Yara International Asa · OSL:YAR
Yara International Asa — Investor Presentation (September 2005)
34 slides from Yara International Asa's investor presentation, Sep 21, 2005
Slide 1: Satisfying the need for increased agricultural productivity
Satisfying the need for increased agricultural productivity CEO Thorleif Enger Frankfurt 21 September 2005
Slide 2: Key facts about Yara
2 Key facts about Yara Demerged from Norsk Hydro and listed on the Oslo stock exchange 25 March 2004 The world’s largest fertilizer company with 2004 revenues of USD 6.4 billion and net income of USD 560 million In 2004 Yara sold 21.9 million tonnes of fertilizer products Sales offices in more than
Slide 3: A chemical company with fertilizer application as its biggest market
3 A chemical company with fertilizer application as its biggest market Fertilizer Nitric acid Energy Ammonia Urea Industrial Yara converts energy and nitrogen from the air into useful products for farmers and industrial customers Date: 2005-09-21- Page: 3
Slide 4: Increasing population and reduced land available for food production per capita
4 Increasing population and reduced land available for food production per capita Almost no increase in farmable land is possible 0.5 10 P opula tion (billion) 0.4 8 Increased standard of H e c ta re s /pe rs on living leads to growing 0.3 6 protein consumption per 0.2 4 person, requiring more grain
Slide 5: Mineral fertilizer essential to sustain future yield increases
5 Mineral fertilizer essential to sustain future yield increases Example: Cereals, global average 4.5 4 Tonnes of cereals per hectare 3.5 • Increased production of 3 mineral fertilizers necessary 2.5 Mineral fertilizer to meet future nutrient demand 2 1.5 • Limited potential of recycling Organic fer
Slide 6: Unique global network, now also including production in Russia and Australia
6 Unique global network, now also including production in Russia and Australia 62 46 15 18 22 Major plant Sales office No. of plants/ “On the ground” in ~50 countries, terminals/ sales to more than 120 countries, warehouses more than 160 plants/terminals/warehouses Date: 2005-09-21- Page: 6
Slide 7: Yara – three business segments with strong synergies
7 Yara – three business segments with strong synergies 2004 IFRS pro forma financials Downstream Global distribution and ammonia-based production Unique global distribution network Sales: USD 4,677 mill Global no. 1 in calcium nitrate and potassium EBITDA: USD 319 mill nitrate specialty fertilizer I
Slide 8: Downstream and Industrial stable platform – Upstream follows fertilizer cycle
8 Downstream and Industrial stable platform – Upstream follows fertilizer cycle EBITDA Downstream + Industrial Upstream USD million USD million 900 900 800 800 700 700 600 600 531 500 422 500 344 358 400 400 320 289 104 300 99 98 300 209 72 141 200 200 245 260 319 100 217 100 0 0 2001 2002 2003 2004
Slide 9: Return on capital for chemical companies
Return on capital for chemical companies Gross return on assets* 2002 2003 2004 Air Products 17.3 Yara** 17.4 BASF 21.7 Yara** 16.4 Agrium 17.4 Yara** 21.4 BASF 15.2 BASF 16.2 Agrium 20.2 K+S 14.4 Air Products 15.2 Air Products 16.6 DuPont 12.7 K+S 13.7 K+S 14.9 Kemira 12.0 Kemira 12.6 PCS 14.1 Syng
Slide 10: Third party volumes supplement own production to maximize capacity utilization
10 Third party volumes supplement own production to maximize capacity utilization Yara produced products is Third party volumes significant for approximately 70% of total nearly all Yara products Million Million tonnes tonnes 8 Third party and JV production 25 Own production incl. bulk blends 20 6 K
Slide 11: Summary second quarter 2005
11 Summary second quarter 2005 Strong financial results Continued tight global fertilizer market Improved European market position for Yara Higher fertilizer prices more than compensated for increased European energy costs Rossosh integration on track Successful refinancing at BBB+ equivalent terms
Slide 12: Earnings per share
12 Earnings per share* NOK 4.50 3.94 4.00 3.50 3.08 2.90 3.00 2.68 2.50 2.35 2.38 2.50 2.00 1.55 1.63 1.31 1.50 1.00 0.50 0.00 2003 2004 2005 Accumulated NOK 6.85 11.90 5.57 * Average number of shares for 2Q 2005: 316.2 million; YTD 316.3 million Date: 2005-09-21- Page: 12
Slide 13: Earnings per share adjusted for foreign exchange gain / (loss)
13 Earnings per share adjusted for foreign exchange gain / (loss)* NOK 3.50 3.31 3.18 3.06 3.00 2.50 2.53 2.46 2.50 2.27 2.00 1.80 1.46 1.50 1.06 1.00 0.50 0.00 2003 2004 2005** Accumulated NOK 6.82 10.31 6.49 * After tax ** Average number of shares outstanding in 2Q 2005: 316.2 million; YTD 316.3 m
Slide 14: Net interest-bearing debt / equity ratio
14 Net interest-bearing debt / equity ratio Per quarter 0.80 0.68 0.70 0.60 0.50 0.44 0.45 0.40 0.37 0.36 0.35 0.30 0.20 0.10 0.00 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 Date: 2005-09-21- Page: 14
Slide 15: China's production of grain has been consistently below consumption since 2000
15 Upstream – China China’s production of grain has been consistently below consumption since 2000 Chinese grain production vs. consumption Chinese grain stocks mill. t mill. t 400 350 380 Consumption 300 250 360 200 340 150 100 320 Production 50 300 0 1994 1996 1998 2000 2002 2004 1995 1997 1999 20
Slide 16: Chinese urea export lower than in 2004
16 Upstream – China Chinese urea export lower than in 2004 due to agri, energy or logistics policy or a combination 4,500 4,000 2004 3,500 3,000 2,500 kt product 2,000 2003 1,500 1,000 2005 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -500 Date: 2005-09-21- Page: 16
Slide 17: China's main focus is on high value cash crops
17 Downstream and Industrial – Value-added China’s main focus is on high value cash crops 000 ha Million ha 0 500 1000 1500 2000 2500 25 Watermelons Vegetables Cabbages 20 Cucumbers Tomatoes 15 Asparagus 1991 Eggplant 2004 Onions 10 Spinach Fruit Garlic 5 Chillies&Pepper Lettuce Carrots 0 Source: FA
Slide 18: Chinese NPK import higher than last two years
18 Downstream – China Chinese NPK import higher than last two years 2,500 2003 2,000 1,500 2004 2005 kt product 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Date: 2005-09-21- Page: 18
Slide 19: Biofuel impact already important and increasing
19 Biofuel impact already important and increasing Global use of maize 2003/04 16% Food 14% Industrial Feed 70% Nearly all industrial use In the US 17% of maize production of maize is for biofuel is now going into ethanol (biofuel) Source: IGC, CBOT Date: 2005-09-21- Page: 19
Slide 20: From ammonia to denox and dry ice
20 From ammonia to denox and dry ice Petrocare Nutriox Tech. nitric acid Cleaning/scrubbing Nitcal Concentrated AdBlue nitric acid Acq. ammonia Dipcal Acrylonitrile glue Reduktan CN ANFO Emulsions Dry ice TAN Nitric acid Laughing gas Urea Applic. LIC Melamine CO2 Ind. gases LIC Wholesale Combined pr
Slide 21: Yara's Air1 AdBlue concept is catching on
21 Downstream and Industrial – Value-added Yara’s Air1™ AdBlue concept is catching on Agreements with truck manufacturers corresponding to 36% of first fill market for new trucks complying with EU regulations from October 2005 Factory filling of trucks Vehicle servicing First sales supplies Over the
Slide 22: Listed gas prices US and Europe
22 Upstream – Energy Listed gas prices US and Europe Yearly averages 1994 – 2004, quarterly averages for 2005 with forward prices after 3Q 2005* USD/MMBtu 14 12 US spot gas 10 (Henry Hub) 8 European spot gas (Zeebrugge Hub) 6 4 Yara’s global 4.2 3.5 3.6 energy cost 3.2 2 (weighted average) 0 95 96 9
Slide 23: Urea price compared to production cost in US Gulf
23 Upstream – Energy Urea price compared to production cost in US Gulf – quarterly averages 400 350 300 Urea fob US Gulf 250 (granular) USD/tonne 200 Cash cost 150 US Gulf* 100 50 0 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q * Future c
Slide 24: New urea capacity growth corresponds to historic average demand growth
24 Upstream – Supply-demand New urea capacity growth corresponds to historic average demand growth Global urea capacity Driving regions growth estimate* China: 61% 2004 2.3% (3.1%) Qatar: 17% China: 51% 2005 2.8% (3.4%) Oman: 21% China: 53% 2006 5.4% (4.4%) Iran: 20% Egypt: 31% 2007 3.1% (3.5%) Chin
Slide 25: Grain consumption in 2005 expected to outpace production
25 Upstream – Supply-demand Grain consumption in 2005 expected to outpace production Grain consumption again expected … leading to decline in to exceed production in 2005 … global grain inventories mill. t mill. t 2100 800 2050 700 Global grain inventory 2000 600 Consumption 1950 500 1900 400 1850 3
Slide 26: Recent strategic growth investments improve Yara's competitiveness
26 Recent strategic growth investments improve Yara’s competitiveness Investments Low-cost gas High growth market Increased ownership in SQM, Chile N/A Yes 30% equity stake in Rossosh, Russia Yes Yes 30% equity stake in Burrup, Australia Yes Yes Letter of intent for Qafco-5 Yes Yes Date: 2005-09-21-
Slide 27: Prospects full year 2005
27 Prospects full year 2005 Food and Agriculture Organization of the UN expects global grain production to decline in 2005-2006, potentially leading to lower grain inventories, supporting fertilizer demand High forward price for US gas could support prices for ammonia and urea should a weakening of
Slide 28: Additional information
XG YARA Additional information
Slide 29: The basis for mineral fertilizer: Energy, ammonia and natural minerals
29 The basis for mineral fertilizer: Energy, ammonia and natural minerals Nitrogen (N) from air Finished products: Ammonia Urea UAN Nitrates (CAN, AN) Natural NPK gas Specialty fertilizers Industrial products Natural minerals: Phosphorus (P) Potassium (K) Date: 2005-09-21- Page: 29
Slide 30: Key value drivers – 10-year history
30 Key value drivers – 10-year history Ammonia fob Caribbien (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 200 187 181 180 167 163 175 165 251 180 160 146 250 160 139 197 185 203 140 124 119 140 117 110 111 200 120 103 160 120 101 96 148 137 94 100 86 150 100 84 117 110 80 9
Slide 31: 10-year grain/oilseed prices – yearly averages
31 10-year grain/oilseed prices – yearly averages Quarterly averages for 2005 Wheat (HRW US Gulf) Rice (Thailand) USD/tonne USD/tonne 220 350 200 300 180 160 250 140 200 120 100 150 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Q1 Q2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Q1 Q2 Maize
Slide 32: Average Net cash from operating activities higher than Capital expenditures
32 Average Net cash from operating activities higher than Capital expenditures Average annual Capex vs Net cash from operating activities 2001 - 2004 4000 3,100 3000 NOK million 2000 1,400 Major upgrading and growth 1000 Continuity investments 0 Capital expenditures Net cash from operating activitie
Slide 33: Yara cash distribution policy: 40 – 45% cash return over the cycle
33 Yara cash distribution policy: 40 – 45% cash return over the cycle Yara’s average profitability and return on capital is well above investors’ cost of capital Cash distribution must be balanced against opportunities for profitable growth Financial discipline will be the basis for the development
Slide 34: Yara annual sensitivities
34 Yara annual sensitivities* EBITDA EBITDA EPS** USD million NOK million* NOK CAN + 10 USD/t 63.1 410 0.90 Urea + 10 USD/t 26.2 170 0.40 Ammonia + 10 USD/t 4.6 30 0.09 Oil price + 1 USD/boe - 15.4 - 100 - 0.22 Currency + 0.1 NOK/USD at an 5.7 105 0.25 EBITDA of USD 680 million ... of which Translat
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