Yara International Asa · OSL:YAR
Yara International Asa — Debt Investor Presentation (March 2009)
44 slides from Yara International Asa's debt investor presentation, Mar 12, 2009
Slide 1: Yara International ASA Investor Presentation – NOK Bond Offering
Yara International ASA Investor Presentation NOK BOND OFFERING 12 March 2009 CFO Egil Hogna
Slide 2: Yara – A global industry leader
Yara – A global industry leader Global leader in nitrogen fertilizer with unrivalled distribution network Unique business model Favourable long term - balanced production industry dynamics - diversified product offering #1 in ammonia Stable ownership #1 in nitrates* - 36% Norwegian State #1 in NPK c
Slide 3: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 3
Slide 4: Yara at a glance
Yara at a glance Founded in 1905 under the name of Norsk Hydro and Strong financial performance listed as Yara International ASA in 2004 on Oslo Stock NOK Mill. Exchange 18000 70000 16000 60000 Global leader in fertilizers measured by revenue 14000 50000 World’s largest nitrogen fertilizer producer
Slide 5: A chemical company with fertilizer markets focus
A chemical company with fertilizer markets focus Fertilizer Nitric acid Energy Ammonia Urea Industrial Yara converts energy, natural minerals and nitrogen from the air into useful products for farmers and industrial customers 5
Slide 6: Yara has a unique business model
6 Yara has a unique business model Industrial Downstream Upstream Business concepts that exploit combined strength Industrial ”Low-cost product ” push” ”Added value market pull” Favorable gas cost Global optimization Scale advantage Scale advantage Sourcing and flexibility Balanced fertilization Amm
Slide 7: Unique global fertilizer distribution network
Unique global fertilizer distribution network Major plant “On the ground” in ~50 countries Sales office Sales to more than 120 countries, Plants in 29 No. of plants/ locations in 17 countries(1) ~80 terminals/ warehouses ~50 ~20 Global presence… ~20 • Limits seasonality • Asset utilization ~20 • Mar
Slide 8: Yara production base creates economies of scale
Yara production base creates economies of scale Global #1 in ammonia Global #1 in nitrates Global #1 in NPK complex fertilizer Production capacity* (mill t) Production capacity (mill t) Production capacity* (mill t) 10 8 8 8.0 8 Libya 6.3 6.1 6 Saskferco 6 Kemira GrowHow 1.5 Kemira GrowHow 1,8 6 Kem
Slide 9: Yara is a leading fertilizer company
Yara is a leading fertilizer company 2008 revenues* 2008 net income* Market cap 9/3/09** Historical net income*** 15,7 656 Yara 1,5 5,8 1 037 1 459 -121 Mosaic 12,9 3,5 17,9 420 3 528 559 Potash 9,4 3,5 20,4 1 032 3 495 289 K+S 7,0 0,8 6,9 -127 810 29 Agrium 10,3 1,3 5,1 412 1 332 0 5 10 15 0 2 4 0
Slide 10: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 10
Slide 11: Fertilizer market is large with supportive drivers
Fertilizer market is large with supportive drivers Need for significant increase Industry trends in agricultural productivity Fertilizer demand drivers Population growth / hunger reduction Strong economic growth in Asia Higher food consumption per capita High energy prices increase the competitivene
Slide 12: Possible industry concerns and likely mitigants
Possible industry concerns and likely mitigants Challenges and risks Mitigating factors Over-investment at top of the cycle Participants more rational, private leading to over-capacity investments replacing state funds • Increasing investment cost in new plants leads to project delays Fragmented ind
Slide 13: Year-on-year consumption growth
Current market slow-down Fertilizer price development U S D /to n Substantial slow-down in the global 1 ,4 0 0 economy influencing fertilizers 1 ,2 0 0 1 ,0 0 0 Yara’s forth quarter deliveries were down 8 00 DAP fob US Gulf approx. 40 % from last year 6 00 4 00 2 00 Urea fob Black Sea Buying for sto
Slide 14: Action taken by Yara mitigates current slow-down and low ammonia price
Action taken by Yara mitigates current slow- down and low ammonia price Million Global production capacity* Actions taken tons Actions taken 9,0 8.0 8,0 Nearly all purchases from third party 7,0 producers stopped 28% 6.3 6.3 Urea curtailed due to cost. Ferrara and 6,0 5% Le Havre restarting producti
Slide 15: Current grain stocks still low, but up on last two years
Current grain stocks still low, but up on last two years Stable consumption growth is expected and grain … whilst 2009 margin outlook for US corn stocks are close to minimum historical levels… farmers second only to record 2008 USD/bu 5,5 Corn price Logistics 35 % 5,0 Other variable 115 days invento
Slide 16: Cash cost mainly variable and flexible sourcing
Cash cost mainly variable and flexible sourcing … Yara can choose whether to produce or Yara’s operating cash costs are mainly variable… import ammonia NOK Million billions tons 80 6 5,1 3,2 70 5 60 4 50 Variable costs (90%) 64,1 - Dry raw materials 3 40 - Energy - Freight 30 - 3rd party finished 2
Slide 17: Fertilizer and energy prices well correlated
17 Fertilizer and energy prices well correlated Yara has an effective natural hedge on energy… …spot natural gas exposure in Europe reduces purchase commitments as gas can be re-sold Urea fob Black Sea USD/t 900 NAT. GAS 25% 800 OIL- 35% LINKED 45% 700 600 70% SPOT 55% 45% 500 35% 400 300 20% 20% 20
Slide 18: Summary
Summary Low income elasticity of demand Limited new capacity expected over the next few years Economic crisis will increase project delays, as well as new project initiatives Grain stock are at a very low level Closure of fertilizer capacity due to current slow demand will severely restrict fertiliz
Slide 19: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 19
Slide 20: Yara has a well-balanced and diversified portfolio
Yara has a well-balanced and diversified portfolio 2008 Downstream Industrial Upstream EBITDA NOK 4,648 m (27%) NOK 629 m (4%) NOK 12,372 m (69%) Global presence Product innovation Economies of scale Local market Incremental margin Reduced per unit costs knowledge from Upstream production flows Key
Slide 21: Downstream optimizes market knowledge as well as leveraging scale and logistics
Downstream optimizes market knowledge as well as leveraging scale and logistics Key financials (NOK millions) 5 000 4,648 70 000 Downstream characteristics 4 500 60 000 4 000 3 500 50 000 3035 NOK millions 3 000 Sales, marketing and distribution, plus 2 500 40 000 1984 1960 local production sites cl
Slide 22: Industrial products improve production economics
Industrial products improve production economics Key financials (NOK millions) 1850 16451 12000 Industrial characteristics 1650 10000 1450 NOK millions 1250 8000 Nitrogen chemicals and industrial gases sold 1050 6000 850 720 736 629 to non-fertilizer market segments. 650 4000 Environmental and explo
Slide 23: Upstream is a global leader in ammonia and upgraded products
Upstream is a global leader in ammonia and upgraded products Key financials (NOK millions) 14 000 12 372 45 000 Upstream characteristics 12 000 40 000 35 000 10 000 NOK millions 30 000 8 000 25 000 3 563 3 797 20 000 6 000 3 922 Has approximately 8 million tonnes 4 000 15 000 10 000 of ammonia produ
Slide 24: Yara value drivers
Yara value drivers Drivers Effect on Grain inventories/prices Urea demand New urea capacity vs. closures Urea supply Global urea demand vs. supply Urea price (above floor) Revenue drivers US / European gas prices Floor price for urea Urea price Most other nitrogen fertilizer prices Market segmentati
Slide 25: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 25
Slide 26: Pillars of strength for global fertilizer leadership
Pillars of strength for global fertilizer leadership Global leader in ammonia leveraging scale and low-cost capacity Ammonia positions Nitrates Global leader in nitrates, the most important fertilizer in Europe NPK Global leader in value-added segments via balanced fertilization Specialty Global lea
Slide 27: Strategic growth with financial discipline remains a key virtue in Yara
Strategic growth with financial discipline remains a key virtue in Yara Business strategy Meet challenging market situation with Growth across the business cycle action-oriented approach Drive productivity and optimization Volatility creates growth opportunities Millions tons product Financial disci
Slide 28: Business model and global presence mitigate cyclicality and create value for Yara
Business model and global presence mitigate cyclicality and create value for Yara EBITDA break-down Knowledge Margin Local market knowledge USD millions Strong customer relations 4 000 Agronomic and application competence Differentiation and branding 3 500 3 350 118 Logistics Leverage 3 000 1 020 Sc
Slide 29: Yara will proactively seek low-cost production and sourcing positions
Yara will proactively seek low-cost production and sourcing positions No new ammonia capacity to be built in Europe due to cost disadvantage - consolidation of the industry will continue Attractive markets Nitrate production based on imported ammonia is less High gas cost energy intensive and compet
Slide 30: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 30
Slide 31: Financial policy and targets
Financial policy and targets Financial policy Financial targets Financial discipline will be the basis Long-term credit rating target for the development of Yara’s global Mid investment grade (BBB/Baa2) leadership position Relative competitiveness Total cash return to shareholders EBITDA/Total asset
Slide 32: Historical Financials – Strong performance
Historical Financials – Strong performance Yara NOK million* FYE 2006 FYE 2007 FYE 2008 Revenue and other 48,261 57,486 88,775 income EBITDA 6,472 8,441 17,917 EBITDA Margin 13.4% 14.8% 20.2% Net Income** 4,210 6,037 8,228 CROGI 14.1% 16.1% 22.8% Net Capex 1,759 6,988 12,786 Business model and flexi
Slide 33: Financial Strength and Stability
Financial Strength and Stability 4 000 90,0% 20,0 x 1,6x 80,0% 18,0 x 3 500 1,4x 16,0 x 70,0% 3 000 1,2x 14,0 x 60,0% 2 500 1,0x 12,0 x USD million 50,0% 2 000 10,0 x 0,8x 40,0% 8,0 x 1 500 0,6x 30,0% 6,0 x 1 000 0,4x 20,0% 4,0 x 500 0,2x 10,0% 2,0 x 0 0,0% 0,0 x 0,0x 2005 2006 2007 2008* 2005 2006
Slide 34: Liquidity headroom and flexibility in net operating capital support financial profile
34 Liquidity headroom and flexibility in net operating capital support financial profile Available Net interest- financing lines Bn USD bearing debt Funding 6 .0 5.7 Significant new short-term 5.5 funding secured in 2nd half 2008 5.3 5.3 5 .0 0.5 0.7 Completed extension of USD 1 billion in December
Slide 35: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 35
Slide 36: Prospects 2009
Prospects 2009 Grain stocks-to-use remain at historical lows despite strong 2008 harvest Short-term slow-down in fertilizer deliveries due to credit crunch and wait-and-see attitude with reduced commodity prices Key demand drivers in the fertilizer industry are less effected by economic slow down th
Slide 37: Yara – The Industry Shaper
Yara – The Industry Shaper Business uniqueness and flexibility Positioned Market and product leadership for industry leadership Business strength from environmental sustainability Solid growth foundation Strong and stable financial performance and commitment to investment grade 37
Slide 38: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 38
Slide 39: Yara International ASA NOK bond offering
Yara International ASA NOK bond offering Yara International announced March 12 a bond offering at the following terms: • NOK 3 year FRN at Nibor + 2.50 % (Restrictions on maximal amount issued) and • NOK 5 year FRN at Nibor + 3.75 % and/or • NOK 5 year Fixed Rate Note at swaps + 3.75% The bonds will
Slide 40: Agenda
Agenda Company Overview Industry Dynamics Business and Operating Review Strategy Financial Review Summary Bond Offering Appendix 40
Slide 41: Key value drivers – 10-year history
Key value drivers – 10-year history Ammonia fob Black Sea (USDA) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 600 600 500 466 525 499 500 500 400 400 400 308 300 245 300 264 300 212 229 240 245 220 223 186 200 185 200 175 200 146 165 138 121 139 119 111 84 100 101 96 94 86 103 100 100
Slide 42: 10-year grain/oilseed prices – yearly averages
10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/t USD/t 350 700 300 600 250 500 200 400 150 300 100 200 50 100 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Jan Corn (US Gulf) Soybeans (cif Rotterdam
Slide 43: Definition of EBITDA and CROGI
Definition of EBITDA and CROGI Operating income before financial items Total assets + Share of net income in non-consolidated investees - Cash and other liquid assets + Interest income - Deferred tax assets + Net gain/loss on securities - Other current liabilities + Dividends received from 0-20 comp
Slide 44: Disclaimer
Disclaimer This presentation has been prepared by, and the information contained herein (unless otherwise indicated) has been provided by Yara International ASA (the “Company”). By attending the meeting or otherwise viewing this presentation you agree to be bound by the following conditions. This do
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