Bunge Limited Q2 2009 Earnings Call Transcript

Jul.23.09 | About: Bunge Limited (BG)

Bunge Limited (NYSE:BG)

Q2 2009 Earnings Call

July 23, 2009 10:00 am ET

Executives

Mark Haden – Investor Relations

Alberto Weisser – Chief Executive Officer and Chairman

Jacqualyn Fouse – Chief Financial Officer

Analysts

Christine Mccracken – Cleveland Research

Christina Mcglone – Deutsche Bank Securities

Robert Moskow – Credit Suisse

Kenneth Zaslow – BMO Capital Markets

Donald Carson – UBS

Vincent Andrews – Morgan Stanley

Operator

Please standby. Good day everyone and welcome to Bunge Limited second quarter 2009 conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Mark Haden. Please go ahead sir.

Mark Haden

Great, thank you, James. And thank you everyone for joining us this morning. Welcome to Bunge Limited second quarter 2009 earnings conference call.

Before we get started, I wanted to inform those of you who may not have seen it in the press release this morning, that we have prepared a slide presentation to accompany our discussion on the second quarter results. It can be found in the Investor Information section of our website, www.bunge.com, under Investor Presentation.

Reconciliations of non-GAAP measures disclosed orally on this conference call to the most directly comparable GAAP financial measure are posted on our website in the Investor Information section.

I'd like to direct you to slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current views with respect to future events, financial performance, and industry conditions. These forward-looking statements are subject to various risks and uncertainties.

Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation, and encourages you to review these factors.

Participating on the call this morning to discuss our second quarter results, are Alberto Weisser, Bunge's Chairman and CEO; and Jackie Fouse, Bunge's Chief Financial Officer.

And now, I will turn the call over to Alberto.

Alberto Weisser

Good morning everyone. While the second quarter was somewhat volatile, our skilled team leveraged our integrated global asset network to generate better than expected agribusiness returns, offsetting weak fertilizer results. Though some agribusiness results were pulled forward from the third quarter into the second, this is not uncommon and is why we look at earnings on a yearly rather than quarterly basis.

Looking ahead, we remain optimistic for a solid second half of the year. Lower soybean production in South America has limited oilseed processing utilization in Argentina, while challenging locally, this should continue to support crush margins on the global level. A large North American harvest, which according to early indicators is likely, should provide us with ample volumes for our agribusiness operations.

To rebuild global stocks, crop prices will need to stay at levels that encourage good planting and fertilizer use by South American farmers in the coming months. We continue to work through some remaining high-cost raw material inventory in our fertilizer sector, but good demand and improved international phosphate pricing should benefit our fertilizer margins.

We also continued to follow our strategy of investing in our core businesses. During the second quarter, we continued - we announced the creation of a joint venture to build and operate a state-of-the-art export grain terminal in U.S., Port of Longview in Washington State.

This investment will improve the balanced global asset network that is a key driver of value for our company. We also announced an agreement to acquire Raisio, a European margarine producer. The transaction encompasses margarine plants in Finland and Poland as well as several brands. This will expand our food and ingredients business and enhance our efficiencies.

I will now turn the call over to Jackie, who will discuss our second quarter results.

Jacqualyn Fouse

Good morning. Thank you for joining us on the call this morning. Starting with some highlights from the income statements. Overall volume growth for both the quarter and year-to-date was driven by agribusiness and came from sugar, expansion of our European grain origination and new plants that are now fully operational in Eastern Europe and Asia. These more than offset lower volumes in fertilizer.

Solid earnings before interest and taxes from agribusiness resulted from good margins, with grain origination and distribution benefiting from strong soybean demand from China, and oil seed processing supported by the soybean crop shortages in Argentina. Soy meal demand was also somewhat stronger in Q2 than we previously expected.

Fertilizers results remained weak. During the quarter, international prices fell more than did our inventory costs. These results include the impact of $183 million of foreign exchange gains on U.S. dollar denominated financing of working capital as the Brazilian real appreciated quarter-to-quarter.

Most of these gains were offset in gross margins during the quarter via both sales and inventory write-downs, so the carry forward foreign exchange balance is relatively small. The inventory write-down was $120 million in the quarter.

In our Foods and Ingredients business, total edible oils suffered from aggressive competition in Brazil. The results in Europe and North America improved, and wheat milling results were negatively impacted by margins though volumes were up.

SG&A expenses were well managed in all segments and fertilizer SG&A was favorably impacted by the $32 million transactional tax credit taken in the quarter.

Moving on to slide 4, in the balance sheet. Operating working capital balances at quarter end were higher than at the end of December of 2008, but are inline with seasonal patterns and were lower than June of 2008 mainly due to lower prices. Regarding the components in working capital, agribusiness inventories are seasonally up, but lower than June of 2008 and are driven by higher commodity prices this year.

Fertilizer inventories are down due to both volume and prices. Trade receivables are lower due to tight management of credit and payables are down driven by fertilizer as we significantly reduced purchasing and paid down balances related to the higher priced purchases in earlier periods.

In terms of efficiency, the cash cycle for fertilizer is negatively impacted by the decline in payables balances, while fertilizer inventory has come down only slowly. But the agribusiness cash cycle is better than last year and the overall Bunge Group 12 month rolling average cash cycle has improved by 1.4 days on a June-to-June comparison.

Consistent with the above, gross debt is up versus year-end 2008, but lower than June of 2008. With respect to cash flow, cash flow from operations was negative for the first six months of 2009 followed by negative funds from operations and working capital increases.

The two main drivers of our working capital are higher agribusiness inventories and lower fertilizer accounts payables. We expect the working capital situation in fertilizer to improve by year-end as we sell inventory and as our purchasing activities there normalize. We continue to manage capital expenditures prudently and spending has been slightly lower than 2008 despite the incremental expansion of our sugar business.

On liquidity, our liquidity position remains strong. In the second quarter, we were able to replace two revolving credit facilities and maintain our total of $3.5 billion in committed funds, of which only about $900 million was drawn at June 30th. We also issued $600 million of 10-year senior notes during the quarter, and in doing so lengthened the maturity profile of our debt portfolio.

Now with respect to the outlook, in light of our performance in Q2 and given our outlook for the remaining six months of the year, we are maintaining our full year earnings guidance of $4.90 to $5.40 per share.

We see second half agribusiness structural margins is well supported, given the current supply and demand situation, and we see a better environment for fertilizer as farmer economics are good, especially for soybean and we think demand in Brazil will be solid.

We expect the second half results to be somewhat more weighted to Q4, partly because we saw soy meal demand recovered a bit earlier than we had anticipated in Q2, as buyers began to replenish pipelines and pull some volumes from Q3 to Q2. In addition the North American harvest will also be in full swing in Q4.

The presently stronger real should not have a significant impact on the remainder of 2009, because we have some hedges in place, but it does keep the pressure on us for continuos efficiency improvements in our operations.

And with that, I will open the call up to Q&A.

Question-and-Answer Session

Operator

(Operator Instructions) And we'll take our first question today from Christine Mccracken with Cleveland Research.

Christine Mccracken – Cleveland Research

Good morning.

Alberto Weisser

Good morning Christine.

Christine Mccracken – Cleveland Research

Yeah, Alberto, we seen a pretty healthy I think rebound in the health of the Brazilian farmer and yet, they continue to be fairly reluctant to buy fertilizer and I am wondering, if you could characterize the situation is this really a credit issue still despite the fact the banks claim they have a lot more money or is it just a general reluctance on their part to take risk?

Alberto Weisser

I would characterize it more as a difficulty in comparisons, because last year and in ’07, we had much more anticipation in the first half and this year we have a more normal pattern, where something like 40% or 35% to 40% of the fertilizer demand is in the first half and the two-thirds in the second half. So, I think it is more normal. We feel that the demand should be fine. We are seeing also that there is enough credit. The governments have increased their offer of credit. But at least another $20 billion through Banco do Brasil. So we have the impression that, from the demand side, the picture is relatively normal, if there is a normal picture.

Christine Mccracken – Cleveland Research

Okay, there is not a problem though with the banks actually getting the money to the farmers, that was I think one of the constraints, we heard about earlier that the government made the funds available, but they didn’t actually get to the farmers?

Alberto Weisser

Yes, that has been traditionally an issue, but this year should be the same as last year or a little bit better. So that is why we are comfortable. So, we are not increasing the whole industry the whole agribusiness industry is not increasing significantly if at all their credit. So who jumped in are the banks and the government. So, I do not see it as a major constrain this year.

Christine Mccracken – Cleveland Research

Okay. And when you look by nutrient, just looking at the difference between phosphate products, I’m just wondering have you seen demand for phosphate maybe pick up a little more quickly than products given the price disparity between the two or is it fairly down?

Alberto Weisser

Now comes the - now we are in the term of the year where the phosphate really picks up because it is mostly used in for soybeans. So this is the time of the year where phosphate picks up. It’s also one of the reasons you saw a slight increase in prices.

Christine Mccracken – Cleveland Research

Right. And then just one final question just on sulfur cost. Are you seeing now the full benefit of the lower sulfur cost in terms your phosphate mining business? Or is that still lagged into the quarter?

Alberto Weisser

It’s still lagged and it will be with us even through the third quarter and slightly into the fourth quarter. But obviously, we adjusted as much as we could through the lower cost of market, but we will have issues until the – into the beginning of the fourth quarter.

Christine Mccracken – Cleveland Research

All right. I leave it there and followup. Thanks.

Alberto Weisser

Okay. Thank you.

Operator

Next we’ll hear from Christina Mcglone with Deutsche Bank.

Christina Mcglone – Deutsche Bank Securities

Good morning.

Alberto Weisser

Good morning, Christina.

Christina Mcglone – Deutsche Bank Securities

Alberto, can you just go through your kind of what you are thinking about agribusiness over the next few quarters as we - we’re in a tight supply situation now. And I like you mentioned some soybean meal pipelines have been refilled. And then we will get the new U.S. crop, but if we get a very big South American crop it looks like Argentina is gearing up the plant a lot more beans and Brazilian soybean plantings maybe up, do we - what does it look like in terms of the first half ’010 in terms of the crush margin environment?

Alberto Weisse

It’s a little bit early to think in these kind of situation, because Brazil does need much more fertilizer. They cannot save like in U.S. reduce the consumption of fertilizer and still have a good yield in Brazil, that’s not possible because the soil is so poor. And we do not expect an increase in demand this year. So, we expect Brazil to be perhaps same or slightly up, Argentina should be better because we should not have the drought. But, that should be only with the good crop in northern hemisphere - normal crop in southern hemisphere, we probably, still are going to be tight by the end of September of next year. We have a tight situation on ending stocks, because demand is picking up. We already see that this calendar it should be up 1%. Soybean meal demand and vegetable oil should be up 4%. And USDA is estimating an increase next year of 3%. So, our outlook for ‘010 is probably at this stage a normal type of environment.

Christina Mcglone – Deutsche Bank Securities

Okay and just to follow-on in the soybean meal outlook, so, if we get a large liquidation of hogs in the U.S. and then in Canada and potentially in China, is that incorporated in that view of an increase in soybean meal demand next year?

Alberto Weisse

Yes it is included the - obviously for over the next 10 months, we are going to all production for the hog industry these piglets they are and need to be fed. And the hog industry is relatively healthy in Europe. So, this is using USDA numbers, this is more or less all included.

Christina Mcglone – Deutsche Bank Securities

Okay. And then, just my last question. On fertilizer, I know you don’t give quarterly guidance but it’s been really difficult to model. For the third quarter, given the still the high cost sulfur, but the fact that sales should be picking up seasonally, are we looking at and you wrote - had that write-down are we looking at break-even to positive? How can we think about fertilizer for the third quarter?

Alberto Weisse

It should be positive, because we are selling – it’s now the more normal pattern. It should be positive.

Christina Mcglone – Deutsche Bank Securities

Okay, thank you.

Alberto Weisse

Okay, thank you.

Operator

Next we’ll hear from Robert Moskow with Credit Suisse.

Robert Moskow – Credit Suisse

Hi, thanks. I want to know are you done taking write-offs in your fertilizer business? Or have the recent price movements in potash will that play a role in future quarters?

Alberto Weisse

No, per definition, we are done, because that’s exactly what we do was a lower cost for market. Now, obviously if the prices continue to going down, there is always a risk, but we are there exactly where the market is.

Robert Moskow – Credit Suisse

Okay. And you said that phosphate prices are starting to improve again. And it’s probably related to, I guess the pent-up demand that had been building. You are saying that in July, it’s starting to accelerate again because of the soybean meal or because of the soybean plantings that are going on?

Alberto Weisse

Yeah, we are seeing - there are a couple of reasons why we are seeing an increase in prices. First of all, we have to remember that phosphate prices have to be in the neighborhood of $400 to $500 per ton to allow expansion of opening of mines and investments and having the right returns. So the prices we have been seeing were just too low. So they have to converge back to a more normal environment something between $400 and $500 depending on where you will sell it to, that is number one. Number two is, farmers are obviously seeing that inventories are quite low in Brazil, and there is some, there is some nervousness that they want to have access through the products. And thirdly, their farm economics are very strong where the commodity prices are, in soybeans in the neighborhood of $10 per bushel and break-even in Brazil is between Parana 520 and Mato Grosso 750, 760. So the farm economics are very strong, and farmers are more capitalized, and so there is - the environment is shaping up to allowing at the prices to normalize at a little bit higher level.

Robert Moskow – Credit Suisse

Thanks. And then just one last question Alberto. My understanding is that the financing, the tight financing environment makes it very difficult to make the case for more acreage and kind of undeveloped acre - undeveloped land in Brazil. Does that have any influence on how you look at 2010 or even 2011. If new acreage isn’t being developed, does that hurt the volume growth algorithm for fertilizer or is there volume growth just on existing acres that you can expect the growth on?

Alberto Weisser

I would see that from the financing point of view and from the economics, there would be room for expansion already this year. And probably the more limiting factor this year is going to be the lack of availability of fertilizer, because when you do the more or less a simple calculation, the Brazil bought 8.5 million tons in the first half. If we sell the same amount as we sold last year the whole industry would be 22.5 million tons. Production is something like 7 million to 8 million. So the imports will have to be 6 million to 7 million tons. This over the next two or three months, it will be very, very difficult. So I think it is more a question of logistics and availability of fertilizer, which again is another support for normalize - normalization of pricing. But when we look at next year, farmers are being capitalized with the good prices, last year, this year. So, I think we will see a much more normal pattern of growth back to what we saw before the 5% or 6% expansion in production. Yield or acreage as well, a mix of the two.

Robert Moskow – Credit Suisse

So you really think that that like, in Mato Grosso for example, that you could see acreage expansion?

Alberto Weisser

Probably not the next - I don’t think the next, it’s early to say, but next harvest probably not. I would say that, it’s probably the same acreage.

Robert Moskow – Credit Suisse

Right, so you are talking about like 12 months from now, we might be looking at that?

Alberto Weisser

Yes,

Robert Moskow – Credit Suisse

Okay.

Alberto Weisser

Exactly in one year from now, we might see expansion.

Robert Moskow – Credit Suisse

Okay. Thank you.

Alberto Weisser

Thank you, Rob.

Operator

We will move on to David Driscoll with Citi Investment Research.

Unidentified Analyst

Good morning everyone. This is Cornell with a question on behalf of David Driscoll.

Alberto Weisser

Good morning.

Unidentified Analyst

Okay, great. Just looking at what’s been happening on the foreign currencies, we’ve seen there Real begin to strengthen a bit since the first quarter. It’s my understanding that given that you buy a lot of your inputs in your fertilizer division during the first half of the year, would we have negative impacts on margins in the fertilizer division over the second half if we continue to see an appreciation in the Brazilian Real. And furthermore, you talked about phosphate prices, I understand that there are modestly over the last week or so, but still down about 20% from where we were in the – at the end of the first quarter so would be my understanding that we would need a bit more improvement on those in order to kind of get fertilizer margins moving in a right direction, just you want to hear your thoughts on that? Thank you.

Jacqualyn Fouse

Hi Cornell, it’s Jackie. On the FX, I mean, you are correct in your observation, but what you saw during the quarter was a negative impact in gross margins for exactly the reason that you highlighted. And based on where we are now, how much product we sold and then the pattern of that appreciation during the quarter, including the fact that some currency impact flows through that lower cost to market calculation and therefore in the inventory a write-off numbers there is an element of that. We are at - right now where rates are pretty close to if they stay there not having much of an impact on the fertilizer gross margins from currency. Obviously, if it moves one way or the other, there will be the corresponding usual impact.

Alberto Weisser

Yeah also the side effect of the test of lower cost of market, also adjust this, because it’s done in local currency and therefore the new price in dollars have a double negative effect in Brazil and that’s why the lower cost of market charge of $121 million covers part of that. In terms of phosphate, we have to think about two business units inside Bunge. One is the retail business, which is the buying and reselling, and the other ones are the phosphate mines. So the prices where they are at the moment they are fine. So we are quite profitable in that area with the exception that we still have to walk away through the high sulfur costs. But, once where they are, the mines are profitable.

Unidentified Analyst

Okay, thank you.

Alberto Weisser

Thank you.

Operator

Kenneth Zaslow with BMO Capital Markets has our next question.

Kenneth Zaslow – BMO Capital Markets

Hey, good morning everyone.

Alberto Weisser

Good morning Ken.

Kenneth Zaslow – BMO Capital Markets

Hi, Jack, I have two questions for you. One is in terms of the soy crush, your hedging and how you’re looking at it? How you guys positioning for the soy crush environment going forward in terms of I know spot has been a little weaker than the futures, are you guys positioned to be able to capitalize on that? How does that works?

Alberto Weisser

The environment, the crush margins for the fourth quarter, the third quarters, they are quire solid. And at the moment, it’s a little bit, when you look at the futures market, it’s not exactly the reflection of how the physical is and, but obviously the end of the third quarter is – or the third quarter is always a time where the northern hemisphere, the U.S. plants start to prepare for maintenance. And so, some of the business moves it’s more or like in July and in June, and the feed millers, the meat industry anticipate some of the buying. So, I would say the margins are a little bit more normal now, but physically they are probably a little bit better than the future is indicating.

Jacqualyn Fouse

Ken, just one thing maybe to keep in mind from a timing standpoint is we expect for them to improve from here to towards the end of the year. So, you might want to keep that in mind when you think about how the profits will flow through Q3 and Q4.

Kenneth Zaslow – BMO Capital Markets

Okay, so you are telling me that physical margins are good?

Alberto Weisser

Physical margins are good.

Kenneth Zaslow – BMO Capital Markets

Okay.

Alberto Weisser

And you also have to remember that because of the short crop in South America, and because of the high export of soybeans to China there is very, very little supply from South America, what we normally would see unusually low. So, as of September, the only important player in the market is North America.

Kenneth Zaslow – BMO Capital Markets

Okay, but you are saying that soybean meal demand, soybean oil demand, less soybean prices is good?

Alberto Weisser

Yes.

Kenneth Zaslow – BMO Capital Markets

Okay.

Alberto Weisser

When you look at – when you look at the year, let’s first talk USDA. The crop year in soybean meal demand should be down 3%, but when we look at the calendar year, we expect it to be up 1%.

Kenneth Zaslow – BMO Capital Markets

Okay.

Alberto Weisser

And when we look at next year, the USDA is estimating at an increase of 3%. So what we are seeing is a stabilization in the meat industry, obviously, we still have an issue on the hog industry on margins. But poultry margins are good and the egg sets are low. So the outlook for the poultry industry is positive.

Mark Haden

Hey Ken. It’s Mark. Just want to add that the margins have come down probably from what you have seen in the second quarter.

Kenneth Zaslow – BMO Capital Markets

Okay.

Mark Haden

And that kind of transition period between old crop and new crop where the market is kind of waiting, they are incented to wait until once the harvest begins to do more of a purchasing. And then you would start to see them, as Jackie was saying kind of full back, kind of ramp backup towards the end and into the fourth at much stronger levels. But they have come down – they’re good, but they’ve come down from where they were.

Kenneth Zaslow – BMO Capital Markets

Okay. Alberto, you say that 2010 would be - I think you used the word normal year. I think historically you said base year at 750. Is that normal? Or is that base? Or am I mixing up normal and base? Is that what you’re trying to say?

Alberto Weisser

What we are saying now, we got so much into trouble, what is normal, what is base, what is what. What we like to say is what Jackie introduced two or three quarters ago, it’s the 2% points above cost of capital. So, we think next year is a 2% points above cost of capital type of year. All indications are, we think there is still going to be a tight inventory. So, commodity prices should be positive for the farmers to buy fertilizer. So, we should see expansion on the fertilizer side. But we should have enough grains to process. So, when we look at the whole picture, we have a good feeling. Also with more normalized prices the food and ingredients sector should not suffer so much as it did this year and last year because of the volatility of the prices.

Kenneth Zaslow – BMO Capital Markets

Okay and my last question is, when you say that phosphate prices have improved, I’m assuming you mean import parity has improved within Brazil more than the international prices have risen, is that a fair assumption?

Alberto Weisser

Well, Brazil is now at import parity for a couple of months already.

Kenneth Zaslow – BMO Capital Markets

Okay.

Alberto Weisser

But number two also in Brazil phosphate prices have gone up. But I think they also have gone up slightly on international price - on phosphate. This is now the key one for us. Potash, it’s coming down or came down, but phosphate is going up and in Brazil, it’s also going up.

Kenneth Zaslow – BMO Capital Markets

But Phosphate price as you said internationally have gone up a smidge and then the recovery has really been internal Brazil specific, is that fair?

Alberto Weisser

Yes.

Kenneth Zaslow – BMO Capital Markets

Okay, cool. Thank you, very much.

Alberto Weisser

Thank you.

Operator

Next we will hear from Don Carson with UBS.

Donald Carson – UBS

Yes, thank you. A question on – couple questions on Brazil. One, now that potash pricing has come down with the NDA contract. What’s sort of the new marker for the import price into Brazil? And are - you mentioned phosphate demand has picked up, have you seen that happen on potash yet? And then just a followup on cost of production for Mato Grosso, soybean farmers, you mentioned the 750, 760, that’s down somewhat. Is that just due to lower fertilizer costs?

Alberto Weisser

In terms of pricing, Brazil was following exactly the international prices so, also on potash. So, what we are seeing is the movements, we are seeing is very similar prices for everyone. No different than the international prices. Now in terms of the break-even for Mato Grosso and Parana, it is the main reason is the reduction in fertilizer prices. But also, some interest rates have come down in Brazil, energy has come down so it’s accumulation of a couple of things. But fertilizer has a big impact.

Donald Carson – UBS

Just to clarify, so are you sourcing now at sort of that 460 global prices into Brazil on potash?

Alberto Weisser

We would not comment on what we are doing. You have to remember we are a large buyer. But, what I can tell you is inline with what is out there at the international prices.

Donald Carson – UBS

Okay. Thank you.

Alberto Weisser

Welcome.

Operator

Next we’ll hear from Vincent Andrews of Morgan Stanley.

Vincent Andrews – Morgan Stanley

Thank you, guys. Good morning everybody.

Jacqualyn Fouse

Good morning, Vincent.

Vincent Andrews – Morgan Stanley

Jackie I apologize if you discussed this in your prepared remarks. I was on another call at the time. But could you characterize the cash flow generation in the quarter or the use of cash in the quarter and just help us understand what happened?

Jacqualyn Fouse

Yeah, I mean, the main drive obviously is the increase in working capital plus just the FFO generation is weak or slightly negative for the six months. But, the two impacts in working capital are seasonally higher agribusiness inventories and somewhat impacted by price as well. But then in addition, the fertilizer working capital situation has not yet normalized. The cash stockholders have been negatively impacted by lower payables as we stopped purchasing, importing product and then have had to pay down, those payable balances that came from previous purchases and those were at higher prices. So, fertilizer working capital has been very negative for the first six months of this year versus last year and more so than a normal environment whatever that is and we expect that to improve pretty significantly in the second half of the year.

Vincent Andrews – Morgan Stanley

So, do you expect a positive cash flow from the year, all else equal?

Jacqualyn Fouse

I think at the cash flow from operations line, we will be – we will be nicely positive.

Vincent Andrews – Morgan Stanley

Okay and then, Alberto maybe two questions. The first is, it seems like the basis in soybeans in Brazil has gotten pretty wide. Am I reading that correctly?

Alberto Weisser

It has improved, yes.

Vincent Andrews – Morgan Stanley

And what do you characterize that or how would you explain that and do you think the current basis level is indicative of where it will be in the future or what do you see happening?

Alberto Weisser

I think it is more a question of the market becoming tighter as it becomes to the end of the crop and the farmers being capitalized. They don’t need to sell it. So, it's more of a seasonal situation.

Vincent Andrews – Morgan Stanley

Okay and then maybe lastly, Alberto, when you talk about the kind of break-even price necessary from a Greenfield phosphate perspective when you talk about $400 to $500 a ton, what type of sulfur and ammonia prices are you assuming there? And is that for somebody that isn’t vertically integrated in rock or how does that come together?

Alberto Weisser

This is opening up the mines and having all the chemical plants, but not having sulfur. So having phosphoric acid, sulfuric acid production, a traditional the way we have it in our mines, where we don’t have the sulfur from 1 to 2 million tons of production. A very traditional one, nothing…

Vincent Andrews – Morgan Stanley

Nothing else.

Unidentified Company Representative

Nothing special.

Vincent Andrews – Morgan Stanley

Yeah, nothing special. Okay, thanks so much.

Alberto Weisser

Thank you.

Operator

And that’s all the time we have for questions today. I will turn the conference over to Mr. Haden for any additional or closing remarks.

Mark Haden

James, thank you very much. And thank you everyone for joining us today. Have a nice afternoon. Bye.

Operator: That does conclude today’s conference call. Thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!