Yara International Asa · OSL:YAR

Yara International Asa — Investor Presentation (June 2017)

53 slides from Yara International Asa's investor presentation, Jun 15, 2017

  1. Slide 1: Yara International ASA Investor presentation

    Yara International ASA Investor presentation June 2017

  2. Slide 2: Safe operations is our first priority

    Safe operations is our first priority 4.5 TRI (Total recordable injuries 12-month rolling)1 4.0 3.5 3.0 2.5 2.0 1.5 Jan '16 Feb Mar Apr May June Jul Aug Sep Oct Nov Dec Jan '17 Feb Mar 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per o

  3. Slide 3: Capacity additions outside China exceed consumption growth

    Capacity additions outside China exceed consumption growth… Capacity additions, excl. China 8.2 (mill. tonnes urea1) Nigeria 0.7 Russia 0.1 Iran 1.8 Egypt 0.9 India 0.7 Indonesia 0.8 Bolivia 0.5 Saudi Arabia 0.5 Azerbaijan 0.4 Malaysia 0.3 5.1 Turkmenistan 0.3 Bangladesh 0.1 Indonesia 0.3 Argentina

  4. Slide 4: Higher costs have reduced Chinese urea production and exports

    …but higher production and logistical costs have significantly reduced Chinese urea production and exports Chinese urea production Chinese exports and urea price Black Sea Million tons Kilotons USD/t 7.0 2,400 550 15/16 2,200 500 6.5 14/15 2,000 450 1,800 400 1,600 350 6.0 1,400 300 1,200 250 5.5 1,

  5. Slide 5: China domestic pricing and utilization

    China domestic pricing and utilization IR – May 2017 5

  6. Slide 6: Sustaining profitable growth within three focus areas

    Yara: sustaining profitable growth and competitive edge within three focus areas Implications of market outlook Strategic response 1 • Increased relative strength of integrated Organic growth and Shape the markets where we are business model market development present, and grow our positions • Reduc

  7. Slide 7: Yara Improvement Program targets minimum $500MM EBITDA improvement

    Yara Improvement Program targets sustained improvement of minimum $500MM EBITDA, plus cash benefits USD$MM, vs. 2015 baseline and 2015 prices 500 ~450 Production volume ~30% Sustained ~300 Consumption factor ~15% EBITDA ~150 ~30% Variable unit cost improvement 641 Fixed cost ~25% Sustained capex Sus

  8. Slide 8: Program is still in early phase, but well on track

    Program is still in early phase, but well on track Program progress Financial benefits 2017 2018 2019 2020 Annualized EBITDA improvement, $MM, vs. 2015 baseline, at 2015 prices Start: Today End: 2016 2020 500  Program progressing according to plan:  Productivity system pilots rolled out 150 and im

  9. Slide 9: Yara Productivity System roll-out is showing good results

    The Yara Productivity System roll-out is showing good results Record production for Uusikaupunki1 and Sluiskil Estimated improvement potential confirmed Improvement potential in first 3 plants Total production at site, thousand tonnes1 (Sluiskil, Uusikaupunki and Belle Plaine) Expansion Base product

  10. Slide 10: Strategic growth with financial discipline

    Strategic growth with financial discipline: brownfield expansions, acquisitions and occasional divestments  OFD  Greenbelt Fertilizers Expand premium products sales and  CN/NPK expansion Porsgrunn  West Sacramento import supply  NPK expansion Uusikapuunki terminal  Bunge (Crop Nutrition) Expan

  11. Slide 11: Growth project pipeline adds ~6 NOK EPS by 2020

    Yara growth project pipeline adds ~6 NOK earnings per share by 2020 at current market prices Profitable growth through expansions and M&A Incremental earnings at current prices1 (NOK/share)  CN/NPK expansion Porsgrunn (2H 2017) 6.1 4.2 Expand premium products  NPK expansion Uusikaupunki (2H 2016)

  12. Slide 12: Major improvement and growth investments in 2016-2017

    Major improvement and growth investments in 2016-2017; main earnings improvement from 2018-2020 Improvement and growth capex1 (BNOK) Improvement program EBITDA improvement (MUSD) Growth 12.2 1,100 950 1.4 500 700 Improvement program: 350 600 + 350 MUSD cost improvement 164 +150 MUSD volume improveme

  13. Slide 13: Cash return target range 40-45% of net income

    Cash return target range 40-45% of net income Dividend and buy-backs1 per share Share of net income 15.5 64% 0.5 14.1 13.8 57% 1.1 0.8 16% 53% 6% 11.9 48% 48% 48% 47% 6% 11.0 1.9 6% 1.0 41% 12% 6% 32% 25% 7.4 30% 15.0 0.4 7% 13.0 13.0 26% 5.4 5.5 23% 51% 5.3 21% 48% 47% 7% 19% 43% 4.5 0.8 10.0 10.0

  14. Slide 14: Additional information

    Additional information IR – May 2017

  15. Slide 15: Summary first quarter

    Summary first quarter  Weaker results reflecting lower margins  Strong finished fertilizer production, but lower ammonia production  Strong Industrial result  Improvement program on track IR – May 2017 15

  16. Slide 16: Earnings per share

    Earnings per share* EPS excluding currency and special items 14.56 7.41 11.23 10.51 10.59 10.22 6.37 2.65 9.58 9.16 8.26 8.17 7.62 7.03 7.74 6.74 6.19 6.18 6.40 5.01 3.97 3.46 1.58 3.00 1.66 -1.22 2014 2015 2016 YTD 2017 Annual NOK 27.59 29.38 23.25 6.19 *Average number of shares for 1Q 2017: 273.2

  17. Slide 17: Strong finished fertilizer production; lower ammonia production

    Strong finished fertilizer production; lower ammonia production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 +4% -6% 5,000 2,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2014 2015 2016 2017 2014 2015 2016 2017 Urea Nitrates NPK CN UAN SSP - based fertilizer 1)

  18. Slide 18: Brazil: focus on premium products and solutions drives growth

    Brazil: focus on premium products and solutions drives growth Brazil 1Q fertilizer deliveries Yara 1Q premium product deliveries Kilotons Kilotons 8,000 +4% 500 Thousands +8% 6,000 450 4,000 400 2,000 350 0 300 Kilotons 2013 2014 2015 2016 2017 250 2,000 200 Thousands 1,500 0% 150 1,000 100 500 50 0

  19. Slide 19: Strong Industrial volume development

    Strong Industrial volume development Kilotons Kilotons AdBlue deliveries +17% 500 1,800 450 1,600 400 1,400 350 1,200 300 1,000 250 800 200 600 150 400 100 200 50 0 0 1Q16 1Q17 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 Other (ex. CO2) Industrial N-chemicals Environmental products IR – M

  20. Slide 20: EBITDA

    Earnings before interest, tax, depreciation and amortization (EBITDA) EBITDA excluding special items NOK millions 7,884 4,614 5,742 5,179 5,489 4,794 5,055 5,055 3,958 4,625 5,050 4,227 3,830 4,002 4,528 4,185 3,508 3,591 3,964 3,335 3,504 3,004 3,216 2,968 2,474 2,015 2014 2015 2016 YTD 2017 Annual

  21. Slide 21: EBITDA development

    EBITDA development NOK millions 5,055 95 784 738 9 124 279 3,216 EBITDA 1Q16 Volume Price/Margin Energy costs Currency Special Other EBITDA 1Q17 translation items IR – May 2017 21

  22. Slide 22: Natural gas cost

    Natural gas cost Yara European natural gas cost Change in global natural gas cost USD/ NOK MMBtu millions 7.0 1,000 730 6.5 800 187 530 6.0 600 430 400 180 5.5 180 543 200 350 5.0 250 0 4.5 (251) (200) 4.0 (704) (400) (923) (1,042) 3.5 (600) 3.0 (800) 2.5 (1,000) 2.0 (1,200) 1Q16 2Q16 3Q16 4Q16 1Q17

  23. Slide 23: Lower European nitrate premiums in new season

    Lower European nitrate premiums in new season Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 700 100 90 600 80 500 70 Nitrate 60 400 premium above urea 50 300 Value above 40 ammonia Value 30 200 above gas 20 100 Yara EU gas co

  24. Slide 24: Lower commodity phosphate margins, solid compound NPK premiums

    Lower commodity phosphate margins, solid compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 Weighted average global premium above blend cost 400 300 Value above Nitrate premium, CIF inland Germany raw material 300 NH3, fob Black Sea *0.22 Ur

  25. Slide 25: Strong growth and profitability track record

    Strong growth and profitability track record Average cash return on gross investment (CROGI) Average annual shareholder return of 23%1 well above the Yara CROGI target of 10% NOK/share 400 0 160 22.8% 20.9% 350 140 0 300 17.4% 17.3% 120 16.1% 14.4% 100 250 0 14.1% 14.1% 13.3%14.0% 12.6% 80 200 9.5 %

  26. Slide 26: Integrated business model creates value through scale and flexibility

    Integrated business model creates value through scale, flexibility and value chain presence IR – May 2017 26

  27. Slide 27: Differentiated product portfolio represents a key source of competitive edge

    Differentiated product portfolio represents a key source of competitive edge Fertilizer product portfolio (2015/16 season volume) NPK blends Standard products 19% (Urea, UAN, Ammonia) 36% 24% Specialty 21% (CN, Compound NPK, Differentiated products Fertigation) (CAN, AN) IR – May 2017 27

  28. Slide 28: Yara has invested for the long term in Brazil

    Yara has invested for the long term in Brazil; Bunge acquisition brought critical mass in distribution Volume (MM tons) 9.3 8.2 7.8 3.2 3.3 2.8 2.7 2.4 2.2 2.2 1.8 2.0 1.7 1.8 1.3 1.5 0.8 0.5 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Acquisition Acquisition Acquisition Divestment Acquisi

  29. Slide 29: Yara Brazil today: unrivalled market presence

    Yara Brazil today: unrivalled market presence and farmer-centric strategy Unrivalled presence: 28 sites in 11 states Farmer-centric strategy drives growth > 20,000 growers using Yara solutions Yara (offices, production, blending > 200 Yara agronomists and 600 sales and distribution of fertilizers, p

  30. Slide 30: Crop Value Index

    Crop Value Index – a key guide to our approach What is CVI: Crop revenue High value, Low volume Fertilizer costs Double price premium for high quality 2% yield increase= +1200 USD/ha Take the position in cash crop – but not enough scale Key parameters: Quality and yield Build positions for crop with

  31. Slide 31: Brazil: focus on premium products and solutions drives growth

    Brazil: focus on premium products and solutions drives growth Brazil 2016 fertilizer deliveries Yara premium product deliveries Kilotons Kilotons 40,000 +13% 1,800 Thousands 30,000 1,600 +57% 20,000 1,400 10,000 1,200 0 1,000 Kilotons 2012 2013 2014 2015 2016 10,000 800 Thousands 8,000 +14% 600 6,00

  32. Slide 32: Growth project pipeline adds ~6 NOK EPS by 2020

    Yara growth project pipeline adds ~6 NOK earnings per share by 2020 at current market prices Profitable growth through expansions and M&A Incremental earnings at current prices1 (NOK/share)  CN/NPK expansion Porsgrunn (2H 2017) 6.1 4.2 Expand premium products  NPK expansion Uusikaupunki (2H 2016)

  33. Slide 33: Growth and capex pipeline

    Growth and capex pipeline Capex plan1 Production growth 2015 - 20202 NOK bn 18.8 Finished products3 Ammonia 1.9 Cost&capacity improvements 2) M&A Mill.tons 24.1 14.2 3.5 9.0 Committed growth 1.5 Maintenance 2.6 0.4 11.0 1.2 7.3 1.7 1.2 0.3 6.9 7.6 7.0 0.4 3.5 19.2 0.7 0.2 1.4 0.2 0.3 0.7 0.5 1.1 1.6

  34. Slide 34: Yara 1Q fertilizer deliveries by market and product

    Yara 1Q fertilizer deliveries by market and product Kilotons 2,733 2,754 1Q16 1Q17 1,589 1,562 735 756 429 469 400 525 342 293 Europe Brazil Latin America North America Asia Africa 1,536 1,445 1,511 1,308 1,175 1,158 879 863 786 672 354 320 283 299 Compound NPK1 Blend NPK Nitrate Urea Other products

  35. Slide 35: Fertilizer deliveries

    Fertilizer deliveries Kilotons 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 Europe Outside Europe IR – May 2017 35

  36. Slide 36: Fertilizer deliveries by product and source

    Fertilizer deliveries by product and source Kilotons 1,536 1,445 1,511 1,308 1,175 1,158 1,068 971 879 863 354 320 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – May 2017 36

  37. Slide 37: YaraMila and YaraBela deliveries

    YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Yara-produced YaraBela deliveries Kilotons Kilotons 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 800 800 600 600 400 400 200 200 0 - 1Q13 1Q14 1Q15 1Q16 1Q17 1Q13 1Q14 1Q15 1Q16 1Q17 Outside Europe Europe

  38. Slide 38: Strong premium product deliveries

    Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 4,000 433 3,500 401 3,000 292 305 296 2,500 225 229 2,000 199 197 188 CAGR 172 180 1,500 9% 1,000 500 33 30 46 0 1Q13 1Q14 1Q15 1Q16 1Q17 Asia Brazil Latin Africa North America excl. America Outsi

  39. Slide 39: Value-added and distribution make up larger part of contribution

    Value-added and distribution make up larger part of Yara’s contribution NOK millions Total Yara contribution 11,000 10,000 9,000 8,000 Trade 7,000 6,000 5,000 Upgrade & distribution 4,000 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3

  40. Slide 40: AdBlue deliveries

    AdBlue deliveries Kilotons 500 450 400 350 300 250 200 150 100 50 0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 IR – May 2017 40

  41. Slide 41: Debt/equity ratio

    Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.18 0.17 0.17 0.15 0.16 0.14 0.13 0.13 0.11 0.08 0.08 0.07 0.06 0.06 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2012 2013 2014 2015 2016 2017 IR – May 2017 41

  42. Slide 42: Net interest-bearing debt development

    Net interest-bearing debt development NOK millions 14,454 584 649 1,167 12,802 2,555 2,136 Net debt Cash earnings* Investments (net) Net operating Foreign currency Other Net debt Dec 16 capital change translation loss Mar 17 * Operating income plus depreciation and amortization, minus tax paid, net

  43. Slide 43: Yara stocks

    Yara stocks Kilotons Finished fertilizer Bunge Fertilizer included from 3Q 2013 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR – May 2017 43

  44. Slide 44: Season to date deliveries up in Europe, down in USA

    Season to date deliveries up in Europe, down in USA Million tons N West Europe Million tons N US 7.0 16.0 +3% -5% 6.0 14.0 5.0 12.0 10.0 4.0 8.0 3.0 6.0 2.0 4.0 1.0 2.0 0.0 0.0 12/13 13/14 14/15 15/16 16/17 12/13 13/14 14/15 15/16 16/17 Domestic Imports Production Net imports Source: Yara estimate f

  45. Slide 45: Chinese urea production suffering from increased production costs

    Chinese urea production suffering from increased production costs, domestic demand lower this season Million tons Chinese urea production Domestic urea supply Million tons 7.0 60 15/16 51.7 14/15 50 6.5 42.7 -13% 41.8 40 9.1 37.2 6.0 4.6 30 5.5 20 5.0 10 16/17 4.5 0 Production Export Export Domestic

  46. Slide 46: Increasing coal prices drove nitrogen prices higher

    Increasing coal prices drove nitrogen prices higher Coal price in China (fob Qinhuangdao 5500, RMB/mt) China anthracite and urea prices (RMB/mt) 800 700 2017 2016 600 500 400 300 2015 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IHS, CFMW IR – May 2017 46

  47. Slide 47: European producers' nitrate stocks

    European producers’ nitrate stocks Index June 2007 = 1 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 16/17 12/13 13/14 14/15 15/16 Source: Fertilizers Europe, Yara estimate for March IR – May 2017 47

  48. Slide 48: Energy cost

    Energy cost Yearly averages 2009 – 2014, quarterly averages for 2015-17 with forward prices* for 2Q17 and 3Q17. 11.0 11.4 10.7 10.5 9.1 9.2 9.4 7.6 7.6 7.5 8.1 7.0 6.5 6.6 8.2 8.0 8.0 7.0 6.2 6.6 6.8 5.3 5.5 5.5 6.9 6.5 5.8 5.0 4.6 4.9 5.4 5.0 5.7 5.9 5.7 5.4 5.0 4.7 5.3 4.2 5.2 5.3 4.7 4.8 4.2 4.4

  49. Slide 49: Balanced grain market forecasted for this season

    Balanced grain market forecasted for this season, stable stock-to-use ratio, despite a record crop Grain consumption and production Days of consumption in stocks Million tons Days 2,650 95 2,600 2,550 90 2,500 85 2,450 2,400 80 2,350 2,300 75 2,250 2,200 70 2,150 65 2,100 2,050 60 2,000 1,950 55 07

  50. Slide 50: Non-commercials' net long position in corn

    Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: US Commodity Futures Trading Commission IR – May 2017 50

  51. Slide 51: Relatively weak grain and food production economics

    Relatively weak grain and food production economics Index FAO price index 300 250 200 150 100 50 0 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 1/2017 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – May 2017 51

  52. Slide 52: Key value drivers – quarterly averages

    Key value drivers – quarterly averages TTF day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea CAN cif Germany (USD/t) granular fob Egypt (dotted line, USD/t) 5.8 5.4 4.3 4.2 265 249 4.1 233 233 242 231 207 198 208 183 193 206 197 184 166 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 2Q16 3Q16 4Q16 1Q17 1

  53. Slide 53: 10-year fertilizer prices – monthly averages

    10-year fertilizer prices – monthly averages USD/t Ammonia fob Black Sea USD/t CAN cif Germany 1,000 500 800 400 600 300 400 200 200 100 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 USD/t Urea prilled fob Black Sea/Urea granular fo

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