 220.0

ROE 53.19% beta 1.48S&P500 1.47% risk-free 3.50%expected return 6.30% equity premium 5.00%realized alpha 46.89% CAPM 10.89%

yield to maturity 5.975% due 12/15/20112-year T-Note 0.84%10-year T-Note 3.48%spread 2.64%

cost of debt 8.62%

weight of equity 88.62%weight of debt 11.38%tax rate 23.43%

CAPM WACC 10.40%ROE WACC 47.89%   Goalpost WACC 14.15%

CompanyTicke

r

Share Price

@ 11/26/09

MarketCap

Trailing P/E

Price/Sales

Price/Book

Mosaic Co. MOS 55.98 24.91B 19.73 3.24 2.8

Agrium Inc. AGU 56.71 8.90B 19.41 0.89 1.89

Potash Corp of Saskatchew

an POT 114.18 33.78B 22.72 7.46 5.67

Trailing P/E Price/Sales Price/Book

Low 19.41 0.89 1.89

Average 21.07 4.18 3.78

High 22.72 7.46 5.67

http://finance.yahoo.com/ (Accessed November 26, 2009)

Mosaic Company

Earning per share 2.84

Revenue per share 16.724

Book value per share 19.306

Diluted shares 444.94m

Current Share Price: $58.29

http://finance.yahoo.com/ (Accessed November 26, 2009)

Stock Price Calculation

Trailing P/E Price/Sales Price/Book DCF

Min 55.12 14.88 36.49 55.52

Average 59.82 69.82 72.98 61.69

Max 64.52 124.76 109.47 67.86

Valuation Methods Stock Price Weights

DCF 61.69 70.00%

Trailing P/E 59.82 10.00%

Price/Sales 69.82 10.00%

Price/Book 72.98 10.00%

Triangulation Value $63.45

  Mosaic

American Eagle 0.0699

Diamond Offshore 0.4916

First Industrial 0.0229

Jack Henry 0.1338

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Walgreens 0.0438

MEMC Electronics 0.4625

Low correlation with current holdings

Closing Price: $59.94 (12/7/09) DCF Value: $61.69 Triangulation Value: $63.45

Buy 200 shares at a limit price of $55 good through 12/31/09