Yara International Asa · OSL:YAR
Yara International Asa — Q2 2009 Earnings Presentation
55 slides from Yara International Asa's earnings presentation, Jul 16, 2009
Slide 1: Yara International ASA Second quarter results 2009
Yara International ASA Second quarter results 2009 16 July 2009
Slide 2: Summary second quarter 2009
1 Summary second quarter 2009 z Strong cash flow and further debt reduction z Significant operating capital release, stocks below last year z Reduced margins despite lower energy costs z Further inventory write-downs primarily related to potash and phosphates z Sales volumes down 13% due to continue
Slide 3: Net income after non-controlling interests
2 Net income after non-controlling interests NOK millions 5,000 4,354 4,000 3,175 2,808 3,000 2,044 2,000 1,403 1,4221,487 853 1,041 891 1,085 887 1,122 1,000 0 (1,000) (2,000) (2,109) (3,000) 2006 2007 2008 2009 Accumulated NOK mill 4,188 6,037 8,228 2,009 IR – Date: 2009-07-16
Slide 4: Earnings per share
3 Earnings per share* NOK 20 14.93 15 10.91 9.63 10 7.01 4.68 4.85 5.10 5 2.77 3.42 3.01 3.67 3.06 3.88 0 (5) (10) (7.27) 2006 2007 2008 2009 Accumulated NOK 13.86 20.60 28.27 6.94 * Average number of shares for 2Q 2009: 289.2 million (2Q 2008: 291.6 million). IR – Date: 2009-07-16
Slide 5: Earnings per share adjusted for foreign exchange gain/loss and special items
4 Earnings per share adjusted for foreign exchange gain/loss and special items* NOK 16 14.71 14 12.44 12 10 9.20 8 6 4.56 3.59 3.90 3.86 4 2.69 3.00 2.81 1.79 2.35 2 1.19 0 (0.10) (2) 2006 2007 2008 2009 Accumulated NOK 9.80 15.91 36.28 4.01 * After tax. Average number of shares for 2Q 2009: 289.2 m
Slide 6: Strong cash flow
5 Strong cash flow NOK millions 25,000 5,555 21,611 1,105 104 1,235 881 182 20,000 866 18,459 15,000 10,000 5,000 0 Net interest- Cash Dividends Net Other Yara Foreign Other Net interest- bearing earnings* received** operating investments dividend exchange bearing debt Apr09 capital (net) and share
Slide 7: Overall fertilizer market development during quarter
6 Overall fertilizer market development during quarter z Improvement in demand for nitrogen and phosphates, but markets still supply driven at lower prices than during the first quarter z Buyers continued to avoid potash purchases due to high and declining prices z 10% decline in Western Europe nitr
Slide 8: Lower volatility in nitrogen demand
7 Lower volatility in nitrogen demand 10 % 5% Global consumption growth, Y/Y 0% -5 % -10 % -15 % -20 % 2006/07 2007/08 2008/09 2009/10 Nitrogen Phosphate Potash Source: IFA, May 2009 IR – Date: 2009-07-16
Slide 9: European and US nitrogen deliveries substantially down from last season
8 European and US nitrogen deliveries substantially down from last season Western Europe USA 8.0 18.0 7.0 - 16% 16.0 - 16% Million tons of nitrogen 14.0 Million tons of nitrogen 6.0 12.0 5.0 10.0 4.0 8.0 3.0 6.0 2.0 4.0 1.0 2.0 0.0 0.0 Jul-Jun 07/08 Jul-Jun 08/09 Jul-May 07/08 Jul-May 08/09 Domestic
Slide 10: Potash price not aligned with nitrogen and phosphate prices
9 Potash price not aligned with nitrogen and phosphate prices Index 700 600 500 z Yara focus on low-K 400 NPK grades z Yara’s starting NPK 300 * price reflects expected 200 drop in potash price 100 0 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Apr 05 Oct 05 Apr 06 Oct 06 Ap
Slide 11: Yara NPK production planned at 70% in third quarter
10 Yara NPK production planned at 70% in third quarter Planned third quarter utilization Mt 9.0 8.0 8.0 z NPK curtailments reduced from 50% in 10% 2Q to 30% in 3Q Yearly production capacity* 7.0 6.3 5.9 z Tertre ammonia and nitrate production 6.0 10% affected 5.0 30% 4.1 z Belle Plaine turnaround an
Slide 12: Switching from NPK to nitrate in Finland – partly reducing loss of Tertre nitrates
11 Switching from NPK to nitrate in Finland – partly reducing loss of Tertre nitrates Glomfjord z Lost nitrate capacity in Tertre partly replaced by switching from NPK to nitrate production in Finland Uusikaupunki z Using spare NPK capacity in Glomfjord to replace reduced NPK in Uusikaupunki z Reduc
Slide 13: Current grain stocks up on last two years, but still low
12 Current grain stocks up on last two years, but still low Mt 2,300 35 % 115 days inventory 2,200 2001-2008: 1.7% growth/year 30 % 25 % 2,100 76 days inventory 20 % 2,000 Consumption 15 % 1,900 Production 10 % 1,800 5% 1995-2001: 0.8% growth/year 1,700 0% 1995 1997 1999 2001 2003 2005 2007 2009E 19
Slide 14: Earnings before interest, tax, depreciation and amortization (EBITDA)
13 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 7,000 6,215 6,089 6,000 5,000 3,988 4,000 3,000 2,531 2,222 1,947 1,901 2,036 2,000 1,682 1,787 1,492 1,351 1,626 1,259 1,000 0 2006 2007 2008 2009 Accumulated NOK mill 6,472 8,441 17,917 3,295 IR – Date: 2009-07-1
Slide 15: EBITDA and operating income by segment
14 EBITDA and operating income by segment EBITDA (NOK millions) 2Q 2009 2Q 2008 Downstream (229) 2,885 Industrial 276 276 Upstream 1,190 3,165 Other and eliminations 22 (112) Yara total 1,259 6,215 Operating income (NOK millions) 2Q 2009 2Q 2008 Downstream (454) 2,564 Industrial 211 221 Upstream 153
Slide 16: Variance analysis Yara group
15 Variance analysis Yara group NOK millions 2Q 2009 EBITDA 2009 1,259 EBITDA 2008 6,215 Variance EBITDA (4,956) Volume & mix (580) Price/Margin (7,135) of which third party write-down (383) of which write-down of Yara sourced products (236) Oil & gas costs in Europe 1,607 Special items (651) Non-re
Slide 17: Special items
16 Special items EBITDA effect (NOK millions) 2Q 2009 2Q 2008 YTD 2009 YTD 2008 Restructuring costs Kemira GrowHow - (5) - (45) Sale of shares SQM - 440 - 440 Downstream - 435 - 395 Restructuring costs Kemira GrowHow - 8 - (6) Sale of business to Brenntag - 90 - 90 Contract derivatives - 24 - 7 Indu
Slide 18: Significant reduction of net operating capital
17 Significant reduction of net operating capital NOK millions 35,000 25,000 15,000 5,000 -5,000 -15,000 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 Receivables Raw materials Finished goods Payables Accumulated NOK mill 9,946 9,809 9,388 11,084 13,620 15,796 22,557 23,283 17,969 12,636 IR – Da
Slide 19: Balance sheet strengthened during quarter
18 Balance sheet strengthened during quarter Net interest-bearing debt / equity ratio (end of period) 1.0 0.9 0.82 0.8 0.74 0.7 0.62 0.6 0.5 0.41 0.42 0.40 0.4 0.34 0.33 0.34 0.35 0.34 0.31 0.27 0.28 0.3 0.2 0.1 0.0 2006 2007 2008 2009 IR – Date: 2009-07-16
Slide 20: Bond issue in June has improved maturity profile
19 Bond issue in June has improved maturity profile Debt maturity, USD millions 700 z Successfully issued USD 500 mill bonds in the US market due 2019 600 500 z Maturing short term debt covered by undrawn long term committed 400 facilities 300 200 100 0 2009 2010 2011 2012 2013 2014 2015 2016 >2016
Slide 21: Downstream segment
20 Downstream segment z Negative EBITDA mainly due to further inventory write-downs z Stocks down 36% during quarter, ending 19% below last year z Sales volumes down 13% due to continued slow NPK sales z Nitrate sales above last year after strong pick-up in June z Increased European market share IR
Slide 22: Downstream – EBITDA
21 Downstream – EBITDA NOK millions 3,000 2,885 2,554 2,049 2,000 724 804 661 847 826 1,000 518 441 490 511 552 Write-downs 781 0 -229 (1,000) (2,000) (3,000) (2,840) 2006 2007 2008 2009 Accumulated NOK mill 1,960 3,035 4,648 597 IR – Date: 2009-07-16
Slide 23: Nitrate demand picked up in June
22 Nitrate demand picked up in June Kt Nitrates sales Kt NPK sales 1,000 1,000 900 900 800 800 2009 700 700 600 600 2008 500 500 Capacity 400 400 Actual 300 production 300 200 200 100 100 0 0 Apr May Jun Apr May Jun IR – Date: 2009-07-16
Slide 24: European producer nitrate stocks estimated at 2007 level
23 European producer nitrate stocks estimated at 2007 level Index, June 2007=1 1.8 1.6 1.4 1.2 1 06/07 08/09 0.8 07/08 0.6 0.4 0.2 0 Jul Aug Sep Oct Nov Des Jan Feb Mar Apr May Jun Yara estimate Source: European Fertilizer Manufacturing Association IR – Date: 2009-07-16
Slide 25: Nitrate premium lowest at start of new season
24 Nitrate premium lowest at start of new season 2,000 240 % 1,800 200 % 1,600 1,400 160 % Nitrate premium USD/ton N 1,200 120 % 1,000 80 % 800 600 40 % 400 0% 200 0 -40 % July 2004 July 2005 July 2006 July 2007 July 2008 July 2009 Jan Jan Jan Jan Jan Jan CAN CIF Germany Urea, FOB Black Sea Premium
Slide 26: Yara stocks 30% down from first quarter
25 Yara stocks 30% down from first quarter Kt 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 NPK Nitrates UREA UAN MAP/DAP MOP/SOP 2Q09 1Q09 IR – Date: 2009-07-16
Slide 27: Industrial segment
26 Industrial segment z Strong earnings despite demand slow-down z Volumes down 14% from last year z Margin improvement for technical nitrates and environmental products IR – Date: 2009-07-16
Slide 28: Industrial – EBITDA
27 Industrial – EBITDA NOK millions 1,200 1,007 1,000 800 600 410 400 276 252 258 276 205 181 166 165 153 174 200 139 33 0 2006 2007 2008 2009 Accumulated NOK mill 736 1,645 629 686 IR – Date: 2009-07-16
Slide 29: Volume drop on technical nitrates mainly affecting third party sourced products
28 Volume drop on technical nitrates mainly affecting third party sourced products Kt 1,000 800 600 400 200 0 2004 2005 2006 2007 2008 YTD 08 YTD 09 Own produced Third-party IR – Date: 2009-07-16
Slide 30: Upstream segment
29 Upstream segment z Satisfactory earnings despite lower prices and volumes z Production curtailments for NPK, full nitrate utilization z Burrup insurance settlement received z Ammonia production in Tertre down for approximately 12 months z Substantial energy costs improvement IR – Date: 2009-07-16
Slide 31: Upstream – EBITDA
30 Upstream – EBITDA NOK millions 4,500 4,169 4,000 3,500 3,165 3,044 3,000 2,500 1,994 2,000 1,500 1,168 1,202 1,173 1,190 797 926 911 956 1,000 673 728 500 0 2006 2007 2008 2009 Accumulated NOK mill 3,563 3,797 12,372 2,363 IR – Date: 2009-07-16
Slide 32: Estimated European energy cost
31 Estimated European energy cost NOK millions 2,500 Actual for quarter July 2009 estimate* 2,000 1,500 Cost change on previous year 1,000 745 500 0 (500) (465) (1,000) (1,500) (1,200) (1,616) (1,600) (2,000) (2,500) 4Q08 1Q09 2Q09 3Q09 4Q09 * Based on forward prices as of 9 July 2009 IR – Date: 200
Slide 33: Share of net income in equity-accounted investees
32 Share of net income in equity-accounted investees NOK millions 2Q 2009 2Q 2008 Qafco 156 359 Tringen 40 105 Rossosh 15 141 GrowHow UK Ltd. 20 156 Burrup 311 39 Other 111 122 Total 654 922 IR – Date: 2009-07-16
Slide 34: Prospects third quarter 2009
33 Prospects third quarter 2009 z Urea price floor set by Ukrainian gas price and ceiling set by Chinese domestic prices and export tax z Yara’s nitrate capacity fully committed at announced monthly price increases z Yara’s NPK sales continues below last year in early July, 30% NPK capacity curtailm
Slide 35: Prospects next twelve months
34 Prospects next twelve months z Low grain inventories support strong fertilizer demand z Grain inventories expected to drop if yields do not match last year’s record harvest z Global nitrogen balance quite tight with only 3-5% of urea capacity excluding China currently curtailed IR – Date: 2009-07
Slide 36: Additional information
Knowledge grows ' YARA J > ~ & .\ wi . |
Slide 37: Fertilizer volumes up 7% from first quarter
36 Fertilizer volumes up 7% from first quarter Kt Europe Outside Europe 7,000 6,104 6,284 6,017 6,000 2,575 2,835 5,256 5,179 3,015 5,210 5,000 4,786 4,685 4,883 2,388 2,827 4,763 4,742 4,882 2,658 4,437 2,275 2,507 2,697 2,629 2,180 2,290 4,000 1,848 3,496 3,710 1,540 3,000 3,269 2,868 3,002 2,589
Slide 38: Yara 2Q fertilizer sales by market and product
37 Yara 2Q fertilizer sales by market and product 2009: 5.2 million tons (2008: 6.0 million tons) 3,500 3,002 Million tons product 3,000 2,551 2Q09 2Q08 2,500 2,000 1,363 1,500 805 1,000 764 631 595 564 459 493 500 0 Europe Latin America Asia North America Africa 4,000 Million tons product 2Q09 2Q08
Slide 39: Upstream – production volume
38 Upstream – production volume* Kt 5,000 Finished fertilizer 4,589 Ammonia 4,362 4,295 4,027 2,895 4,042 4,139 3,937 4,000 2,738 2,511 3,357 3,437 3,443 2,615 2,579 2,753 2,569 3,247 3,312 3,175 3,256 3,000 2,010 1,983 1,914 1,994 1,999 2,053 2,051 2,000 1,694 1,624 1,784 1,358 1,384 1,392 1,412 1,
Slide 40: Income statement
39 Income statement NOK millions 2Q 2009 2Q 2008 Revenue and other income 16,129 24,038 Operating income (85) 4,664 Share of net income in equity accounted investees 654 922 Interest income and other financial income 54 177 Interest expense and other financial items (71) 183 Foreign exchange gain (l
Slide 41: Consolidated balance sheet
40 Consolidated balance sheet NOK millions 30 June 2009 30 June 2008 Deferred tax assets 2,923 1,359 Property, plant and equipment 21,863 10,569 Other non-current assets 20,498 17,335 Inventories 10,528 13,097 Receivables 7,635 11,395 Other current assets 2,111 2,656 Cash and cash equivalents 2,049
Slide 42: Spot natural gas versus Yara average
41 Spot natural gas versus Yara average* Yearly averages 2004 – 2007, quarterly averages for 2008 and 2009 with forward prices for 2009** USD/MMBtu 14 12,5 11,9 12 12,3 US spot gas price 11,2 (Henry Hub) 10 10,6 8,4 9,9 Yara European oil & gas 9,0 9,0 cost (weighted average) 8 7,1 7,5 7,0 6,0 6,1 6
Slide 43: Satisfactory available funding
42 Satisfactory available funding Net interest- Available bearing debt financing lines* USD billions 6.0 5.4 5.0 4.6 4.0 4.0 4.0 2.9 3.0 2.0 1.0 0.0 2Q09 3Q09E 4Q09E 4Q10E 4Q11E *Includes 500 MUSD central and local overdraft facilities IR – Date: 2009-07-16
Slide 44: Currency gain second quarter
43 Currency gain second quarter z Average net US dollar debt position was reduced from USD 2.0 billion in the first quarter 2009 to around USD 1.75 billion in the second quarter 2009 z Net currency gain reported was due to following exposures: 1. The US dollar debt hedge of future earnings • In 2Q 2
Slide 45: Lower fertilizer consumption and crops in Latin America
44 Lower fertilizer consumption and crops in Latin America Brazil Argentina -14% -7% -16% -7% 70 70 -16% 61 59 57 60 60 -31% 50 50 50 -50% -39% 46 Million tonnes Million tonnes 40 40 -53% -41% -9% 32 30 24.6 30 22.4 22 18 20 20 -28% 13 8 10 10 3.6 2.6 0 0 Nutrient Corn Soybeans Nutrient Wheat Corn S
Slide 46: Low Chinese exports in second quarter
45 Low Chinese exports in second quarter quarter Urea exports Kt USD/ton Export tax 6,000 900 200 % 2007 800 180 % 5,000 700 160 % 2008 4,000 140 % 2004 600 Export tax 120 % 500 3,000 Urea fob 100 % 400 Black Sea 80 % 2,000 300 60 % 2005 200 40 % 1,000 2009 2006 100 20 % 0 0 0% Apr Apr Apr Oct Oct O
Slide 47: Indian domestic urea deficit stable compared to last year
46 Indian domestic urea deficit stable compared to last year Sales - Production Kt 8,000 7,000 08/09 07/08 6,000 5,000 06/07 4,000 3,000 2,000 05/06 1,000 0 04/05 09/10 -1,000 -2,000 z Kharif (July planting) – imports Apr-Sep -3,000 z Rabi (November planting) – imports Oct-Jan Apr May Jun Jul Aug Se
Slide 48: Non-commercials net long position in corn at CBOT
47 Non-commercials net long position in corn at CBOT (futures and options) Thousand contracts 400 350 300 250 200 150 100 50 0 -50 jan-07 apr-07 jul-07 okt-07 jan-08 apr-08 jul-08 okt-08 jan-09 apr-09 jul-09 Source: US Commodity Futures Trading Commission IR – Date: 2009-07-16
Slide 49: Will new capacity come on stream as planned?
48 Will new capacity come on stream as planned? Year Global urea capacity growth estimate Driving regions World Excluding China World Excluding China 2008 2.2% (2.5%) 1.6% (1.6%) China 56% Iran 56% Iran 24% Egypt 26% 2009 6.3% (6.6%) 2.4% (3.4%) China 77% Oman 28% Oman 7% Turkmenistan 16% 2010 7.0%
Slide 50: Key value drivers – quarterly averages
49 Key value drivers – quarterly averages Oil Brent blend spot (USD/bbl) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 800 761 600 140 121 511 115 700 464 483 120 573 500 600 384 100 400 500 80 59 300 246 55 400 301 60 44 269 243 300 200 40 200 20 100 100 0 0 0 2Q 08 3Q 08 4Q 08 1Q 09 2
Slide 51: Key value drivers – 10-year history
50 Key value drivers – 10-year history Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 600 500 466 600 525 499 500 500 400 400 400 308 300 245 264 212 300 229 240245 300 220223 186 138 121 185 139 175 200 119111 146 165 200 200 84 100 67 101 96 94 86 103 100
Slide 52: 10-year fertilizer prices – monthly averages
51 10-year fertilizer prices – monthly averages Ammonia fob Black Sea CAN cif Germany USD/t USD/t 1000 500 800 400 600 300 400 200 200 100 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Urea prilled fob Black Sea USD/t 1000 800 600 4
Slide 53: Agricultural commodity prices at 2007 levels
Ju Ju n n 0 1 2 3 4 5 6 7 8 0 2 4 6 8 10 12 14 06 06 USD/bushel Se USD/bushel Se p p 06 06 D Corn (US Gulf) ec D ec 06 06 M M Wheat (HRW US Gulf) ar ar 07 07 Ju Ju n n 07 07 Source: World Bank, July 2009 IR – Date: 2009-07-16 Se Se p p 07 07 D D ec ec 07 07 M M ar ar 08 08 Ju Ju n n 08 08 Se Se p p
Slide 54: Strong margin development for US Ethanol producers
53 Strong margin development for US Ethanol producers Source: PIRA IR – Date: 2009-07-16
Slide 55: www.yara.com
54 More information can be found at … www.yara.com IR – Date: 2009-07-16