Yara International Asa · OSL:YAR
Yara International Asa — Q3 2013 Earnings Presentation
42 slides from Yara International Asa's earnings presentation, Oct 18, 2013
Slide 1: Yara International ASA Third Quarter results 2013
0 Yara International ASA Third Quarter results 2013 18 October 2013 IR-Date: 2013-10-18
Slide 2: Summary third quarter
1 Summary third quarter Strong results despite weaker commodity fertilizer markets 17% increase in deliveries including Brazil acquisition Robust value-added premiums Stable NPK deliveries outside Europe Strong Industrial deliveries, especially NOX abatement IR-Date: 2013-10-18
Slide 3: Earnings per share
2 Earnings per share* 12.86 EPS excluding currency and 12.42 11.84 special items 10.54 9.82 10.02 9.25 8.04 7.73 6.68 7.67 6.68 5.42 5.65 5.27 2010 2011 2012 2013 Annual NOK 30.23 41.99 37.31 20.38 * Average number of shares for 3Q 2013: 277.6 million (3Q 2012: 281.4 million). IR-Date: 2013-10-18
Slide 4: Fertilizer market development
3 Fertilizer market development Solid farm economics support fertilizer demand, despite lower grain prices Increased exports from China led to supply-driven urea pricing Western Europe nitrogen fertilizer industry deliveries 9% lower Phosphate and potash markets impacted by reduced consumpti
Slide 5: Solid farm economics support fertilizer demand
4 Solid farm economics support fertilizer demand FAO price index Index 300 250 200 150 100 50 0 1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR-Date: 2013-10-18
Slide 6: Strong global urea demand, but increased export availability from China
5 Strong global urea demand, but increased export availability from China Global urea trade Chinese urea exports Kilotons USD/t 40.3 1 800 450 36.9 33.9 +6.4 1 600 400 31.4 1 400 350 27.8 1 200 300 1 000 250 800 200 600 150 400 100 389 251 350 448 378 200 50 0 0 08/09 09/10 10/11 11/12 12/13 Jul- Se
Slide 7: Cautious start to season in Europe and US
6 Cautious start to season in Europe and US USA* Western Europe Million tons Million tons 4.5 -17%* 2.5 4.0 3.5 2.0 -9% 3.0 1.5 2.5 2.0 1.0 1.5 1.0 0.5 0.5 0.0 0.0 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 Production Net imports Domestic Imports *July only, due to non-availability
Slide 8: Long-term growth in NPK deliveries outside Europe; stable year-over-year development
Long-term growth in NPK deliveries outside 7 Europe; stable year-over-year development Yara-produced NPK deliveries Overseas Yara-produced NPK deliveries Kilotons Kilotons 1,400 271 1,200 237 1,000 198 800 600 95 86 400 73 68 76 72 CAGR 64 64 18% 54 200 15 18 14 0 3Q09 3Q10 3Q11 3Q12 3Q13 Asia Brazi
Slide 9: Record production
8 Record production Finished fertilizer Ammonia Kilotons Kilotons 5,000 2,000 4,500 1,900 4,000 1,800 3,500 1,700 3,000 1,600 2,500 1,500 2,000 1,400 1,500 1,300 1,000 1,200 500 1,100 0 1,000 2011 2012 2013 2011 2012 2013 * Including share of equity-accounted investees IR-Date: 2013-10-18
Slide 10: Bunge acquisition completed and integration underway
Bunge acquisition completed 9 and integration underway Bunge Yara Fertilizantes Brasil Sales volume 2012 (mt) 4.6 3.3 Revenues 2012 (USD billions) 2.6 1.8 Employees ~1,300 ~1,300 SSP production units 2 1 Blending units 22 11 Own sales force ~100 ~80 Sales representatives ~500 ~300 IR-Date: 2013-10-1
Slide 11: Bunge acquisition improves geographical balance
Bunge acquisition improves 10 geographical balance 2012 Fertilizer deliveries, Yara and Bunge Brazil Europe 9.6 mill. tons North America 3.0 mill. tons Asia 1.9 mill. tons Africa 1.2 mill. tons Bunge 4.6 mill. tons Latin America Oceania 4.7 mill. tons 0.3 mill. tons IR-Date: 2013-10-18
Slide 12: Significantly improved footprint in Brazil
11 Significantly improved footprint in Brazil 1,000 km ~60 USD/t Bunge plant Yara plant Market size Northeast Mato Grosso West Bahia Paraná Minas Gerais São Paulo Rio Grande do Sul IR-Date: 2013-10-18
Slide 13: Bunge acquisition increases purchasing scale
12 Bunge acquisition increases purchasing scale Potash purchases, China, India and Yara 2012 First half 2013 Million tons, MOP equivalents 5.3 1.1 3.9 2.8 0.6 1.9 1.8 1.0 China India Yara China India Yara Bunge Source: Yara, International Fertilizer Industry Association IR-Date: 2013-10-18
Slide 14: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and 13 amortization (EBITDA) NOK millions EBITDA excluding special items 6,587 5,444 4,982 4,966 4,281 4,310 4,103 4,129 3,995 3,455 3,591 3,251 3,307 2,992 2,486 Annual 2010 2011 2012 2013 NOK 15,315 18,163 16,970 11,432 millions IR-Date: 2013-10-18
Slide 15: EBITDA development
14 EBITDA development NOK millions 145 4,103 174 924 1 269 3,307 79 EBITDA Special Volume Price/margin Gas & oil Other Currency EBITDA 3Q12 items costs in 3Q13 Europe IR-Date: 2013-10-18
Slide 16: Strong earnings in Downstream and Industrial
15 Strong earnings in Downstream and Industrial NOK millions EBITDA excluding special items 3,077 1,799 1,094 766 239 291 Downstream Industrial Upstream 3Q12 3Q13 IR-Date: 2013-10-18
Slide 17: Net income from equity-accounted investees
16 Net income from equity-accounted investees NOK millions 412 3Q12 3Q13 130 132 85 73 33 14 16 20 -78 Qafco Tringen GrowHow UK Lifeco Other IR-Date: 2013-10-18
Slide 18: Increased fertilizer deliveries
17 Increased fertilizer deliveries Kilotons 1,336 1,380 1,305 1,094 1,111 1,032 988 706 216 258 3Q12 3Q13 3Q12 3Q13 3Q12 3Q13 3Q12 3Q13 3Q12 3Q13 Nitrate NPK compounds NPK blends Urea UAN Yara-produced deliveries Joint venture & third party sourced Total IR-Date: 2013-10-18
Slide 19: Yara stocks, including Bunge Brazil from 3Q
18 Yara stocks, including Bunge Brazil from 3Q Kilotons Finished fertilizer 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Other NPK Nitrates Urea Bunge IR-Date: 2013-10-18
Slide 20: Farmer yield benefits justify nitrate premium
19 Farmer yield benefits justify nitrate premium Nitrogen upgrading margins Nitrate premium, USD/t CAN USD/t 700 160 600 140 Nitrate premium above urea 120 500 Value 100 400 above ammonia 80 300 Value above gas 60 200 40 100 Yara EU gas cost *20 20 0 0 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 3Q
Slide 21: Stable NPK premiums
20 Stable NPK premiums Phosphate upgrading margins NPK blend premium USD/t USD/t 700 700 600 600 Margin above Value above blend cost 500 raw material 500 400 400 Urea, fob Black sea NH3, fob Black Sea *0.22 300 300 MOP, cfr NWE 200 200 100 Rock, fob NA *1.4 100 DAP, fob Morocco 0 0 1Q10 3Q10 1Q11 3Q
Slide 22: Strong cash generation
21 Strong cash generation NOK millions 70 3,519 229 360 732 1,117 741 2,309 4,295 702 626 331 Net debt Cash Dividends Net Funding Acquisition Other Yara Share Yara FX loss Other Net debt Jun 13* earnings** from equity operating Yara of Bunge investments buy backs / Dividend Sep 13* accounted capital
Slide 23: Prospects
22 Prospects Continued strong farm economics support fertilizer demand Marginal urea profitability in China; Chinese coal price and export tax regime are key for global urea pricing going forward Capacity outside China: limited greenfield additions next 2-3 years apart from Algeria Limited p
Slide 24: Potential joint investment in world-scale ammonia plant on US Gulf coast
Potential joint investment in world-scale 23 ammonia plant on US Gulf coast Attractive long-term partnership: – BASF has strong existing presence in the United States and ammonia sourcing requirement for US downstream activities, investment would further strengthen backward integration – Yara has
Slide 25: Additional information
24 Additional information IR-Date: 2013-10-18
Slide 26: Fertilizer volumes
25 Fertilizer volumes Kilotons 7,000 6,284 6,343 6,104 6,017 5,884 6,000 5,296 5,474 5,438 5,256 5,179 5,210 5,216 5,253 5,299 5,129 4,914 4,970 5,013 5,045 4,882 5,000 4,763 4,742 4,791 4,759 4,834 4,239 4,000 3,496 3,000 2,000 1,000 0 2007 2008 2009 2010 2011 2012 2013 Europe Outside Europe Total
Slide 27: Yara 3Q fertilizer sales by market and product
26 Yara 3Q fertilizer sales by market and product 2013: 5.9 million tons (2012: 5.0 million tons) Kilotons 2,377 3Q12 3Q13 2,270 2,138 1,497 469 544 573 461 316 252 Europe Latin America Asia North America Africa 1,380 1,336 1,305 1,094 1,032 988 1,111 706 449 569 216 258 225 229 NPK compounds NPK bl
Slide 28: NPK and nitrate deliveries
27 NPK and nitrate deliveries Yara-produced NPK deliveries Yara-produced nitrate deliveries Kilotons Kilotons 1,300 1,700 1,200 1,500 1,100 1,300 1,000 900 1,100 800 900 700 700 600 500 500 3Q09 3Q10 3Q11 3Q12 3Q13 3Q09 3Q10 3Q11 3Q12 3Q13 IR-Date: 2013-10-18
Slide 29: Value-added upgrading and distribution make up larger part of Yara's contribution
28 Value-added upgrading and distribution make up larger part of Yara’s contribution Total Yara contribution NOK millions 9,000 8,000 7,000 Trade 6,000 Industrial upgrade & distribution 5,000 4,000 Fertilizer upgrade & distribution 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 1Q10 2Q10 3Q
Slide 30: European producer nitrate stocks
29 European producer nitrate stocks 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 13/14 08/09 09/10 10/11 11/12 12/13 Source: Fertilizers Europe IR-Date: 2013-10-18
Slide 31: Yara production volume
30 Yara production volume* Finished fertilizer and industrial products 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 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Urea Nitrates NPK CN UAN SSP - based fertilizer * Including sha
Slide 32: Gas & oil cost
31 Gas & oil cost Yearly averages 2009 – 2010, quarterly averages for 2011-13 with forward prices* for 4Q13 and 1Q14 USD per MMBtu 14 11.9 11.8 11.1 11.4 11.5 11.3 12 10.9 10.8 11.0 11.0 10.8 10.8 10.1 10 8 7.6 8.3 8.6 8.3 8.3 8.5 8.3 6.6 7.9 8.1 8.3 7.7 7.5 7.9 6 7.6 5.7 4 4.8 2 0 2009 2010 1Q11 2Q
Slide 33: Yara European gas cost closer to hub price
32 Yara European gas cost closer to hub price European energy cost Spread between Yara and Zeebrugge USD/ USD/ MMBtu MMBtu 13.0 2.1 12.0 1.7 11.0 1.4 10.0 1.1 9.0 0.9 0.9 0.8 0.9 8.0 7.0 6.0 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Zeebrugge (1-month lag) Yara
Slide 34: Debt/equity ratio
33 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.75 0.63 0.57 0.56 0.49 0.38 0.32 0.27 0.20 0.22 0.12 0.12 0.08 0.07 0.06 0.06 0.02 0.01 -0.04 2009 2010 2011 2012 2013 IR-Date: 2013-10-18
Slide 35: Currency exposure affecting P&L
34 Currency exposure affecting P&L At the beginning of the fourth quarter 2013 1. The US dollar debt generating p&l exposure was USD 1,100 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Around 50% towards EUR and NOK, the rest towards emerging market curr
Slide 36: Continued strong price incentives necessary to match consumption growth
Continued strong price incentives necessary to 35 match consumption growth Grain consumption and production Days of consumption in stocks Million tons Days 2,500 85 2,450 2,400 80 2,350 75 2,300 2,250 70 2,200 2,150 65 2,100 2,050 60 2,000 1,950 55 06 07 08 09 10 11 12 13E 14F 06 07 08 09 10 11 12 1
Slide 37: Chinese urea production and export balance
36 Chinese urea production and export balance Chinese urea production Domestic urea balance Million tons Million tons 7.0 14 12/13 13/14 11.8 12.2 6.0 12 11/12 -12.0% 10.7 5.0 10 1.0 9.4 2.8 4.0 8 3.0 6 2.0 4 1.0 2 0.0 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Production Production Domestic
Slide 38: Chinese urea export increase
37 Chinese urea export increase Chinese urea exports, Kilotons Urea price, USD/t 1,800 550 1,600 500 450 1,400 400 1,200 350 1,000 300 800 250 200 600 150 400 100 200 50 0 0 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Urea, fob Yuzhny Chinese urea exports Source: BOABC IR-Date: 2013-10-18
Slide 39: Projected nitrogen capacity additions outside China in line with historical consumption growth
Projected nitrogen capacity additions outside 38 China in line with historical consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Qatar 19% 2013 1.4% (2.5%) Algeria 17% Iran 23% 2014 1.8% (1.8%) India 21% Algeria 25% 2015 3.5% (
Slide 40: Non-commercials' net long position in corn
39 Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Source: US Commodity Futures Trading Commission IR-Date: 2013-10-18
Slide 41: Key value drivers – quarterly averages
40 Key value drivers – quarterly averages Zeebrugge day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 11.1 10.3 10.3 10.1 343 351 383 385 400 314 322 9.1 294 342 308 3Q12 4Q12 1Q13 2Q13 3Q13 3Q12 4Q12 1Q13 2Q13 3Q13 3Q12 4Q12 1Q13 2Q13 3Q13 Ammonia fob Black Sea (USD/t
Slide 42: 10-year fertilizer prices – monthly averages
41 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 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Urea prilled fob Black Sea DAP fob US Gulf USD