Yara International Asa · OSL:YAR
Yara International Asa — Investor Day (October 2004)
18 slides from Yara International Asa's investor day presentation, October 2004
Slide 1: Agenda
Agenda z Facts replacing myths z Fertilizer market and competitive climate z Yara business model and strategy z Financial performance and approach z Business segments z Outlook and key messages Yara CMD 2004, page 43 43
Slide 2: Financial highlights 2004
Financial highlights 2004 z February: Record financials for 2003 published z March: Debt financing and IPO considerably oversubscribed z March 25: Successful stock market launch z Q1: Good results and cash flow, strong fertilizer market z June: New Qafco-4 plant in Qatar started z Q2: Record second
Slide 3: Net income after minority interest shows strong development and reduced seasonality
Net income after minority interest shows strong development and reduced seasonality NOK million 1,200 962 1,000 811 786 750 745 800 650 600 496 521 420 400 261 197 200 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2002 2003 2004 Accumulated NOK mill 1,894 2,186 2,518 USD mill 237 311 366 Yara CMD 2004, page 45
Slide 4: Net interest-bearing debt / equity ratio significantly improved
Net interest-bearing debt / equity ratio significantly improved Per quarter 1.20 1.06 1.00 0.86 0.80 0.65 0.60 0.43 0.44 0.40 0.20 0.00 3Q 2003* 4Q 2003* 1Q 2004 2Q 2004 3Q 2004 * Figures from Demerger Information Memorandum and Offering Memorandum Yara CMD 2004, page 46 Net interest bearing debt ha
Slide 5: Net interest-bearing debt strongly reduced despite increase in operating capital
Net interest-bearing debt strongly reduced despite increase in operating capital NOK million 9 000 8 500 3 886 8 000 7 000 745 402 332 6 000 856 630 4 851 5 000 4 000 3 000 Net Interest Earnings* Net Investments Dividends Tax Other*** Net Interest Bearing Operating Received** Receivable Bearing Debt
Slide 6: Net operating capital turnover key to high return on capital
Net operating capital turnover* key to high return on capital Downstream operating revenues / net operating capital 6 5.0 5.0 4.9 4.9 5 4.4 4.6 4.6 4.3 4.3 3.9 4 3.7 3 2 1 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2002 2003 2004 * 12-month rolling average Yara CMD 2004, page 48 Comparing the different segm
Slide 7: Yara's positions and business model provide natural hedges
Yara’s positions and business model provide natural hedges z Competitive production facilities, no swing producers z Geographical spread reducing seasonality z Balanced product and market portfolio z Balance between Upstream and Downstream/Industrial z Long-term financing mostly in US dollar z Emerg
Slide 8: Yara revenue drivers
Yara revenue drivers Drivers Effect on US gas price Floor price for urea Grain inventories/prices Urea demand New urea capacity Urea supply vs. closures Global urea demand vs. Urea price (above floor) supply Urea price Most other nitrogen fertilizer prices Market segmentation Value-added margins Yar
Slide 9: Yara cost drivers
Yara cost drivers Drivers Effect on Oil product prices Gas cost in Europe Manning Fixed cost Economies of scale Unit cost Yara CMD 2004, page 51 Yara’s gas consumption in fully-owned plants is approximately 145 million MMBtu. With an average gas cost in fully-owned facilities around USD 4 per MMBtu,
Slide 10: Yara sensitivities updated to reflect weaker US dollar
Yara sensitivities updated to reflect weaker US dollar* EBITDA EBITDA EPS** USD million NOK million* NOK CAN + 10 USD/t 63.1 410 0.90 Urea + 10 USD/t 26.2 170 0.40 Ammonia + 10 USD/t 4.6 30 0.09 Oil price + 1 USD/boe - 15.4 - 100 - 0.22 Currency + 0.1 NOK/USD at an 5.7 105 0.25 EBITDA of USD 680 mil
Slide 11: Improved business model drives improved earnings
Improved business model drives improved earnings z Major turnaround implemented and consolidated z Yara organic growth double the market growth z Competitive ammonia position in Upstream z Low volatility in Downstream and Industrial Yara CMD 2004, page 53 Following a three-year turnaround programme
Slide 12: Supply-driven future scenario chosen for illustration purposes
Supply-driven future scenario chosen for illustration purposes Parameter Assumption z Currency Yara is a US dollar business z Commodity US supply-driven scenario (4 out of last 5 fertilizer prices years prices based on forward US gas prices) [Alt: Demand-driven scenario (1 out of last 5 years, mainl
Slide 13: Gas forward market expects sustained, but reduced gap between US and European gas
Gas forward market expects sustained, but reduced gap between US and European gas Yearly average gas prices USD/MMBtu 8 7 US gas price (Henry Hub) 6 5 4 European gas price (estimates based on crude 3 forward prices) 2 1 0 2005E 2006E 2007E 2008E Source: Nymex, forward prices per Oct 19, 2004; Yara Y
Slide 14: Illustration of supply-driven scenario
Illustration of supply-driven scenario Last 12 months Supply-driven scenario Historical Ending 3Q 2004 2005-2008* 10-year average Ammonia price (USD/t) 238 214 152 Urea price (USD/t) 180 173 133 Nitrate price (USD/t) 157 158 124 US Henry Hub gas price 5.6 6.3 3.0 (USD/MMBtu) Brent blend crude oil pr
Slide 15: Profit and loss in supply-driven scenario
Profit and loss in supply-driven scenario Last 12 months Average 2005-2008 Scenario based on historical 10-year Ending 3Q 2004 Supply driven scenario average prices EBITDA (USD million) 832 650 – 700 690 EBITDA (NOK million) 5,733 4,250 – 4,550 5,180 Income before tax (NOK mill.) 4,443 2,750 – 3,100
Slide 16: Positive and negative risk factors associated with supply-driven scenario
Positive and negative risk factors associated with supply-driven scenario z Conservative assumption that whole period will be supply- Upsides driven z Value creation from organic and step growth z Link between fertilizer floor prices and US natural gas Downsides prices broken z Gap between US and Eu
Slide 17: Preliminary estimates for effects of IFRS implication for Yara
Preliminary estimates for effects of IFRS implication for Yara NOK million One time implementation Issue impacted Future effect yearly Future effect yearly effect on equity after tax by IAS/IFRS EBITDA Net income Jan 1, 2004 Pensions (650) + 130 + 50 Plant maintenance/ + 250 - 350 + 120 0 shut-down
Slide 18: Ambitious targets
Ambitious targets z Solid profitability CROGI over the cycle >10% as average z Investment hurdle-rate IRR real, after tax >10% z Relative competitiveness Gross Return (EBITDA/Total assets) Best quartile of peers z Financial strength Long-term rating target Mid investment grade z Cash returns