Yara International Asa · OSL:YAR
Yara International Asa — Q4 2006 Earnings Presentation
56 slides from Yara International Asa's earnings presentation, Feb 9, 2007
Slide 1: Yara International ASA Fourth quarter results
Yara International ASA Fourth quarter results 9 February 2007
Slide 2: Summary fourth quarter 2006
2 Summary fourth quarter 2006 Strong financial results Increased sales in Latin America and Asia, delayed season in Europe and North America Strong Industrial performance, volumes up 10% 100% ownership and de-listing of Fertibras achieved Strong demand fundamentals and improved short-term energy out
Slide 3: Net income after minority interest
3 Net income after minority interest NOK millions 1,600 1,403 1,400 1,251 1,200 1,041 985 917 846 1,000 800 846 853 891 759 800 588 600 400 200 0 2004 2005 2006 Accumulated NOK mill 3,794 3,198 4,188 USD mill 564 500 657 IR - Date: 2007-02-09
Slide 4: Earnings per share
4 Earnings per share* NOK 5.00 4.68 4.50 3.94 4.00 3.42 3.50 3.08 2.90 3.01 2.68 2.70 2.77 3.00 2.50 2.38 2.50 1.90 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 Accumulated NOK 11.90 10.20 13.86 * Average number of shares for 4Q 2006: 296.3 million (4Q 2005: 309.3 million) IR - Date: 2007-02-09
Slide 5: Earnings per share adjusted for foreign exchange gain / (loss)
5 Earnings per share adjusted for foreign exchange gain / (loss)* NOK 4.75 4.50 4.00 3.31 3.50 3.18 3.06 2.98 3.00 2.65 2.57 2.46 2.53 2.61 2.27 2.18 2.50 2.00 1.50 1.00 0.50 0.00 2004 2005 2006** Accumulated NOK 10.31 11.36 12.90 * After tax ** Average number of shares for 4Q 2006: 296.3 million (4
Slide 6: Yara's 6-year average return well above cost of capital
6 Yara’s 6-year average return* well above cost of capital Cash Return On Gross Investment** Percent 16 14.1% 14.4% 14.1% 14 12 Average = 12% 10.6% 10 9.4% 9.2% 8 6 4 2 0 2001 2002 2003 2004 2005 2006 * Target: Minimum 10% CROGI as an average over the business cycle. **CROGI defined as gross cash fl
Slide 7: Yara earnings volatility below fertilizer peers
7 Yara earnings volatility below fertilizer peers EBITDA volatility* 60 53 50 50 44 40 36 36 38 35 Average = 34 30 26 20 13 10 10 0 ra ta ira al m S nt S s SF ct K+ PC ic en Ya riu o m du BA uP m ng Ke Ag he ro D Sy rP C ow Ai D *Standard deviation divided by average EBITDA 2000 – 2005 (excl. specia
Slide 8: Overall fertilizer market development during quarter
8 Overall fertilizer market development during quarter Urea import increased through the quarter Strong demand from India West European fertilizer volumes down 12% North American nitrogen import low, but purchases picked up in December IR - Date: 2007-02-09
Slide 9: Fertilizer price development during quarter
9 Fertilizer price development during quarter Urea prices increased, with average prices slightly higher, end prices 25% above last year Average ammonia price below last year due to lower natural gas prices in North America CAN price in Germany fairly flat through the quarter, at a higher level than
Slide 10: Accumulated Indian urea deficit
10 Accumulated Indian urea deficit kt 4,000 Sales - Production 2006/07 1.8 mill tonnes 3,000 increase 2,000 2005/06 1,000 2004/05 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar -1,000 -2,000 -3,000 Source: Indian Statistics IR - Date: 2007-02-09
Slide 11: Net urea export from China
11 Net urea export from China Kt product 4,500 4,000 2004 3,500 3,000 2003 2,500 2,000 2005 1,500 2006 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -500 IR - Date: 2007-02-09
Slide 12: US urea deficit: increased imports expected
12 US urea deficit: increased imports expected Production Net imports USD/t 3.5 380 Season to date: 3.0 19% behind last year 360 Fob US Gulf (granular) 340 2.5 Million tonnes urea 320 2.0 300 1.5 280 Fob Black Sea 260 1.0 240 0.5 220 0.0 200 5-Jan 12-Jan 19-Jan 26-Jan 3-Nov 10-Nov 17-Nov 24-Nov 6-Oc
Slide 13: Agricultural commodity prices strong…
13 Agricultural commodity prices strong… Corn Wheat Soybeans Rice Source: Chicago Board of Trade, 5 February 2007; March contracts IR - Date: 2007-02-09
Slide 14: …and strength extends beyond current harvest
14 …and strength extends beyond current harvest Forward prices USD/bu USD/bu Rice (150 kg N/ha) 6 11 Wheat (75 kg N/ha)10 5 9 4 8 Corn (150 kg N/ha) 7 Soybeans (30 kg N/ha) 3 6 2 5 4 1 3 0 2 Jun-07 Jul-07 Nov-07 Jun-07 Jul-07 Nov-07 May-07 Aug-07 May-07 Aug-07 Oct-07 Apr-07 Mar-07 Sep-07 Dec-07 Oct-
Slide 15: Strong increase in grain production needed to avoid further inventory drop
15 Strong increase in grain production needed to avoid further inventory drop* Million tonnes 108 mill tonnes (5.5%) 2,100 35% 115 days inventory 2,050 30% 2,000 25% Consumption 1,950 20% 1,900 15% 1,850 57 days inventory 1,800 Production 10% 1,750 5% 1,700 0% 1995 1997 1999 2001 2003 2005 2007E 199
Slide 16: Continued heavy investment in biofuels
16 Continued heavy investment in biofuels US Ethanol capacity European Biodiesel capacity Billion liters Billion liters 90 20 80 18 70 16 60 14 50 Existing Firm Probable 12 10 40 8 30 6 20 4 10 2 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Source: PIRA (US), Tallage (most realistic outlook
Slide 17: US natural gas versus Yara average
17 US natural gas versus Yara average Yearly averages 2000 – 2005, quarterly averages for 2006 with forward prices for 2007* USD/MMBtu 10 9 US spot gas price 8 (Henry Hub) 7 6 6.0 5 5.6 5.5 5.2 5.3 5.2 4 Yara global 4.4 oil & gas cost 3 3.5 (weighted average) 3.2 2 2.6 2.5 2.3 1 0 2000 2001 2002 200
Slide 18: Lower estimated European energy cost
18 Lower estimated European energy cost Actual for quarter October 2006 estimate January 2007 estimate NOK millions 700 600 616 600 Cost change on previous year 500 445 400 300 200 162 100 50 0 (100) (50) (200) (200) (300) 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 IR - Date: 2007-02-09
Slide 19: Urea price versus production cost in US Gulf
19 Urea price versus production cost in US Gulf Yearly averages 2000 – 2004, quarterly averages from 2005 with forward prices 2007* USD/t 400 350 300 Urea fob US Gulf (granular) 250 200 Cash cost US Gulf* 150 100 2000 2001 2002 2003 2004 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 *
Slide 20: Minor upward revisions to urea capacity outlook
20 Minor upward revisions to urea capacity outlook Global urea capacity Year Driving regions growth estimate* World Excluding China World Ex. China 2006 4.5% (4.6%) 2.9% (3.3%) China 48% Oman 24% Oman 9% S. Arabia 18% 2007 5.3% (5.2%) 4.7% (4.5%) China 43% Iran 43% Iran 24% Egypt 28% 2008 4.2% (4.7%
Slide 21: Strong NOx abatement growth
21 Strong NOx abatement growth Sales volume (kt) Strong growth driven by legislation 400 25% volume increase from last year Main segments: power plants, cement 300 and incineration industries Automotive: new growth area started 200 1st October 2006 100 0 2002 2003 2004 2005 2006 IR - Date: 2007-02-0
Slide 22: Yara 100% owner of Fertibras, incl. 15% Fosfertil
22 Yara 100% owner of Fertibras, incl. 15% Fosfertil Fosfertil Share Price All non-voting shares acquired January 2007 18.0 17.0 Fertibras de-listed 16.0 15.0 Process to realize USD per share 14.0 Fertibras acquired synergies started 13.0 18.7.2006 Merge Fertibras into Yara 12.0 Brazil 11.0 25% head
Slide 23: Growth objectives across business cycle remain firm
23 Growth objectives across business cycle remain firm Million tonnes Growth Projects 2006 product 50 High-growth markets 45 ~10% market share – Fertibras 40 – China BlueChemical – Olmeca 35 – Phosyn 30 25 ~6% Expansion in low-cost gas 20 – Burrup started – Qafco-5 concluded 15 – Trinidad feasibilit
Slide 24: Financial results
24 Financial results Sven Ombudstvedt, CFO IR - Date: 2007-02-09
Slide 25: Earnings before interest, tax, depreciation and amortization (EBITDA)
25 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 1,947 2,000 1,866 1,868 1,800 1,682 1,582 1,565 1,600 1,484 1,477 1,505 1,492 1,379 1,351 1,400 1,200 1,000 800 600 400 200 0 2004 2005 2006 Accumulated NOK mill 6,108 6,618 6,472 USD mill 909 1,033 1,014 IR - Date
Slide 26: EBITDA and operating income
26 EBITDA and operating income Individual operating segments EBITDA (NOK millions) 4Q 2006 4Q 2005 Downstream 511 319 Industrial 153 146 Upstream 673 944 Other and eliminations 14 (30) Yara total 1,351 1,379 Operating income (NOK millions) 4Q 2006 4Q 2005 Downstream 252 144 Industrial 95 98 Upstream
Slide 27: Net interest-bearing debt / equity ratio
27 Net interest-bearing debt / equity ratio End of quarter 0.80 0.69 0.70 0.60 0.50 0.45 0.46 0.38 0.37 0.39 0.40 0.36 0.35 0.34 0.31 0.33 0.30 0.27 0.20 0.10 0.00 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 IR - Date: 2007-02-09
Slide 28: Net interest-bearing debt 2006
28 Net interest-bearing debt 2006 NOK millions 8,000 7,584 7,000 6,000 503 5,350 5,232 2,823 1,974 422 5,000 4,000 2,038 3,000 740 349 2,000 1,375 1,312 1,000 0 Net Net Cash Dividends Net Divestment Investment Other Yara Foreign Other Net Interest- Interest- earnings* received** operating ammonia Fe
Slide 29: Variance analysis Yara group
29 Variance analysis Yara group NOK millions USD millions* EBITDA 4Q 2006 1,351 212 EBITDA 4Q 2005 1,379 208 Variance EBITDA in NOK (28) Conversion (NOK vs. USD) 51 Variance EBITDA 23 4 Volume & mix 69 11 Price/Margin 104 16 Energy arbitrage (90) (14) Energy cost in Europe (230) (36) Oil and gas pro
Slide 30: Special items
30 Special items EBITDA (NOK millions) 4Q 2006 4Q 2005 South Africa restructuring - (50) Employee centennial gift - (17) UAN plant closure (73) - SQM gain 62 Downstream (11) (66) Employee centennial gift - (5) Contract derivatives (32) 17 Industrial (32) 12 Trinidad gas contract - (42) Employee cent
Slide 31: Downstream – fourth quarter
31 Downstream – fourth quarter Strong financial results Market rebound in Brazil, ending 2-3% above 2005 Increased sales in Southeast Asia, primarily Thailand Reduced sales in Europe and North America as customers delay purchases Fertibras integration ahead of plan IR - Date: 2007-02-09
Slide 32: Downstream – EBITDA
32 Downstream – EBITDA NOK millions 700 665 628 566 573 600 526 518 511 477 490 500 441 373 400 319 300 200 100 0 2004 2005 2006 Accumulated NOK mill 2,142 1,984 1,960 USD mill 319 311 305 IR - Date: 2007-02-09
Slide 33: Downstream – sales volume fertilizer
33 Downstream – sales volume fertilizer Europe Outside Europe kt 5,098 4,990 4,956 4,934 4,996 4,879 4,765 5,000 4,726 4,742 2,559 4,588 4,688 4,543 2,195 2,564 2,664 2,279 2,683 2,171 2,094 2,130 2,514 2,324 1,851 4,000 3,000 2,762 2,648 2,693 2,555 2,539 2,558 2,600 2,370 2,332 2,000 2,264 2,251 2
Slide 34: Industrial – fourth quarter
34 Industrial – fourth quarter Strong financial results, despite negative contract derivative effect Environmental sales volumes up 17% with improved margins Increased volumes and margins for N-chemicals and technical ammonium nitrate Continued growth in liquid CO2 sales to end-users IR - Date: 2007
Slide 35: Industrial – EBITDA
35 Industrial – EBITDA NOK millions 300 252 250 211 207 195 200 173 164 165 166 165 156 153 146 150 100 50 0 2004 2005 2006 Accumulated NOK mill 696 720 736 USD mill 104 112 115 IR - Date: 2007-02-09
Slide 36: Upstream – fourth quarter
36 Upstream – fourth quarter Strong financial results Finished fertilizer production up 6%; ammonia lower with Le Havre down and maintenance stop in Ferrara plant Increased energy cost in Europe, but falling spot prices due to excess gas supply Le Havre to re-start in March due to strong demand and
Slide 37: Upstream – EBITDA
37 Upstream – EBITDA NOK millions 1,400 1,168 1,200 1,004 988 987 961 965 944 1,000 910 926 797 800 738 673 600 400 200 0 2004 2005 2006 Accumulated NOK mill 3,573 3,922 3,563 USD mill 531 611 560 IR - Date: 2007-02-09
Slide 38: Upstream – production volume
38 Upstream – production volume* kt Ammonia Finished fertilizer 3,500 3,253 3,286 3,246 3,247 3,312 3,256 3,100 3,134 3,180 3,175 3,011 2,976 1,915 1,940 1,889 2,010 1,983 1,994 3,000 1,834 1,866 1,965 1,914 1,760 1,786 2,500 2,000 1,500 1,339 1,346 1,356 1,329 1,251 1,266 1,190 1,268 1,215 1,237 1,
Slide 39: Share of net income in non-consolidated investees
39 Share of net income in non-consolidated investees NOK millions 4Q 2006 4Q 2005 YTD 2006 YTD 2005 Qafco 239 225 793 803 Tringen 45 57 176 197 Rossosh 3 23 104 95 Other 101 (11) 390 49 Total 388 294 1,463 1,144 IR - Date: 2007-02-09
Slide 40: Qafco – highly successful combination of global marketing and low-cost production
40 Qafco – highly successful combination of global marketing and low-cost production Qafco annual capacities Ammonia Urea Million tonnes 5 Yara has been a consistent partner in 4.5 the JV for more than 30 years 4 3.5 3 Yara contributes with global marketing 2.5 network, selling more than 50% of urea
Slide 41: Prospects first quarter 2007
41 Prospects first quarter 2007 Urea market to remain tight US and European deliveries picking up Higher urea prices reduce risk of nitrate substitution and increased imports in Europe Energy cost in Europe estimated NOK 50 million lower than 1Q’06 IR - Date: 2007-02-09
Slide 42: Prospects 2007
42 Prospects 2007 Strong grain prices support increased fertilizer consumption New US and EU targets support biofuels growth Positive global demand development reduces the risk of overcapacity Market rebound in Brazil More stringent environmental legislation continues to increase demand for industri
Slide 43: Additional information
43 Additional information
Slide 44: Downstream – variance analysis
44 Downstream – variance analysis Fourth quarter NOK millions USD millions* USD/tonne** EBITDA 2006 511 80 16 EBITDA 2005 319 48 10 Variance EBITDA in NOK 192 Conversion (NOK vs. USD) 7 Variance EBITDA 199 31 6 Volume & mix 30 5 1 Margin 108 17 3 Margin excluding ammonia effect 44 7 1 Ammonia effect
Slide 45: Industrial – variance analysis
45 Industrial – variance analysis Fourth quarter NOK millions USD millions* EBITDA 2006 153 24 EBITDA 2005 146 22 Variance EBITDA in NOK 7 Conversion (NOK vs. USD) 3 Variance EBITDA 10 2 Volume & mix 26 4 Margin 48 8 Margin excluding ammonia effect 28 4 Ammonia effect on margin 20 3 Special items (4
Slide 46: Upstream – variance analysis
46 Upstream – variance analysis Fourth quarter NOK millions USD millions* USD/tonne** EBITDA 2006 673 106 33 EBITDA 2005 944 142 44 Variance EBITDA in NOK (271) Conversion (NOK vs. USD) 40 Variance EBITDA (231) (36) (11) Volume & mix 56 9 3 Price/Margin (36) (6) (2) Energy arbitrage (90) (14) (4) En
Slide 47: Three segments mitigate cyclicality and create value for Yara
47 Three segments mitigate cyclicality and create value for Yara EBITDA, pro forma until 2005 . USD millions Knowledge Margin Local market knowledge 1,200 Strong customer relations Agronomic and application 1,000 112 competence 104 115 Differentiation and branding . 800 311 305 Logistics Leverage 31
Slide 48: Global optimization creates value
48 Global optimization creates value 2006 fertilizer and nitrogen chemicals volumes in million tonnes Global Marketing and Sales Product source* optimization Fertilizer Europe Yara production 12.7 9.9 Europe Latin America 3.4 Yara production 2.3 outside Europe Sourcing Business Asia 21.6 units 2.2 A
Slide 49: Another 30-year low for grain stocks-to-use supports high demand for fertilizer
49 Another 30-year low for grain stocks-to-use supports high demand for fertilizer Million tonnes Stocks 700 40% Percent 600 35% 30% 500 25% 400 20% 300 15% 200 10% 100 5% 0 0% 2007F 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 So
Slide 50: Key value drivers – quarterly averages
50 Key value drivers – quarterly averages Ammonia fob Caribbean (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 400 363 250 227 229 232 250 330 221 212 214 223 350 209 188 198 287 278 200 200 300 251 250 150 150 200 150 100 100 100 50 50 50 0 0 0 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 4Q 0
Slide 51: Key value drivers – 10-year history
51 Key value drivers – 10-year history Ammonia fob Caribbien (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 350 250 220 223 250 286 284 212 300 253 200 175 200 186 250 165 203 139 146 150 150 200 160 117 124 119 111 148 137 101 96 110 103 150 84 94 117 110 100 100 86 91 67 100 50
Slide 52: 10-year fertilizer prices – monthly averages
52 10-year fertilizer prices – monthly averages Ammonia fob Caribbean USD/t 400 350 300 250 200 150 CAN cif Germany 100 USD/t 50 200 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 150 100 Urea prilled fob Black Sea 50 USD/t 300 0 250 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 200 150 100
Slide 53: 10-year grain/oilseed prices – yearly averages
53 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/t USD/t 200 350 180 300 160 250 140 200 120 100 150 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Corn (US Gulf) USD/t Soybeans (cif Rotterdam) USD/t 350 13
Slide 54: Income statement
54 Income statement NOK millions 4Q 2006 4Q 2005 YTD 2006 YTD 2005 Revenue and other income 12,428 12,431 48,261 46,550 Operating income 521 651 3,352 3,821 Share of net income in non-consolidated 388 294 1,463 1,144 investees Interest income and other financial income 87 79 277 266 Interest expense
Slide 55: Consolidated balance sheets
55 Consolidated balance sheets NOK millions 31 Dec 2006 31 Dec 2005 Deferred tax assets 1,175 1,359 Property, plant and equipment 7,600 7,536 Other non-current assets 7,989 5,146 Inventories 6,689 7,033 Receivables 6,834 6,868 Other current assets 1,974 1,568 Cash and cash equivalents 1,003 1,108 To
Slide 56: Definition of EBITDA and CROGI
56 Definition of EBITDA and CROGI Operating income before financial items Total assets + Share of net income in non-consolidated investees - Cash and other liquid assets + Interest income - Deferred tax assets + Net gain/loss on securities - Other current liabilities + Dividends received from 0-20 c