Yara International Asa · OSL:YAR
Yara International Asa — Investor Day (March 2016)
60 slides from Yara International Asa's investor day presentation, Mar 1, 2016
Slide 1: Capital Markets Day
Yara International ASA Capital Markets Day Tuesday 1 March 2016
Slide 2: Operational excellence and safety performance go hand in hand
Operational excellence and safety performance go hand in hand. Achieving sustainable improvements in safety performance requires focused efforts by the whole organization, from senior management to plant operator, and our Safe by Choice program is an integral part of the operations at all our sites.
Slide 3: Eventful past two years for Yara
The past two years have been eventful for Yara, with several changes both to the Board and /Ŷ^ĞƉƚĞŵďĞƌϮϬϭϱ^ǀĞŝŶdŽƌĞ,ŽůƐĞƚŚĞƌďĞĐĂŵĞKŽĨzĂƌĂ͘dŚĞĨŝƌƐƚƚŚƌĞĞŵŽŶƚŚƐ management of the company. However, this has not stopped important activities from being ĂĨƚĞƌŚĞũŽŝŶĞĚzĂƌĂǁĞƌĞĨŽĐƵƐĞĚŽŶŐĞƚƚŝŶŐƚŽŬŶŽǁĂƐŵƵĐŚĂƐƉŽ
Slide 4: Consistently positive value proposition to customers
By offering a consistently positive value proposition to customers, Yara can deliver attractive Yara’s integrated business model delivers scale advantages, extensive flexibility and value chain returns to shareholders while at the same time creating value for society. Yara’s business model is presen
Slide 5: Four sources of competitive edge within integrated business model
There are four main sources of Competitive Edge within Yara’s integrated business model. Yara’s Yara does business with a purpose. Today, 800 million people do not have enough food, and the strategic efforts at corporate, segment and business unit level are all aimed at strengthening challenge of su
Slide 6: CROGI well above target since listing
Since Yara was listed on the Oslo stock exchange it has delivered a CROGI well above its target Yara has a strong base and competitive position, but there are also several areas where the of 10%, resulting in an average annual shareholder return of 25% (TSR). These returns company has improvement po
Slide 7: Recent organizational adjustments
The objective of the recently implemented organizational adjustments is to shift the emphasis of the company closer to the market and operations. One key principle applied was for the corporate management to better reflect Yara’s operational footprint. It was therefore natural to include Brazil in Y
Slide 8: Evolution of Yara's strategy over 30-40 years
Going back 30-40 years, Yara acquired many production assets in Europe and needed to develop international markets to manage seasonality and maintain utilization rates. As a result, the focus was mainly on assets. With the internationalization Yara began to develop its products’ reputation and brand
Slide 9: Crop Nutrition aspiration: four main elements
The aspiration contains 4 main elements: Yara Crop Nutrition Segment will continue to have a dual approach: First of all we want to focus on farmers and their profitability. Our aim is to be the farmer’s crop We will have a deep presence in market segments where we are able to increase farmer nutrit
Slide 10: Crop Value Index and segmentation
Crop Value Index (CVI) is from a farmer perspective the crop revenues divided by the fertilizer The key to optimal resource allocation is segmentation: costs. A high CVI means that the value of the crop is high compared to the fertilizer costs required to generate that revenue. In the chart, the X a
Slide 11: Strategy foundation and strategic responses
The foundation of our strategy is safety and compliance. This will continue to be a key priority in There are furthermore 3 internally directed strategic responses will help us deliver: everything we do. 1. Moving the organization towards value selling, with higher farmer interaction and deeper Rest
Slide 12: Northern Germany case from YCN business plan
The following case from Northern Germany is taken from the 2016 YCN business plan, and In Germany we have a farm database which allows us to segment farms by size, location and illustrates our approach and mindset. other parameters. The case demonstrates our approach to developing both farmer centri
Slide 13: Farmer data and My Yara platform
In addition to farm location and size, we track which farms use Yara tools and where. Our target is not only to work with farmer data to focus our work, but also to connect with the farmer to create a real relationship between the farmer and Yara. The Next step is to get more data from the Yara tool
Slide 14: Crop-based roadmaps implementing the strategy
As part of the strategy roll-out, there has been a lot of local activity to create engagement and Our approach to systematically implement our new strategy is through a crop-based roadmap, alignment. More than 80 local townhall meetings, strategy workshops and crop roadmap breaking down the strategy
Slide 15: Crop value index and planned sales volume 2016-2020
In our roadmap we have plotted the crop value index (CVI) and accumulated (planned) fertilizer In our crop roadmap work we have quantified growth targets per key crop for the next five years, sales volume for 2016-2020 for the key crops. representing a bottom-up view on how much we are able to grow
Slide 16: Growth breakdown by crop per year
This slide show the growth breakdown by crop per year. As part of the farmer-centric strategy, strengthening our commercial front-end organization is a key priority; re-balancing resources from central to local level to strengthen our interface with the As mentioned the targets need further validati
Slide 17: Farmer centric strategy summary
In summary, we believe our farmer centric strategy will strengthen our competitive edge, and furthermore we believe this approach is even more advantageous in challenging market conditions. Our targets ahead are ambitious but achievable, and we are re-balancing our resources to strengthen our commer
Slide 18: Commercial approach based on facts, data and innovation
Our commercial approach is and has to be based on a strong fundament of facts, data and innovation. It might be not visible all the time, because it is below the water level, but it is important. It gives us confidence and is a pre-requisite to convince customers. ϯϯ ϯϰ
Slide 19: Being different through crop focus
In order to be better, we have to be different and we are... Once a crop has been identified as important for Yara, we somehow discover this crop again from scratch. We study the literature and gather all available information from crop experts inside and Clear direction outside Yara, but we are als
Slide 20: Potato crop solution based on fertigation
Based on the knowledge we have gained we have developed a crop solution for potato based on Based on the knowledge we have gained we have developed a crop solution for potato based on fertigation. This means a combination of water and nutrient management where both are applied fertigation. This mean
Slide 21: Tools and services for precision farming
Tools and services are an efficient way to bring knowledge to the grower. Therefore tools and We have been pioneers in precision farming with the N-Sensor and its calibration. Just to give a services are an integral part of the Yara Crop Solutions and it is organized via a platform short historical
Slide 22: Knowledge sharing with growers via tools and services
Knowledge sharing with the grower via tools and services makes a lot of sense. By doing this we commercialize our knowledge in a sustainable way. We are working on the development of new and profitable solutions: • Decision support for fine-tuning & optimization • Documentation of Best Practice incl
Slide 23: Brazil agricultural market opportunity
Brazil has already a leading position globally in several soft commodities. But Brazil also The agricultural sector is very important for the Brazilian economy, with significant impact on GDP, represents an interesting market due to the unique combination of land, water and favorable exports and lab
Slide 24: Brazilian market growth and Yara's presence
The Brazilian market has been growing at a pace twice as high as the world average in the last 20 Yara has been present in Brazil since the 70s, and our growth has been done via a series of years. acquisitions over the last 15 years. Despite the 6% reduction (2 million tonnes) in 2015 deliveries, B
Slide 25: Yara Brazil distribution and premium products
Yara Brazil has not only grown its in the commodity products. The premium products were Yara has today a solid distribution position in Brazil. The Yara brand is associated with high expanded by a factor of 10 in approximately 5-6 years. This growth came not at the expense of quality products, relia
Slide 26: Premium products share of volume and EBITDA
The Premium products represent normally 10-15% of the volume, but 40 to 45% of EBITDA of Yara Brazil became the leading distributor in Brazil with the Bunge acquisition, but to remain in Yara Brazil. such a position, we need to defend our position and remain the best company. The three pillars above
Slide 27: Continued investments in Brazil
Yara’s strategy means continued investments in Brazil, to ensure both competitive, good quality, Brazil is an import market for fertilizer, requiring approximately 81% of nitrogen, 57% of safe production, but mostly to ensure we do not lose our critical mass. To follow organic growth phosphates and
Slide 28: Galvani footprint highlights
Galvani footprint highlights Angico dos Dias Mine ily of rock mar Mine Saltre Mine & Chemical Greenfield yh — a Project 7 2 MM Future projects NJ Current operations IR = 01 March 2016 53 Fast and effective integration Launched the Salitre project Business as is Safety performance (from TRI of 9 to b
Slide 29: Salitre project progress and Yara Brazil outlook
Salitre mining part is progressing very well, with start up planned for around mid next year, with Summing up, Yara Brazil will build on its competitive edges. The critical mass in distribution is chemical part coming one year later. achieved, so focus now is optimizing and sustaining such operation
Slide 30: Yara Champion Program (Colombia)
Yara Champion Program (Colombia) Objective Encouraging Yara Champion is a loyalty sustainability program rewarding farmers who follow our recommendations and who produce both high yiekis igh quality. YCP promotes responsible practices in coffee production. \ducing more and bette both higher profitab
Slide 31: Industrial segment overview
The Industrial segment serves a multitude of markets with industrial applications of Yara’s core products. More than 7 million tons of annual industrial deliveries contribute to stable operations and lower stocks in our production plants across fertilizer seasons, and provide diversification from ag
Slide 32: Industrial's four business lines
Industrial is organized into four business lines, with focused strategies and clear deliverables per In addition to balancing and optimizing Yara’s integrated business model, Industrial’s stable line: volume growth has gradually made it a significant outlet for our products. Industrial sells close t
Slide 33: Cleaner air solutions in Industrial
Cleaner air is a major part of Yara’s solutions, and Industrial contributes to this in two areas: Secondly, our Nitrates business (under the brand NutrioxTM) delivers technology solutions for preventive waste water odor control based on Calcium Nitrate. Nutriox™ provides H2S prevention Firstly, our
Slide 34: Emission abatement growth and projects
The emission abatement is fast-growing, driven by local and regional legislation for automotive and Yara has several on-going growth projects related to Industrial solutions. stationary NOX emissions, as well as international standards in the maritime segment, setting requirements for NOX and SOX ab
Slide 35: Sales excellence in Industrial
Sales is the key operational skill across Industrial and its many different markets and customers. Safety is our key priority – launch of HESQ as a service as part of our solutions to further increase our competitiveness. From an expansion perspective particularly completing the AdBlue capacity As p
Slide 36: Production
Production IR - 01 March 2018 “We shall be the leading producer of mineral fertilizers and industrial nitrogen chemicals, driving performance and process excellence in safety, reliability and resource management” MG IR - 01 March 2018 69 70
Slide 37: Production segment overview
The production segment comprises a total of 30 production sites and mines located in 16 different Operational excellence and safety performance go hand in hand. The production segment has countries, as well as Yara’s project office and a productivity group. The segment employs made good progress tow
Slide 38: Cartagena integration and operational improvement
A little more than a year ago Yara took over the operations of an integrated fertilizer factory in The production segment has a good track record of continuous operational improvement. As an Cartagena in Colombia, following the acquisition of OFD (formerly Abocol). As part of the example, the energy
Slide 39: Benchmarking, production records and Safe by Choice
In a network of 30 sites there many opportunities to benchmark and share best practice. As one Safe by Choice is our framework to develop a Yara Safety Culture that reduces exposure to example, our largest single site Sluiskil set over 50 production records last year. injury, where we all share the
Slide 40: Supply Chain
Supply Chain IR - 01 March 2018 “The Supply Chain segment creates value by leveraging Yara’s knowledge and scale through global procurement, optimization of production assets and efficient supply chain operations” MG IR - 01 March 2018 77 78
Slide 41: Supply Chain procurement and raw materials
Supply Chain procures a significant portion of Yara’s cost base including sourcing of energy and Yara is a major buyer of key raw materials. It is the number one industrial buyer of natural gas in all raw materials. In addition, it optimizes Yara’s integrated business model, planning material Europe
Slide 42: Integrated flows and supply chain efficiency
Yara has an integrated business model where optimizing the flows between the segments and Yara has embarked on a journey to increase efficiency and effectiveness of it’s supply chain countries are a key enabler to optimize Yara’s profit. The global planning function in Supply chain activities. A glo
Slide 43: Journey to supply chain excellence
Our focus going forward is to continue the journey to supply chain excellence. Through a dedicated organization with functional expertise working across segments and country borders we will find more cost saving opportunities. We are working on establishing uniform, well defined and efficient supply
Slide 44: Global grain production and stocks
Global grain production has exceeded consumption three years in a row, according to USDA, But if excluding China, global grain stocks have been quite stable, with a very stable stocks to use resulting in higher global grain inventories. ratio. So weather factors will remain key to grain price develo
Slide 45: Food prices and nitrogen demand growth
Global food prices have declined since 2013, across most categories, including grains, oils and Compared to many commodities, demand for nitrogen is growing with only modest volatility, and meat products. But arable farmers, even in USA and other US dollar based economies, are still the 10 year tren
Slide 46: Urea capacity and production growth
Since 2011, production growth outside China has been zero, and capacity expansions in China It must be noted that this graph compares expected additional capacity to need for additional has covered its own growth, as well as the growth needed in the rest of the world, at least through production. Em
Slide 47: Urea prices, export taxes and cash costs
Until recently, global urea prices could deviate significantly from prices in China, primarily due to Most industry analysts estimate that a substantial portion of global export capacity is cash export tax mechanisms. As the Chinese capacity has increased, well beyond the domestic need, negative at
Slide 48: Energy prices and new capacity economics
For the period 2011-2014, global energy prices supported nitrogen prices at a relatively high level, Capital costs are substantial, and at recent or current urea prices, financing new urea plants are and attractive for regions that benefitted from low gas prices, like USA, Russia, Nigeria, North dif
Slide 49: CROGI performance and shareholder returns
Yara uses CROGI (Cash Return On Gross Investment) to measure the performance of its business. The goal is a CROGI at or above 10% as an average over the business cycle. With the exception of 2009 Yara has consistently delivered a CROGI (cash return on gross investment) above 10%, resulting in a year
Slide 50: Earnings scenarios: 5-year average and run rate
The “5-year average” assumes fertilizer prices, energy prices and currency rates equal to the The “5-year average” assumes fertilizer prices, energy prices and currency rates equal to the average over the last five years. The run rate scenario assumptions reflect current market prices. average over
Slide 51: Earnings sensitivities and USD exposure
The basis for the sensitivities is Yara’s capacity for the different product groups. The nitrogen Yara revenues are estimated to be 85% USD exposed. The NOK based fixed cost sensitivity component in NPKs are included in the CAN price sensitivity. measured in NOK has increased, but the underlying fix
Slide 52: 2015 EPS and run rate scenario
Yara’s 2015 EPS excluding special items and currency ended at NOK 31.5 in 2015. The updated The full cost scenario follows the logic that at todays urea prices newbuilds are not giving the run rate scenario gives an EPS of NOK 35. required return to stakeholders to defend the construction and operat
Slide 53: Capex 2015 and 2016 guidance
Yara’s 2015 capex ended at 14.4 BNOK, in line with guidance. Maintenance ended at 6 BNOK mainly due to higher activity in 4Q. Growth and M&A ended 800 MNOK lower mainly due to The full cost scenario illustrates the effect of a urea price at 300 USD/t fob Black sea, assuming 5 reclassification of Sal
Slide 54: Growth projects in the pipeline
Yara has several growth projects in the pipeline. Assuming todays prices, these would add NOK 6 Yara’s capex is mainly Euro exposed as a large part of our asset base is in Europe. Growth per share. outside Europe has however resulted in more USD and BRL exposure. Assuming full cost price scenario, a
Slide 55: Dividend policy and 2015 proposal
Yara’s objective is to pay out an average 40-45% of net income in the form of dividends and share Yara’s committed growth projects varies between value-add debottlenecking, commodity scale, buy-backs. industrial and securing supply of phosphates and potash. However, Yara’s Board will propose to the
Slide 56: Integrated business model as foundation for value creation
The integrated business model is the foundation for Yara’s strong value creation, and the basis for its strategy. ϭϬϵ ϭϭϬ
Slide 57: Adapting strategic positioning to market conditions
In order to respond to changing market conditions and continuously strengthen its competitive Organic growth and market development is mainly driven through the Crop Nutrition and Industrial edge, Yara continually adapts its strategic positioning. However, retaining the balance of the segments which
Slide 58: Cost position, productivity and growth avenues
Improving our relative cost position and productivity is a continuous priority, which is vital to Our strategic rationale for further step growth remains strong. Yara has a strong balance sheet counter the high inflation in many of our core markets, and increase resilience to sudden shifts in that a
Slide 59: Recent growth projects and CEO priorities
The above listing of recent corporate growth projects illustrate the step growth activity delivered in Three areas will be the main CEO priorities going forward; operations, profitable growth and recent years, according to our defined growth avenues. positioning. These will be closely followed up by
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