Yara International Asa · OSL:YAR
Yara International Asa — BMO conference 2014
53 slides from Yara International Asa's conference presentation, May 21, 2014
Slide 1: Yara International ASA – BMO conference presentation
0 Yara International ASA BMO conference presentation 21 May 2014 Torgeir Kvidal, CFO 21 May 2014
Slide 2: Integrated business model provides scale, flexibility and end-to-end presence
Integrated business model provides scale, 1 flexibility and end-to-end presence Downstream Upstream Industrial Supply & Trade Scale advantages + Unique flexibility + Unrivalled presence 21 May 2014
Slide 3: Yara – the leader in nitrogen fertilizers
2 Yara – the leader in nitrogen fertilizers Global no 1 in NPK Global no 1 in ammonia Global no 1 in nitrates complex fertilizer Production capacity* (mill t) Production capacity* (mill t) Production capacity* (mill t) 9 7 8 8 6 7 7 6 5 6 5 5 4 4 4 3 3 3 2 2 2 1 1 1 0 0 0 Yara CF GDF Agrium PCS Yara
Slide 4: 23.7 million tons of fertilizer sold in 2013
3 23.7 million tons of fertilizer sold in 2013 43.0% Europe 10.2 mill. tons North-America 13.9% 3.3 mill. tons Asia 8.9% 2.1 mill. tons Africa 4.2% 1.0 mill. tons 29.1% Latin-America Oceania 6.9 mill. tons 0.8% 0.2 mill. tons 21 May 2014
Slide 5: Value-added upgrading and distribution make up larger part of Yara's contribution
4 Value-added upgrading and distribution make up larger part of Yara’s contribution Total Yara contribution NOK millions 9,000 8,000 Trade 7,000 6,000 5,000 Fertilizer upgrade & distribution 4,000 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 21
Slide 6: Agronomic benefits justify nitrate premium
5 Agronomic benefits justify nitrate premium Nitrogen upgrading margins European nitrate premium USD/t (publication prices) (Yara realized 1) 700 160.0 600 140.0 Nitrate premium above urea 120.0 500 Value 100.0 400 above ammonia 80.0 300 60.0 Value above gas 200 40.0 100 Yara EU gas cost *20 20.0 0
Slide 7: Stable NPK premiums
6 Stable NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 700 700 600 600 500 500 Value above raw material Weighted average global 400 400 premium above blend cost NH3, fob Black Sea *0.22 Nitrate premium 300 300 Urea, fob Black sea 200 200 Rock, fob NA *1.4 MOP, cfr NWE
Slide 8: Fertilizer portfolio is being driven towards greater product differentiation and profit
Fertilizer portfolio is being driven towards 7 greater product differentiation and profit Product portfolio (2012/13 season volume) Differentiation improves margins 10% and reduces exposure to commodity price volatility 35% 28% On-going efforts to further increase differentiation through: – Addi
Slide 9: Farm economics support fertilizer demand
8 Farm economics support fertilizer demand Source: CBOT, FAO 21 May 2014
Slide 10: Early spring in Europe, US well behind
9 Early spring in Europe, US well behind Season-to-date deliveries (9 months ending 31 March) USA West Europe Million tons N Million tons N 7.0 14.0 -13% +5% 12.0 6.0 10.0 5.0 8.0 4.0 6.0 3.0 4.0 2.0 2.0 1.0 0.0 0.0 08/09 09/10 10/11 11/12 12/13 13/14 08/09 09/10 10/11 11/12 12/13 13/14 Production N
Slide 11: Chinese urea: significant export increase, but modest production increase
Chinese urea: significant export increase, but 10 modest production increase Chinese urea production, Chinese urea exports Urea price (million tons) (Kilotons) USD/t 7.0 1,800 550 12/13 13/14 500 1,600 6.0 11/12 450 1,400 5.0 400 1,200 350 4.0 1,000 300 800 250 3.0 200 600 2.0 150 400 100 1.0 200 50
Slide 12: Lower forward gas cost in Europe
11 Lower forward gas cost in Europe Yara European gas & oil cost Change in European energy cost USD/ NOK MMBtu millions 13.0 300 Actual for quarter 232 200 April 2014 estimate** 12.0 100 1 11.0 0 (100) (51) (36) 10.0 (200) 9.0 (300) 8.0 (400) (500) (450) 7.0 (600) (600) 6.0 (700) 4Q12 1Q13 2Q13 3Q13
Slide 13: Debt/equity ratio
12 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.75 0.63 0.570.56 0.49 0.38 0.32 0.27 0.20 0.22 0.12 0.12 0.08 0.07 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2009 2010 2011 2012 2013 2014 21 May 2014
Slide 14: NOK 10 per share proposed dividend improves capital efficiency
NOK 10 per share roposed dividend improves 13 capital efficiency 37% 28% Above-target dividend 48% Overall target 40-45% 10% proposed, to improve capital efficiency 3% Minimum 30% dividend 34% 34% 10% 9% 11% Growth ambition remains in 7% 25% 23% place, but focus for 2014 on 18% 19% 3% 18% organi
Slide 15: Strong first quarter results in Yara Brazil
14 Strong first quarter results in Yara Brazil Yara Brazil deliveries1 and EBITDA Strong result improvement Kilotons NOK millions reflecting volume growth from 3,000 180 acquisition, and improved EBITDA 160 market 2,500 Deliveries 140 2,000 120 Synergies and integration cost 100 in line with exp
Slide 16: Latin America growth & integration progress
15 Latin America growth & integration progress OFD (Colombia): – Integration preparation underway, with resource transfer from Bunge work – Closing expected 3Q 2014 Bunge (Brazil): – Integration completed – Result improvement expected going forward – USD 50 million synergies effective 2014 21 Ma
Slide 17: Increased investments in 2014 drive continued value-added product growth outside Europe
Increased investments in 2014 drive continued 16 value-added product growth outside Europe Total • Smaller growth initiatives: Hurdle rate for all NOK 13 billion - Largest category is plant expansions; e.g. investments is 7% Norway & Finland approx. 500kt NPK & CN real after tax - Also Downstream
Slide 18: Additional information
17 Additional information 21 May 2014
Slide 19: Yara sensitivities
18 Yara sensitivities Operating Income EBITDA EPS* USD million USD million USD Urea sensitivity +100 USD/t 937 1,103 3.1 …of which pure Urea 285 416 1.2 …of which Nitrates 367 393 1.1 …of which NPK 211 220 0.6 Nitrate premium +50 USD/t 468 498 1.4 …of which pure Nitrates 289 311 0.9 Hub gas Europe +
Slide 20: Simplified P&Ls for scenarios
19 Simplified P&Ls for scenarios 5-year avg. Chinese swing Last 4 Demand- NOK millions to quarters driven 30 Sep 132) Low High EBITDA1) 14,800 14,800 11,300 14,700 23,500 Depreciation -3,400 -3,600 -3,600 -3,600 -3,600 Interest expense -900 -800 -800 -800 -800 Income before tax 10,500 10,400 6,900 1
Slide 21: Price and currency assumptions in scenarios
20 Price and currency assumptions in scenarios 5-year Chinese swing* Last 4 Demand- avg. to quarters driven** 30 Sep 13 Low High Ammonia fob Black Sea (USD/t) 546 424 400 400 475 Urea prilled fob Black Sea (USD/t) 365 340 300 350 475 Nitrate premium, USD/t 84 85 85 85 85 Phos rock fob North Africa (
Slide 22: Earnings scenario price assumptions
21 Earnings scenario price assumptions USD/t Urea price fob China 440 420 USD/RMB 6.23 USD/RMB 6.23 USD/RMB 6.10 USD/RMB 6.10 400 380 360 360 340 335 320 56 320 22 310 7 7 300 24 24 33 33 280 260 289 289 270 270 0 CMD 12 CMD 12 CMD 13 Assumed cost CMD 13 High tax Assumed cost Realized export tax Tax
Slide 23: Nitrate premium increased to 85 USD/t in scenarios
Nitrate premium increased to 85 USD/t 22 in scenarios, in line with 5-year average CAN USD/t 160 Lower urea prices increase farm 140 margins and make room for stronger nitrate premiums 120 100 A situation with continued strong 80 food prices and supply-driven urea 60 pricing allows for higher ni
Slide 24: Earnings per share
23 Earnings per share* 12.42 11.84 EPS excluding currency and special items 10.54 10.02 9.82 9.25 8.04 7.73 7.67 6.69 6.40 5.66 0.23 2011 2012 2013 2014 Annual NOK 41.99 37.31 20.67 6.40 * Average number of shares for 1Q 2014: 277.1 million (1Q 2013: 280.6 million). 21 May 2014
Slide 25: EBITDA development
24 EBITDA development NOK millions 4,184 610 274 978 3,591 36 327 340 EBITDA Special Volume Price/margin Gas & oil Other Currency EBITDA 1Q13 items costs in 1Q14 Europe 21 May 2014
Slide 26: Record fertilizer deliveries
25 Record fertilizer deliveries Kilotons 7,000 6,341 6,405 6,284 6,104 6,146 6,017 5,884 6,000 5,474 5,296 5,437 5,256 5,179 5,253 5,297 5,210 5,216 5,129 4,970 5,013 5,044 4,882 4,914 5,000 4,763 4,742 4,791 4,759 4,834 4,239 4,000 3,496 3,000 2,000 1,000 0 2007 2008 2009 2010 2011 2012 2013 2014 E
Slide 27: Yara 1Q fertilizer sales by market and product
26 Yara 1Q fertilizer sales by market and product Kilotons 1Q13 1Q14 3,110 2,892 1,583 923 800 929 484 482 198 300 Europe Latin America Asia North America Africa 1,463 1,454 1,569 1,285 1,282 1,248 867 561 326 374 316 418 261 279 NPK compounds NPK blends Nitrate Urea Other products UAN CN 21 May 201
Slide 28: Yara 1Q fertilizer sales product and source
27 Yara 1Q fertilizer sales product and source Kilotons 1,569 1,454 1,463 1,285 1,282 1,248 867 561 418 374 326 316 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 1Q13 1Q14 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced Total 21 May 20
Slide 29: Increased NPK and nitrate deliveries
28 Increased NPK and nitrate deliveries Yara-produced compound NPK deliveries Yara-produced nitrate deliveries Kilotons Kilotons 1,400 1,700 1,300 1,500 1,200 1,100 1,300 1,000 1,100 900 800 900 700 700 600 500 500 1Q10 1Q11 1Q12 1Q13 1Q14 1Q10 1Q11 1Q12 1Q13 1Q14 21 May 2014
Slide 30: Yara production volume
29 Yara production volume* Finished fertilizer and industrial products Ammonia Kilotons Kilotons 5,000 2,500 4,500 4,000 2,000 3,500 3,000 1,500 2,500 2,000 1,000 1,500 1,000 500 500 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Urea Nitrates NPK CN UAN SSP - based fertilizer * Including sha
Slide 31: Net income from equity-accounted investees
30 Net income from equity-accounted investees NOK millions 350 1Q13 1Q14 204 53 49 32 24 8 -90 Qafco GrowHow UK Lifeco Other Tringen is from 2014 classified as “Joint operations” in line with IFRS 11, and is not any longer included as equity-accounted investee. 2013 has been restated accordingly. 21
Slide 32: First-quarter special items
31 First-quarter special items • Other: - Contract derivative loss -71 - OFD acquisition and integration costs -30 • Bunge integration costs -48 • Partner settlement • Libya costs -90 - Negative result in Lifeco where production was suspended since mid-January 21 May 2014
Slide 33: Net interest-bearing debt development
32 Net interest-bearing debt development NOK millions 3,333 2,591 78 83 2,473 1,772 552 506 Net debt Cash earnings** Dividends Net operating Other FX gain/(loss) Other Net debt Dec 13* received from capital change investments net Mar 14* equity-accounted investees * Included in net interest-bearing
Slide 34: Currency exposure affecting P&L
33 Currency exposure affecting P&L At the beginning of the second quarter 2014 1. The US dollar debt generating p&l exposure was USD 1,000 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Around 75% towards EUR and BRL, the rest towards NOK and emerging mar
Slide 35: Yara stocks
34 Yara stocks Kilotons Bunge Fertilizer Finished fertilizer included from 3Q 2013 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other 21 May 2014
Slide 36: Delivering growth in Latin America: Bunge acquisition and OFD Group
Delivering growth in Latin America: 35 with Bunge acquisition – and OFD Group Value-added N production in Colombia (Abocol) Distribution companies across Latin America FTEs 2012: 959 USD million 2010 2011 2012 Net Revenues 540 820 796 EBITDA 47 64 35 K tons 2010 2011 2012 Total net volumes 1,0
Slide 37: Integration and synergy harvest on track
36 Integration and synergy harvest on track Total USD 50 • Operations: million - Plant & overhead optimization - Storage cost reduction - Equipment leasing contracts 35% • Local logistics & procurement : - Gains in scale - Optimization of product flows 20% • Supply: - Maritime freight: larger vessel
Slide 38: Value-added products drive commercial synergies through increased footprint
Value-added products drive commercial 37 synergies through increased footprint Brazil value-added product deliveries (kilotons) 900 Significant growth track record 800 for Yara value-added fertilizer 700 products exported from our European production facilities 600 to Brazil 500 400 The enlarged
Slide 39: Bunge: increased scale drives maritime logistics savings
38 Bunge: increased scale drives maritime logistics savings 1 USD/t improvement on shipping = 6 MUSD Other Nitrates 6 million tons NPK Urea Phosphate MOP Pre Post Bunge Bunge 21 May 2014
Slide 40: Yara's product portfolio is continuously improved to meet changing customer needs
Yara’s product portfolio is continuously 39 improved to meet changing customer needs Yara has over many years developed a wide, differentiated product offering Continuous development of both new and improved differentiated products key to maintaining earnings in competitive global market We wi
Slide 41: YaraVita: a specialty product success story
40 YaraVita: a specialty product success story YaraVita revenues, USD millions 110 CAGR +17% 78 81 68 58 2009/2010 2010/2011 2011/2012 2012/2013 BP 2014 21 May 2014
Slide 42: YaraVita Procote: cost effective vehicle for differentiation
YaraVita Procote: Cost effective vehicle for 41 differentiation and better agronomic efficiency Uses YaraVita micronutrient expertise Fertilizer in innovative new fertilizer coating products Allows wider differentiation within Downstream with minimal complexity Very strong agronomic and materi
Slide 43: Supply & Trade – global optimization
42 Supply & Trade – global optimization Biggest industrial buyer of Third single biggest buyer of Significant market natural gas in Europe P&K globally share on trade Gas consumption, MMBtu 2012 raw material purchases (mt) 2012 annual trade volumes (mt) 185 5.3 21.3 43 115 3.0 2.8 19 11 25 3.3 23% 9
Slide 44: Leading global position in ammonia trade
43 Leading global position in ammonia trade Europe 6.1 4.9 5.1 • Yara-operated ammonia fleet unrivalled giving scale and Available Demand flexibility Americas Middle East / Africa 2.3 2.5 Asia • Operate 18 ships 1.5 1.1 0.7 Available Demand Available Demand • Total shipping capacity of ~260 Availabl
Slide 45: Yara's flexible cost structure gives downside protection
Yara’s flexible cost structure gives 44 downside protection Total cost base L4Q, NOK Bn European ammonia balance (million tons) Upgrade / consumption 72 Available Fixed 7 Non flexible 1.6 Flexible 0.3 4.9 Variable 65 2.1 1.5 L4Q 1.1 0.5 1. Excluding depreciation, amortization and NH3 Urea/UAN Tertre
Slide 46: Gas & oil cost
45 Gas & oil cost Yearly averages 2009 – 2010, quarterly averages for 2011-14 with forward prices* for 2Q14 and 3Q14 USD per MMBtu 14 11.9 12 11.1 11.4 11.5 11.3 10.9 10.8 11.0 11.0 10.8 10.8 10.1 10 9.4 9.1 8 7.6 8.3 8.6 8.3 8.3 8.5 6.6 7.9 8.1 8.1 8.3 7.7 7.5 6 7.1 7.0 7.6 5.7 4 4.8 2 0 2009 2010
Slide 47: For 2014/15, global grain production and consumption forecast to be in balance
For 2014/15, global grain production and 46 consumption forecast to be in balance Grain consumption and production Days of consumption in stocks Million tons Days 2,500 85 2,450 2,400 80 2,350 75 2,300 2,250 70 2,200 2,150 65 2,100 2,050 60 2,000 1,950 55 06 07 08 09 10 11 12 13 14E 15F 06 07 08 09
Slide 48: Large variations in yields across regions
47 Large variations in yields across regions Maize yields Wheat yields Tons/Ha Tons/Ha 12 8 10 7 6 8 5 6 4 4 3 2 2 1 0 0 US Argentina China Brazil Mexico France China US India Russia Rice yields Soybean yields Tons/Ha Tons/Ha 8 4 7 3 6 3 5 2 4 3 2 2 1 1 1 0 0 China Viet Nam Indonesia Bangladesh Indi
Slide 49: Projected nitrogen capacity additions outside China in line with consumption growth
Projected nitrogen capacity additions outside 48 China in line with historical consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Qatar 24% 2013 1.2% (1.2%) UAE 19% Algeria 22% 2014 1.2% (1.5%) India 21% Algeria 25% 2015 3.5% (3
Slide 50: India nitrogen consumption outpaces capacity
India nitrogen consumption outpaces capacity 49 Urea supply & demand 2005-2012 1,4% 4,6% 30,5 31,0 28,0 26,8 26,5 26,5 25,2 22,6 22,6 22,7 23,0 21,8 22,0 22,0 22,2 20,8 2005 2006 2007 2008 2009 2010 2011 2012 Production Consumption New subsidy policy aimed at increasing production – but limited gas
Slide 51: European producer nitrate stocks
50 European producer nitrate stocks Index June 2007=1 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 13/14 08/09 09/10 10/11 11/12 12/13 Source: Fertilizers Europe 21 May 2014
Slide 52: Key value drivers – quarterly averages
51 Key value drivers – quarterly averages Zeebrugge day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 11.1 351 345 400 322 294 291 10.7 342 338 308 314 10.3 10.1 9.7 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 1Q13 2Q13 3Q13 4Q13 1Q14 Ammonia fob Black Sea (USD/t
Slide 53: 10-year fertilizer prices – monthly averages
52 10-year fertilizer prices – monthly averages Ammonia fob Black Sea CAN cif Germany USD/t USD/t 1,000 500 800 400 600 300 400 200 200 100 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Urea prilled fob Black Sea DAP fob US Gulf USD