In the booming province of Saskatchewan, there is one business leader who towers above the rest of the field. And he spends, on average, just a week a month in the province. Bill Doyle has for 11 years been chief executive officer of Potash Corp. of Saskatchewan, the world's biggest potash producer. We ask Mr. Doyle about his outlook for his company, his industry and the province.
After taking a big hit last year, are you feeling better about fertilizer?
Our business is a science-based business and people who were doubting Thomases [about the state of the business]don't realize the science part. You can't grow crops without proper nutrition and, when you take off a crop every year, you are removing nutrients with each harvest. So at a minimum, you have to put back what you take off. Otherwise you are going to destroy the soil fertility and the real value of any farm is the fertility of the land.
What does it mean for you?
I am feeling better about the world. We're in a recovery year, after last year's all-time record drop - a 43 per cent decline in global shipments of potash. This year, we're going to have a big rebound. We won't be up to the level of 2007-08 but we're going to be substantially back to that area. Then you are going to see some very strong years in 2011-13.
Is that as far ahead as you look?
No, my window is really five years, and it is driven by capacity additions. We know between now and at least 2017 there will be no greenfield [brand-new]mine additions anywhere else in the world. So, to be ultra-conservative, I know that between now and 2015, there is no one who can sneak up on us.
We saw the Chinese invest recently in Syncrude's oil sands business? Will they be more aggressive in securing our commodities?
I think so. They see we're going to go back into a period of scarce commodities with prices escalating, from metals to grains to fertilizer. They recognize that over the next five years you will have pretty strong inflation and rapid recovery in commodities, and there hasn't been any additional capacity come on since the 2007-08 bull period.
The global expansion was really just put on hold by the Great Recession. Now that we are coming out of that, we are seeing GDP growth starting to take off again around the world. In agriculture, the demand for better diets is going to resume; you are going to see food shortages come back into play. The Chinese recognize this.
Will they play a role in the Canadian potash industry?
Possibly - I think they'd like to. The problem is how they do it. Part of the issue with China is that they want to control everything and that's going to be difficult for them - because no one is going to give up their position to the Chinese. It just doesn't make any sense.
So if they were willing to be a shareholder, they can buy shares every day, which might give them some way to hedge their potash needs. We wouldn't give control of the company to the Chinese - that's for sure.
Can you really maintain a global head office in a relatively isolated small city like Saskatoon?
You can. We really operate the company commercially from a common sense point of view. Our headquarters will always be in Saskatoon, but that doesn't mean we don't have people out and around the world at all times.
If you think of our domestic business in North America, 95 per cent of it is in the U.S.; of that 95 per cent, the overwhelming percentage is in the corn belt. So our sales force is largely in Chicago because that is the centre of our customer base.
Aren't you personally based in Chicago?
I'm in both Saskatoon and Chicago. I have an office in both places. I spend about a week a month in each place and the other two weeks on the road. When people ask my wife where her husband lives, she says, "In an airplane." I spend over 200 nights a year on the road and that just comes with the territory. We are an exporting entity and we need to make sure we are in contact with customers, with our shareholder base, with potential merger and acquisition candidates.
In addition to potash, we have our nitrogen and phosphate businesses. About a third of our employees are in Canada and two-thirds outside Canada. We're a global corporation and our headquarters is very proudly in Saskatoon, but we operate commercially in the best interest of customers and shareholders.
Are you required by your charter to keep the headquarters in Saskatchewan?
At one time we were, but we think it is just the best place to be. We've been publicly traded now for over 20 years. When we were a Crown corporation, we had that requirement; today it is a conscious choice. We think that is where our bread is buttered. When you look at the percentage of our gross margin as a total company, the majority comes from potash and we're proud to be the Potash Corp.
Will there be more consolidation in the industry?
On a global basis, yes. If you look at the economics, you can't justify greenfield mines at the moment - the price is not there. These are hugely expensive capital projects and we are not even halfway to where we can justify greenfield [additions]
I don't think you need greenfield with all the brown-field expansions [to existing mine operations]that we and others are making around the world. Brownfield will take up all the slack for demand for potash for at least 10 years.
So the only way to grow is to acquire?
You're right. And my guess is we'll be a consolidator, not a consolidatee.
But isn't everyone flocking to Saskatchewan to nail down mine opportunities?
There is a lot of opportunity but I think there are a lot of speculators in our space and most of them don't have a pot to pee in, to tell you the truth. The FOB [free on board]mine price is about half of what you need to build a greenfield mine. So you just can't make the numbers work, no matter who you are - and I don't care if you're the biggest mining company in the world or a speculator. We can't make them work either, so that's why we're not doing it. But acquiring is another thing.
What's changed about Saskatchewan?
More than anything, it's the attitude. It used to be a place where people thought, "Oh, success can't happen here. It happens in other places.'" Finally the attitude has changed and you can feel it: It is palpable. People have confidence that Saskatchewan is truly a great place. It has exceptionally smart entrepreneurial people who work hard, who have vision. And we are fortunate that we now have a government that understands that. [That's the case]for the first time in my experience. I first started coming to this province in the late 1970s.
Does Premier Brad Wall's Saskatchewan Party government have the right policy mix?
They've done enough to get us to invest. But at the end of the day, for the potash industry, Saskatchewan will still be the highest tax jurisdiction in the world - believe it or not, higher than Russia, higher than Israel, higher than Germany, higher than Jordan. We've come a long way, but it doesn't mean we couldn't be more competitive.
Haven't you worked with conservative-oriented governments in the province?
It's not that it's a conservative government. We made progress with the last NDP government, but it's the mindset the Premier brings - a fundamental understanding of how government should operate to encourage investment, and that encourages job growth. We deal with politicians all over the world and I don't see many I'd put in the class of Brad Wall. I think he's that good and I'm not so sure he wouldn't be a good prime minister for Canada.