Yara International Asa · OSL:YAR
Yara International Asa — Q4 2011 Earnings Presentation
38 slides from Yara International Asa's earnings presentation, Feb 8, 2012
Slide 1: Yara International ASA Fourth quarter results
Yara International ASA Fourth quarter results Hallgeir Storvik, CFO 8 February 2012
Slide 2: A business strategy geared for global optimization
1 A business strategy geared for global optimization Downstream Upstream Industrial Supply & Trade Scale advantages + Unique flexibility + Unrivalled presence IR – Date: 2012-02-08
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: Global downstream presence with sales offices in more than 50 countries
3 Global downstream presence with sales offices in more than 50 countries 51% Europe 10.3 mill tons North America 13% 2.7 mill tons Asia 11% 2.3 mill tons Africa 7% 1.4 mill tons 18% Latin America 3.6 mill tons Sales Yara plants Joint venture plants Sales offices IR – Date: 2012-02-08
Slide 5: Summary fourth quarter
4 Summary fourth quarter Strong quarter and best full-year results so far Good farm profitability drove improved margins, more than offsetting weaker fertilizer deliveries Continued strong demand for premium products, especially outside Europe Divestment of 16% in Yara Praxair at attractive
Slide 6: Earnings per share
5 Earnings per share* NOK EPS excluding currency and special items 20 14.93 10.91 15 12.86 12.42 11.84 9.63 10.02 10 7.73 6.68 5.27 5.42 4.93 5 3.88 3.06 1.21 0 -5 -7.27 -10 2008 2009 2010 2011 Annual NOK 28.27 13.08 30.24 41.99 * Average number of shares for 4Q 2011: 286.0 million (4Q 2010: 288.4 m
Slide 7: 2011 earnings per share highest so far
6 2011 earnings per share highest so far NOK per share 45 41.99 Healthy grain fundamentals and 40 farm margins led to strong demand for all nutrients 35 30.24 30 28.27 Supply constraints as China halved 25 exports due to a tighter domestic 20.63 market and higher coal prices 20 15 13.88 13.08
Slide 8: Net debt development
7 Net debt development NOK millions 6,000 5,500 441 5,539 175 5,000 297 4,961 786 4,500 2,039 4,000 329 3,500 3,000 2,500 2,523 304 2,000 Net interest- Cash earnings** Dividends Net operating Praxair Investments Share buy- Foreign Other Net interest- bearing debt received from capital change divestm
Slide 9: Food prices at high levels despite drop in fourth quarter
8 Food prices at high levels despite drop in fourth quarter FAO price index Index 250 200 150 100 50 0 1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 Cereals Price Index Food Price Index Yearly avg Food price index Source: FAO IR – Date: 2012-02-08
Slide 10: European deliveries lagging last season
9 European deliveries lagging last season USA West Europe Million tons Million tons 4.5 9.0 8.0 4.0 -18% 7.0 3.5 6.0 3.0 5.0 2.5 4.0 2.0 3.0 1.5 2.0 1.0 1.0 0.5 0.0 0.0 2H07 2H08 2H09 2H10 2H11 2H07 2H08 2H09 2H10 2H11 Production Net imports Domestic Imports Source: Yara estimate for fertilizer deli
Slide 11: Strong European 2Q deliveries despite drought
10 Strong European 2Q deliveries despite drought European nitrogen deliveries Kilotons 2,500 2,000 1,500 1,000 500 - 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Average IR – Date: 2012-02-08
Slide 12: European producer nitrate stocks increased in 4Q
11 European producer nitrate stocks increased in 4Q 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 11/12 07/08 08/09 09/10 10/11 Source: Fertilizers Europe IR – Date: 2012-02-08
Slide 13: Good NPK quarter
12 Good NPK quarter NPK volumes NPK margins* Kilotons USD/t 2,000 180 1,800 160 1,600 140 1,400 120 1,200 100 1,000 80 800 60 600 400 40 200 20 0 0 1Q 2Q 3Q 4Q 4Q Full year 2010 2011 2010 2011 * Product from Porsgrunn, Glomfjord, Ravenna and Montoir sold in Europe IR – Date: 2011-04-29 2012-02-08
Slide 14: Chinese domestic urea price remains strong
13 Chinese domestic urea price remains strong RMB/t 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 Urea price ex works Anthracite price Higher coal prices, increased focus on emission control and energy efficiency has led to higher domestic urea prices Source: China Fertilizer Market Week IR –
Slide 15: Current domestic price and 2012 tariff implies swing price of USD 385 fob China
14 Current domestic price and 2012 tariff implies swing price of USD 385 fob China USD/t 800 722 700 600 500 370 385 400 335 300 200 100 0 CMD 2011 Anthracite price Domestic price Domestic price & 2012 system & 2012 system & 110% tax Cash cost Inland transport Tax Producer margin Series5 IR – Date:
Slide 16: Projected nitrogen capacity additions outside China in line with historical consumption growth
15 Projected nitrogen capacity additions outside China in line with historical consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity World Excluding China World Excluding China 2011 China 46% Pakistan 34% 1.6% (2.0%) 1.4% (1.5%) Pakistan 18% Iran 17% 2012 China 6
Slide 17: More information can be found at www.yara.com
16 More information can be found at www.yara.com IR – Date: 2012-02-08
Slide 18: Net income after non-controlling interests
17 Net income after non-controlling interests NOK millions 5,000 4,354 4,000 3,716 3,566 3,386 3,175 2,808 2,889 3,000 2,225 1,927 2,000 1,424 1,522 1,564 1,122 887 1,000 349 0 -1,000 -2,000 -2,109 -3,000 2008 2009 2010 2011 Annual NOK millions 8,228 3,782 8,729 12,066 IR – Date: 2012-02-08
Slide 19: Earnings before interest, tax, depreciation and amortization (EBITDA)
18 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 7,000 EBITDA excluding special 6,587 6,215 6,089 items 6,000 5,444 4,982 5,000 4,281 3,988 4,000 3,455 3,251 2,992 3,000 2,486 2,036 2,000 1,626 1,259 1,394 860 1,000 0 2009 2010 2011 2008 Annual NOK millions 17,91
Slide 20: Stable debt/equity ratio
19 Stable debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.9 0.84 0.8 0.75 0.7 0.63 0.6 0.57 0.56 0.49 0.5 0.40 0.38 0.4 0.34 0.28 0.32 0.3 0.27 0.22 0.20 0.2 0.12 0.12 0.1 0.0 2008 2009 2010 2011 IR – Date: 2012-02-08
Slide 21: Fertilizer volumes
20 Fertilizer volumes Kilotons Outside Europe Europe 7,000 6,284 6,017 6,000 2,575 5,474 5,481 3,015 5,210 5,216 5,129 4,742 4,882 4,791 4,759 2,910 4,914 2,543 4,970 4,834 5,000 2,658 2,765 2,146 2,715 2,290 2,355 2,514 2,617 4,239 2,180 2,412 4,000 3,496 2,280 3,710 1,540 3,000 3,002 2,983 2,937 2
Slide 22: Yara 4Q fertilizer sales by market and product
21 Yara 4Q fertilizer sales by market and product 2011: 4.2 million tons (2010: 4.9 million tons) Kilotons 4Q10 4Q11 3,000 2,401 2,500 1,960 2,000 1,500 997 949 1,000 631 611 516 487 370 500 233 0 Europe Latin America Asia North America Africa Kilotons 3,000 4Q10 4Q11 2,000 1,685 1,547 1,287 1,170 1
Slide 23: Yara – production volume
22 Yara – production volume* Finished fertilizer 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 2008 2009 2010 2011 2008 2009 2010 2011 Urea Nitrates NPK CN UAN * Including share of equity-accounted investees IR – Date: 2012-02-08
Slide 24: Spot natural gas versus Yara average
23 Spot natural gas versus Yara average Yearly averages 2005 – 2010, quarterly averages for 2011-12 with forward prices* for 1Q12 and 2Q12 USD per MMBtu 14 12.0 12 11.1 10.9 10.8 10.6 10.5 10.1 10 8.6 8.3 8.3 9.6 8 7.5 7.6 7.6 7.0 7.8 7.8 6.6 6 5.4 5.6 5.7 5.6 4 4.8 4.4 2 0 2005 2006 2007 2008 2009
Slide 25: Continued strong price incentives necessary to avoid inventory decline
24 Continued strong price incentives necessary to avoid inventory decline Grain production and consumption Days of consumption in stocks Million tons Days 2,400 120 110 2,300 100 2,200 90 2,100 80 70 2,000 60 1,900 50 1,800 40 00 02 04 06 08 10 12F 00 02 04 06 08 10 12F Consumption Production Source
Slide 26: Chinese exports needed to balance the global market
25 Chinese exports needed to balance the global market Accumulated urea exports Urea price and export tax Kilotons USD per ton Export tax 8,000 900 200 % 7,000 2010 800 180 % 700 160 % 6,000 Urea fob Black Sea 140 % 2007 600 5,000 Export tax 120 % 2008 500 4,000 100 % 2009 400 3,000 2011 80 % 300 60
Slide 27: Yara nitrate sales
26 Yara nitrate sales Share of annual sales 12% 10% 8% 6% 4% 2% 0% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 10/11 Avg 05/06-09/10 seasons IR – Date: 2012-02-08
Slide 28: Quarterly urea trade
27 Quarterly urea trade Million tons 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Source: IFA, Iran from GTIS IR – Date: 2012-02-08
Slide 29: Yara production capacities
28 Yara production capacities Million tons product 10.0 8.0 6.0 Outside Europe Europe 4.0 2.0 0.0 Ammonia Nitrate NPK Urea IR – Date: 2012-02-08
Slide 30: Nitrate-based fertilizers are superior to urea both agronomically and environmentally
29 Nitrate-based fertilizers are superior to urea both agronomically and environmentally The agronomical efficiency of nitrates is The carbon footprint is lower than for Urea superior to urea Nitrogen recovery (% of AN) Lifecycle carbon footprint (kg CO2 eq/kg N) 100 12 75 8 50 4 25 0 0 AN Urea UAN
Slide 31: Nitrates’ agronomic advantage has higher value for cash crops than for commodity crops
30 Nitrates’ agronomic advantage has higher value for cash crops than for commodity crops Crop value with nitrates Increase in crop production value €/ha Index using nitrates instead of urea 3,500 1,200 3,192 1,016 3,000 1,000 2,500 800 2,000 1,553 600 1,500 400 1,000 500 200 100 0 0 Wheat/UK Orange
Slide 32: NPKs have significant cash crop share, while nitrates mainly serve commodity crops
31 NPKs have significant cash crop share, while nitrates today mainly serve commodity crops 4,700 150 2,571 Commodity crops 70 866 Cash crops NPK Nitrate NPK Nitrate Europe North America 10 NPK Nitrate 191 Asia 450 343 100 NPK Nitrate NPK Nitrate Africa Latin America IR – Date: 2012-02-08
Slide 33: Significant margin expansion for nitrogen and phosphate fertilizer
32 Significant margin expansion for nitrogen and phosphate fertilizer Nitrogen upgrading margins Phosphate upgrading margins NPK blend premium USD/t USD/t USD/t 700 800 700 700 650 600 Nitrate premium above urea Margin 600 600 above blend 500 cost 550 500 Value above raw 400 500 Value above material
Slide 34: Yara sensitivities
33 Yara sensitivities Operating Income EBITDA EPS* USD million USD million USD Urea sensitivity +100 USD/t 944 1,095 2.8 …of which pure Urea 304 422 1.2 …of which Nitrates 367 391 1.0 …of which NPK 198 207 0.5 Nitrate premium +50 USD/t 439 467 1.2 …of which pure Nitrates 273 294 0.8 Hub gas Europe +
Slide 35: Price and currency assumptions in scenarios
34 Price and currency assumptions in scenarios Last 4 5-year avg. to Chinese Demand- quarters 30 Sep 11 swing* driven** Ammonia fob Black Sea (USD/t) 459 366 450 550 Urea prilled fob Black Sea (USD/t) 386 342 360 510 Nitrate premium , USD/t 94 77 62 68 Phos rock fob North Africa (USD/t) 164 158 200
Slide 36: Simplified P&Ls for scenarios
35 Simplified P&Ls for scenarios Last 4 5-year avg. to Chinese Demand- NOK quarters 30 Sep 20112) swing driven EBITDA1) 14,800 15,200 13,500 23,600 Depreciation -2,600 -2,600 -2,600 -2,600 Interest expense -800 -700 -700 -700 Income before tax 11,400 11,900 10,200 20,300 Tax -2,400 -2,800 -2,100 -4,
Slide 37: Key value drivers – quarterly averages
36 Key value drivers – quarterly averages Zeebrugge day ahead(USD/MMBtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 9.5 600 450 9.6 377 384 376 378 9.4 9.2 484 400 500 446 318 9.2 9.0 9.0 408 350 9 400 359 354 300 8.8 250 8.6 300 8.3 200 8.4 200 150 8.2 8 100 100 7.8 50 7.6 0 0 4Q 10
Slide 38: 10-year fertilizer prices – monthly averages
37 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 20 20 20 20 20 20 20 20 20 20 20 0 01 02 03 04 05 06 07 08 09 10 11 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Urea prilled fob Black Sea DAP fob