Strategy & Performance
Creating superior shareholder value is essential to ensure we can make plentiful possible for all our stakeholders. Strong and sustainable earnings growth – coupled with a premium valuation multiple – rewards our shareholders and, at the same time, allows us to focus on our broader social and environmental responsibilities. Our seven strategic priorities determine where we focus our efforts to create long-term value for all those associated with our business.
Our Long-Term Objective
|Create superior shareholder value by:|
|Growing earnings and cash flow while minimizing volatility||Protecting and enhancing a premium valuation multiple||Maintaining the trust and support of our stakeholders|
|Financially, we prioritize earnings growth and investment opportunities in potash while complementing that business with other best-in-class assets.|
For additional information on our sustainability performance, refer to our GRI content index.
Portfolio and Return Optimization
Maximize returns for our assets and explore other value creation opportunities
|Total shareholder return (TSR) vs peers|
|TSR vs. DAXglobal Agribusiness Index (DXAG)|
|Cash flow return (CFR) vs sector|
|Exceed TSR performance for our sector * and the DXAG||
|Exceed CFR 1 for our sector *||
|Expand and further develop innovation teams for each nutrient||
- *Sector: weighted average (based on market capitalization) for Agrium, APC, CF Industries, ICL, Intrepid, K+S, Mosaic, SQM and Yara for most recent four fiscal quarters available
- 1See reconciliation and description of this non-IFRS measure
- Exceed TSR performance for our sector and the DXAG
- Exceed CFR for our sector
Market-responsive potash approach
We produce to meet the needs of our customers as we believe this approach to the market provides the best opportunity to generate the greatest long-term value for our shareholders. In 2016, we responded to challenging market conditions by indefinitely suspending production at our Picadilly, New Brunswick operations and initiating operational changes at Cory. We also took temporary shutdowns at a number of our Saskatchewan operations to manage inventories during the year.
Nitrogen and phosphate optimization
We strive to allocate our production toward the combination of products that provides the greatest gross margin with the least volatility. In nitrogen, our focus is on industrial markets and ensuring that product can be reliably and competitively supplied under long-term contracts. In phosphate, we focus on specialized feed and industrial products and niche liquid fertilizers.
Merger of Equals with Agrium
During the third quarter of 2016, the company entered into an Arrangement Agreement with Agrium to combine businesses in the Proposed Transaction, which is designed to:
During the fourth quarter, shareholders of both companies overwhelmingly approved the Proposed Transaction and the Ontario Superior Court of Justice issued a final order approving it.
From a regulatory standpoint, we continue to cooperate with the various enforcement agencies in their reviews. We have received clearances in Brazil and Russia, and continue to work on obtaining approval from China, India, Canada and the US.
Upon closing of the Proposed Transaction – which is anticipated mid-2017 – PotashCorp and Agrium will become indirect, wholly owned subsidiaries of a new parent company. PotashCorp shareholders will own approximately 52 percent of the new company and Agrium shareholders will own approximately 48 percent.
Improve our competitive position through reliability, productivity and flexibility
|Potash per-tonne cash cost savings||n/a||n/a|
|Ammonia reliability rate||n/a||n/a||n/a||n/a|
|Achieve potash cash cost savings of $20-$30 per tonne from 2013 levels by 2017 (excluding the impacts of foreign exchange and royalties)||
|Track procurement effectiveness and capture cumulative savings of $125 million from 2014 levels by the end of 2016||
|Achieve 96 percent operating rate 1 for all US nitrogen plants and 88 percent in Trinidad||
- 1The company has clarified that the target refers to ammonia reliability rate, its focus in the nitrogen segment. Operating rate is defined as actual production divided by capacity. Reliability rate is defined as actual production divided by capacity, less non-reliability downtime.
- Achieve potash cash cost savings of $20-$30 per tonne from 2013 levels by 2017 (excluding foreign exchange and royalties)
- Capture direct and indirect annualized procurement savings of $170 million from 2014 levels by the end of 2017
- Achieve a 95 percent ammonia reliability rate for our nitrogen division
Optimizing potash production
Our cash cost of goods sold decreased compared to 2015 due primarily to the shift of production to our lower-cost Saskatchewan mines and the impact of foreign exchange, which more than offset closure-related costs at our Picadilly mine.
Capital expenditures under our multi-year potash expansion program are complete and Rocanville is in the final stages of ramp-up. It will provide additional low-cost production flexibility to meet future customer needs and allow us to increase our Canpotex allocation. We expect cash goods sold to decline further in 2017 as we source a greater proportion of production from Rocanville.
In 2017, we expect to have 10.1 million tonnes of operational capability, maintaining flexibility to meet demand should it exceed our current sales volumes estimate. With the ability to restart idled capacity if market conditions warrant, we believe we are best positioned to meet long-term growth in global demand.
Increasing efficiencies and productivity
In nitrogen, a key focus is to improve our cost position by achieving energy and labor efficiencies through innovation and process improvements. In phosphate, at our Aurora facility we continue to benefit from initiatives to lower rock mining costs and refine our mining and recovery techniques. Across all three nutrients, we are working to better share and standardize maintenance processes to strengthen the reliability of our operations.
In addition, we have transformed the way PotashCorp sources goods and services. Establishing a new center-led approach to procurement has enabled us to improve our supplier relationships, leverage our size and scale to generate significant cost savings, create connections to improve the way we operate and provide our operating sites with new capabilities.
Customer & Market Development
Encourage product demand and support customer growth
|Customer survey score|
|Enhance market development initiatives||n/a||n/a||n/a|
|Outperform competitor groups on quality, reliability and service as measured by customer surveys||
|Support development of existing and new markets with initiatives in education, sales and supply chain enhancements||
|Successfully integrate Hammond, Indiana distribution facility into our North American marketing strategy||
- Outperform competitor groups on quality, reliability and service as measured by customer surveys
- Support development of existing and new markets with enhancements in education, sales and the supply chain
Encouraging potash consumption growth
We explore and invest in market development opportunities primarily through Canpotex and our membership in the International Plant Nutrition Institute to encourage consumption growth in places that have historically under-applied potash, such as Africa, China and India.
Optimizing potash infrastructure
In North America, we added 700 new railcars to our domestic potash fleet and now own approximately 3,000 custom-built high-capacity cars, which increases volumes per trainload. With construction of our regional distribution center in Hammond now complete, we can serve key markets in the US more efficiently.
Our offshore sales are made through Canpotex where our current sales allocation is 51.6 percent. This allocation is expected to grow in the second half of 2017 following the completion of our Rocanville capacity audit. Canpotex currently has export capability of approximately 19 million tonnes annually, which is projected to increase to 20 million tonnes with the expansion of its Portland terminal, expected to be complete in 2017.
Capitalizing on future nitrogen opportunities and maximizing returns
We seek opportunities to enter new market segments where we have a competitive advantage. We have been expanding in the diesel emission fluid (DEF) market, leveraging our ability to produce high-quality products in an area with strong demand. Our expanded Lima facility is expected to further enhance our ability to serve this profitable and growing market.
Evaluating new fertilizer products to meet customer needs
We continue to explore opportunities to differentiate our products in response to changing needs of our customers. In 2016, we evaluated opportunities to integrate new product offerings into our portfolio through investment and partnerships and are working to leverage such opportunities in 2017.
Farmers value business analysis. Our user-friendly eKonomics website features concise summaries of the latest crop nutrition research, tips and tools for more productive soils, industry news, commodity futures prices, rainfall data, as well as our Nutrient ROI Calculator and Nationwide Nutrient Balance Analysis - both industry firsts exclusive to PotashCorp.
Stakeholder Communications & Engagement
Earn stakeholder trust through strong communications and engagement
|Community survey score|
|Shareholder survey score||n/a||n/a||n/a||n/a|
|Invest 1 percent of consolidated income before income taxes (on a five-year rolling average) in community initiatives||
|Achieve 4 (performing well) out of 5 on surveys of community leaders||
|Achieve rating on third-party annual shareholder survey that exceeds 2015 results for quality of communications||
- Achieve 4 (performing well) out of 5 on surveys of community leaders
- Outperform competitor group on quality of communications and responsiveness as measured by investor surveys
Building relationships with our communities
Our stakeholders are critical to our long-term success, and we support them by improving the quality of life in our communities. In 2016, we continued our support of school nutrition programs, food banks, our Trinidad Model Farm and other initiatives related to food security. We also supported a number of Aboriginal initiatives, community-building events and funded scholarships that help develop the workforce of the future.
Engaging with our shareholders
Each year we engage a third party to survey a sample of current and potential shareholders to gain additional insight into perceptions of our company, industry and quality of communications. While we proactively ask for feedback over the course of the year, this annual process allows us to formally benchmark shareholder perceptions so we can address their concerns and improve our performance. We monitor changes over time and ensure investor views are communicated to our management team and the Board.
In 2016, we also asked shareholders to rank key topics in all seven of our strategic priorities to better understand what is most important to them. This information will be combined with similar input from other key stakeholders to give us a holistic picture of what matters most to those who depend on our company, allowing us to improve our communicaitons and reporting.
Partnering with our suppliers
We continue to explore opportunities to connect with our suppliers in new and meaningful ways. This helps us improve performance while focusing on safety, the environment and our other core values.
Our procurement strategy is strongly aligned with our diversity and inclusion objectives. We have an initial objective to allocate 30 percent of our local purchasing in Canada to Aboriginal suppliers by 2020.
Attract, develop and retain engaged employees
|Employee engagement score||n/a||n/a|
|Annual employee turnover rate||n/a||n/a|
|Implement Diversity and Inclusion Policy||n/a||n/a||n/a|
|Achieve an average employee engagement score of 75 percent on the company-wide biennial survey||
|Maintain an annual employee turnover rate of 5 percent or less||
|Implement Diversity and Inclusion Policy through training and communication initiatives||
- Have 95 percent of salaried staff submit and review business goals and individual development plans through our new performance management process
- Maintain an annual employee turnover rate of 5 percent or less
- Achieve progress toward our diversity priorities of increasing the representation of women in management to 25 percent or more by 2025 and becoming representative of Aboriginal people in our Canadian operations by 2020
In 2016, we designed and implemented a new global performance management process, along with a supporting talent management system. This will help us design performance plans for our staff employees, including business goals and an individual development plan, by the end of 2017. Our goal is to provide clarity for performance and behavioral expectations, with an increased focus on coaching and guided development to support employee growth.
Enhancing employee communications
Based on feedback from our employees, we have taken steps to enhance our internal communications. This includes keeping employees informed of events and changes in our company in a timely and interactive manner through in-person meetings, videos and written communications. We also provide employees with updates on performance, development and compensation.
Growing our diverse workforce
We recognize that having a diverse workforce enhances our organizational strength and better reflects our stakeholders. In 2016, we adopted our global Diversity and Inclusion Policy, which includes long-term initiatives to increase representation of women in management across our operations and increase the representation of Aboriginal people in all our Canadian operations.
Developing our employees
In 2016, PotashCorp introduced a new global leadership development framework so employees at all levels could develop skills in this area. Activities include formal learning opportunities, such as classroom training and development, along with self-directed learning, which allows employees to take ownership of their own professional development.
Foster a culture of accountability, fairness and transparency
|Top quartile of governance practices||n/a||n/a|
|Remain in the top quartile of governance practices as measured by external reviews||
- Remain in the top quartile of governance practices as measured by external reviews
Leading governance practices
Our governance score from our 2016 RobecoSAM Corporate Sustainability Assessment far exceeded both the average for our industry and the average score of Dow Jones Sustainability World Index members, a best-in-class benchmark representing approximately 250 of the top companies globally. The areas where we are most progressive are related to Board composition, diversity and disclosure.
Focusing on Board composition and education
The PotashCorp Board and management team bring a broad range of complementary skills and perspectives that allow us to better identify areas of value creation and potential challenges. To ensure our Board members have the best information available to them regarding our company and industry, we provide and support internal and external education opportunities.
We value diversity and believe it enhances our organization by bringing new perspectives and skills. In 2016, women represented 31 percent of our Board and 20 percent of our management positions. To further our efforts in this area, we adopted a company-wide Diversity and Inclusion Policy in 2016 with the aim of developing a more representative workforce, including enhancing female and Indigenous representation across our organization.
Aligning compensation with stakeholder interests
To ensure alignment with the interests of shareholders, our Board members are required to own shares or deferred share units (DSUs) with a value equal to at least five times their annual retainer. We believe an ownership mentality is important for management as well, and have a similar stipulation for our executives – with higher share ownership requirements for more senior roles – including our CEO, whose requirement is five times base salary.
Safety, Health & Environmental Excellence
Be relentless in pursuit of the safety of our people and protection of the environment
|Life-altering injuries at our sites|
|Total recordable injury rate|
|Total lost-time injury rate||n/a||n/a||n/a|
|Greenhouse gas emissions per tonne of nitrogen product|
|Water consumption per tonne of phosphate product||n/a|
|Achieve zero life-altering injuries at our sites||
|Reduce total recordable injury rate to 0.85 (or lower) and total lost-time injury rate to 0.09 (or lower)||
|By 2018, become one of the safest resource companies in the world by achieving recordable injury and lost-time injury rates in the lowest quartile of a best-in-class peer group *||
|By 2018, reduce GHG emissions per tonne of nitrogen product by 5 percent from 2014 levels||
|By 2018, reduce environmental incidents by 40 percent from 2014 levels||
|By 2018, reduce water consumption per tonne of phosphate product by 10 percent from 2014 levels||
- Achieve zero life-altering injuries at our sites
- Reduce total recordable injury rate to 0.75 or lower
- Reduce total lost-time injury rate to 0.07 or lower
- By 2018, reduce GHG emissions per tonne of nitrogen product by 5 percent from 2014 levels
- By 2018, reduce environmental incidents by 40 percent from 2014 levels
- By 2018, reduce water consumption per tonne of phosphate product by 10 percent from 2014 levels
Driving change on serious injuries and fatalities
To ensure our safety program remains best-in-class, we introduced an enhanced SIF prevention program focused on proactive and reactive processes. Our reactive prevention program helps ensure that in-depth investigations are performed on all potential SIF incidents and that the strongest possible controls are put in place to prevent them from recurring. Our proactive prevention program is focused on discovering potential occurrences in routine work and mitigating them before something happens.
While our aim is preventing all injuries, no matter how minor, we are increasingly focused on SIF prevention.
Highlighting the “H” in SH&E
In 2016, we undertook an initiative to enhance our corporate health and wellness program, which included reviewing health and wellness best practices at our sites for inclusion in our program. We also established a corporate steering committee and increased education through our new health and wellness website for employees and their families.
Coaching for safety engagement
A cornerstone of our safety program and one of our four key safety priorities is leadership. For our safety culture to evolve, we have to influence what happens at the worker level – where the majority of our safety exposures exist. We recognize that front-line supervisors have the largest influence on what happens at this critical grassroots level. Our objective is to enable each front-line supervisor in our company to become an expert in safety engagement.
We are proud that this program won the Queen’s University Industrial Relations Center Professional Development Award at the 2016 Canadian HR Awards.
Reducing our environmental impact
To ensure we are minimizing our environmental impact, we have increased our focus on engaging employees in four key environmental priorities. These are identifying and mitigating environmental hazards before every job, regularly stopping during jobs to check for new or missed environmental hazards, identifying and eliminating significant environmental hazards, and focused environmental leadership.
Elevating our environmental practices
We continue to identify, communicate and implement best practices at all our sites. We have developed and are implementing a series of environmental leading indicators to measure our current practices, with the goal of reducing our reportable environmental incidents. These indicators will focus on environmental professionals’ time in the field and environmental incident root-cause corrective actions.
Auditing and site assessments
To affirm our environmental excellence and compliance with regulatory requirements, we regularly conduct site assessments and audits of our operations. During the year, we developed an enhanced auditing program that will be used consistently at all our operating sites. This program will provide us with a better understanding of the severity of audit findings so we can improve environmental performance. Further, we have independent third-party environmental audits conducted biennially at each of our sites.
Reducing serious environmental incidents
We currently report our environmental incidents based on regulatory reporting requirements regardless of the nature or severity of the incident. While we want to prevent all environmental incidents, no matter how minor, our focus is increasingly on preventing serious incidents. We are developing an internal severity and consequences classification matrix to assist in classifying our reportable incidents. We are developing an internal severity and consequences classification matrix to assist in classifying our reportable incidents.