Yara International Asa · OSL:YAR
Yara International Asa — Q3 2014 Earnings Presentation
44 slides from Yara International Asa's earnings presentation, Oct 22, 2014
Slide 1: Yara International ASA Third quarter results 2014
0 Yara International ASA Third quarter results 2014 22 October 2014 IR-Date: 2014-10-22
Slide 2: Summary third quarter
1 Summary third quarter Strong result with record deliveries Continued margin benefit from lower European gas prices Strong fertilizer production; lower ammonia production in Pilbara and Lifeco Record Industrial result IR-Date: 2014-10-22
Slide 3: Earnings per share
2 Earnings per share* 12.42 11.84 EPS excluding currency and special items 10.54 10.02 9.82 9.25 8.04 8.26 7.73 7.67 6.69 6.40 6.18 5.66 0.23 2011 2012 2013 2014 Annual NOK 41.99 37.31 20.67 20.84 • Average number of shares for 3Q 2014: 276.2 million (3Q 2013: 277.6 million). IR-Date: 2014-10-22
Slide 4: Fertilizer market development
3 Fertilizer market development Continued robust fertilizer demand Higher urea prices; continued curtailments in China, Ukraine and Egypt Western Europe nitrogen fertilizer industry deliveries 5% higher Higher phosphate prices and upgrading margins than last year Strong demand for value-ad
Slide 5: Food prices below 5-year average
4 Food prices below 5-year average 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 1/2014 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR-Date: 2014-10-22
Slide 6: Nitrogen deliveries in Europe and USA close to normal
Nitrogen deliveries in Europe and USA close 5 to normal USA West Europe Million tons N Million tons N 2.5 5.0 4.5 +12% 4.0 2.0 +5% 3.5 3.0 1.5 2.5 2.0 1.0 1.5 1.0 0.5 0.5 0.0 0.0 3Q10 3Q11 3Q12 3Q13 3Q14 3Q10 3Q11 3Q12 3Q13 3Q14 Production Net imports Domestic Imports Source: Yara estimate for ferti
Slide 7: Chinese urea: production decline despite significant capacity increase
Chinese urea: production decline despite 6 significant capacity increase Chinese production Chinese exports Black Sea (kilotons) (kilotons) USD/t Jul-Aug 2.4 mt 7.0 2 400 (2.8 mt Jul-Aug last year) 550 12/13 13/14 2 200 Year-to-date 6.6 mt 500 (4.1 mt year-to-date last year) 6.0 2 000 450 14/15 1 80
Slide 8: Long-term growth in deliveries outside Europe
7 Long-term growth in deliveries outside Europe Yara fertilizer deliveries (by quarter) Kilotons 8 000 7 000 6 000 5 000 4 000 3 000 CAGR 12% 2 000 1 000 0 3Q10 3Q11 3Q12 3Q13 3Q14 Europe Overseas IR-Date: 2014-10-22
Slide 9: Brazil: Yara benefiting from Bunge acquisition and industry deliveries
Brazil: Yara benefiting both from Bunge 8 acquisition and increase in industry deliveries Brazil fertilizer industry deliveries (Jan-Sep) Yara Brazil fertilizer deliveries1 (Jan-Sep) Kilotons Kilotons +7% 25 000 6 000 Thousands 5 000 20 000 4 000 15 000 3 000 10 000 2 000 5 000 1 000 0 0 2011 2012 2
Slide 10: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and 9 amortization (EBITDA) NOK millions EBITDA excluding special items 5 444 4 966 4 982 4 281 4 310 4 227 4 103 4 184 4 039 3 964 3 591 3 455 3 591 3 318 1 858 Annual 2011 2012 2013 2014 NOK 18,163 16,970 13,399 11,782 millions IR-Date: 2014-10-22
Slide 11: EBITDA development
10 EBITDA development NOK millions 132 3,964 222 151 891 3,318 68 109 EBITDA Volume & mix Price/margin Gas & oil Special Other Currency EBITDA 3Q13 costs in items 3Q14 Europe IR-Date: 2014-10-22
Slide 12: Improved earnings for all segments
11 Improved earnings for all segments EBITDA (NOK millions) 2 293 EBITDA excluding special items 1 797 1 463 1 094 420 304 Downstream Industrial Upstream 3Q13 3Q14 IR-Date: 2014-10-22
Slide 13: Improved European nitrogen margins; nitrate premium in line
Improved European nitrogen margins; nitrate 12 premium in line Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) (quarterly Yara realized) 700 180 160 600 Nitrate premium 140 500 above urea 120 Value above 400 ammonia 100 Value 300 above gas 80 60 200 40 100 Ya
Slide 14: Solid commodity phosphate margins and NPK premiums
Solid commodity phosphate margins and NPK 13 premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 700 700 600 600 500 500 Value above raw material Weighted average global 400 400 premium above blend cost 300 NH3, fob Black Sea *0.22 300 Nitrate premium Urea, fob Black sea 200 200
Slide 15: Lower natural gas cost in Europe
14 Lower natural gas cost in Europe Yara European gas & oil cost Change in European energy cost USD/ NOK MMBtu millions 13.0 0 12.0 (100) (51) (36) 11.0 (200) (300) 10.0 (400) 9.0 (500) 8.0 (500) (600) 7.0 (700) (660) (650) 6.0 (800) 5.0 (900) (891) 4.0 (1 000) 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q1
Slide 16: Fertilizer deliveries by product and source
15 Fertilizer deliveries by product and source Kilotons 1 713 1 390 1 402 1 305 1 296 1 112 1 009 1 009 941 569 258 274 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced Total IR-Da
Slide 17: Net interest-bearing debt development
16 Net interest-bearing debt development NOK millions 308 4,963 549 164 248 3,347 1,860 3,194 2,743 447 Net debt Cash Dividends Net operating Investments Share buy Yara dividend FX loss Other Net debt Jun 14* earnings** from equity- capital net backs & Sep 14* accounted change redemption investees *
Slide 18: Prospects
17 Prospects IR-Date: 2014-10-22
Slide 19: Prospects
18 Prospects Incentives for nitrogen application remain supportive despite recent decline in grain prices Continued nitrogen curtailments in China, Ukraine and other export regions Capacity outside China: limited greenfield additions next two years; and gas availability uncertain for some loca
Slide 20: Galvani acquisition (Brazil) improves raw material and production integration
Galvani acquisition (Brazil) improves raw 19 material and production integration Current assets: – Three mining operations with a total production of ~500kt phosphate rock – Two industrial sites with a total granulation capacity ~1,000kt Future additions (partly replacement): – ~2 million tons p
Slide 21: 250 kt NPK and Calcium Nitrate expansion in Porsgrunn, Norway
250 kt NPK and Calcium Nitrate expansion in 20 Porsgrunn, Norway Strong Downstream demand for additional value-added fertilizer volumes Brownfield investment of NOK 2,250 million Project adds 200 kt calcium nitrate and 50 kt compound NPK annual capacity Enables further 150 kt NPK and 35 kt c
Slide 22: YaraLiva benefits cash crops in particular
21 YaraLiva benefits cash crops in particular YaraLiva provides soluble and strength-building calcium, alongside nitrate-N (15.5%) Products containing calcium nitrate as the key component are sold under YaraLiva brand Calcium used for good rooting, stress-free growth, strong cell walls, improv
Slide 23: IR-Date: 2014-10-22
22 IR-Date: 2014-10-22
Slide 24: Additional information
23 Additional information IR-Date: 2014-10-22
Slide 25: Value-added upgrading and distribution make up larger part of Yara's contribution
24 Value-added upgrading and distribution make up larger part of Yara’s contribution Total Yara contribution NOK millions 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 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 IR-Date
Slide 26: Debt/equity ratio
25 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.75 0.63 0.570.56 0.49 0.38 0.32 0.27 0.20 0.22 0.12 0.12 0.08 0.08 0.07 0.06 0.06 0.06 0.05 0.06 0.02 0.01 -0.04 2009 2010 2011 2012 2013 2014 IR-Date: 2014-10-22
Slide 27: Gas & oil cost
26 Gas & oil cost Yearly averages 2009 – 2010, quarterly averages for 2011-15 with forward prices* for 4Q14 and 1Q15 USD per MMBtu 14 11.9 12 11.1 11.4 11.5 10.9 10.8 11.0 11.0 10.8 10.8 11.2 11.3 10.1 10.3 9.5 10 9.5 11.1 10.3 10.1 10.7 9.7 9.2 9.0 9.3 9.1 8.7 9.1 9.2 7.6 9.0 7.5 8 8.1 8.99 8.6 8.5
Slide 28: Currency exposure affecting Profit & Loss
27 Currency exposure affecting Profit & Loss At the beginning of the fourth quarter 2014 1. The US dollar debt generating profit & loss exposure was USD 1,400 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Around 60% towards BRL with the rest towards othe
Slide 29: Fertilizer deliveries
28 Fertilizer deliveries Kilotons 7 000 6 848 6 496 6 342 6 389 6 284 6 104 6 146 6 017 5 884 6 000 5 474 5,296 5 437 5 2565 179 5 253 5 297 5 2105 216 5 129 4 970 5 0135 044 4 882 4 914 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 2014
Slide 30: Yara 3Q fertilizer sales by market and product
29 Yara 3Q fertilizer sales by market and product Kilotons 3Q13 3Q14 3 120 2 377 2 138 2 195 544 573 673 515 252 345 Europe Latin America Asia North America Africa 1 713 1 402 1 305 1 390 1 296 1 009 1 009 1 112 941 569 258 274 229 225 NPK compounds NPK blends Nitrate Urea Other products UAN CN IR-D
Slide 31: NPK and nitrate deliveries
30 NPK and nitrate deliveries Yara-produced compound NPK deliveries Yara-produced nitrate deliveries Kilotons Kilotons 1 400 1 700 1 300 1 500 1 200 1 100 1 300 1 000 1 100 900 800 900 700 700 600 500 500 3Q10 3Q11 3Q12 3Q13 3Q14 3Q10 3Q11 3Q12 3Q13 3Q14 IR-Date: 2014-10-22
Slide 32: Industrial deliveries
31 Industrial deliveries Kilotons 896 876 860 867 837 843 816 455 438 432 368 374 382 356 343 342 346 337 342 304 313 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Industrial N-chemicals Environmental products Other IR-Date: 2014-10-22
Slide 33: Strong growth in Air1 deliveries
32 Strong growth in Air1 deliveries Kilotons 350 20% > 1 million tons of product sold L12M 18% 300 16% 250 14% 12% 200 10% 150 8% 100 6% 4% 50 2% 0 0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Europe North America ROW % of total Industrial deliver
Slide 34: Yara production volume
33 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 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Urea Nitrates NPK CN UAN SSP - based fertilizer * Including sha
Slide 35: Production curtailments in Ukraine and Egypt
34 Production curtailments in Ukraine and Egypt Ukraine urea exports (Jan-Jun) Egypt urea exports (Jan-Jun) Kilotons Kilotons 2 000 1 000 1 800 900 1 600 800 -17% 1 400 700 1 200 -60% 600 1 000 500 800 400 600 300 400 200 200 100 0 0 2013 2014 2013 2014 Source: IFA IR-Date: 2014-10-22
Slide 36: Farm economics supportive, despite grain price decline
Farm economics supportive, despite grain price 35 decline Source: FAO IR-Date: 2014-10-22
Slide 37: For 2014/15, global grain production expected to moderately exceed consumption
For 2014/15, global grain production expected 36 to moderately exceed consumption 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 13 14E 15F 06 07 08 09
Slide 38: Production not increasing
37 Production not increasing Chinese urea production Domestic urea balance Million tons Million tons 6.6 14 12/13 6.4 12.1 12 11.7 13/14 6.2 9.7 -5% 10 9.3 6.0 2.4 2.4 5.8 8 14/15 5.6 6 5.4 4 5.2 2 5.0 4.8 0 Export Domestic Domestic Export Production Production Jul Aug Sep Oct Nov Dec Jan Feb Mar Ap
Slide 39: Projected nitrogen capacity additions outside China
Projected nitrogen capacity additions outside 38 China Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Algeria 16% 2014 1.5% Egypt 15% Saudi Arabia 20% 2015 2.1% USA 19% USA 42% 2016 2.3% India 11% Nigeria 32% 2017 2.2% USA 24% Nigeria 55% 2018
Slide 40: Yara stocks: normal level, adjusted for Bunge
39 Yara stocks: normal level, adjusted for Bunge Kilotons Bunge Fertilizer Finished fertilizer included from 3Q 2013 6 000 5 000 4 000 3 000 2 000 1 000 - Urea Nitrates Compound NPK Other IR-Date: 2014-10-22
Slide 41: European producer nitrate stocks ending the season close to average
European producer nitrate stocks ending the 40 season close to average 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 14/15 Source: Fertilizers Europe, Yara estimate for September IR-Date: 2014-10-22
Slide 42: Non-commercials' net long position in corn
41 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 Jan-14 Jul-14 Source: US Commodity Futures Trading Commission IR-Date: 2014-10-22
Slide 43: Key value drivers – quarterly averages
42 Key value drivers – quarterly averages Zeebrugge day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea CAN cif Germany (USD/t) granular fob Egypt (USD/t) 10.7 345 354 10.1 9.7 414 294 309 354 358 358 291 336 338 320 7.6 308 314 299 7.0 3Q13 4Q13 1Q14 2Q14 3Q14 3Q13 4Q13 1Q14 2Q14 3Q14 3Q1
Slide 44: 10-year fertilizer prices – monthly averages
43 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 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Urea prilled fob Black Sea/Urea granular fob E