Yara International Asa · OSL:YAR
Yara International Asa — Q1 2005 Earnings Presentation
52 slides from Yara International Asa's earnings presentation, May 6, 2005
Slide 1: Yara International ASA First quarter results
Yara International ASA First quarter results 6 May 2005 IR – Date: 2005-05-06
Slide 2: Summary first quarter 2005
2 Summary first quarter 2005 z Strong financial results z High fertilizer demand and tight global market z European market volume reduced, but Yara improved market position z Important steps in growth strategy z IFRS from 2004: Effects relatively small IR – Date: 2005-05-06
Slide 3: Net income after minority interest
3 Net income after minority interest NOK million 1,400 1,251 1,200 985 917 1,000 800 751 759 800 496 521 600 420 400 200 0 2003 2004 2005 Accumulated NOK mill 2,188 3,794 917 USD mill 311 564 146 IR – Date: 2005-05-06
Slide 4: Net income after minority interest adjusted for foreign exchange gain / (loss)
4 Net income after minority interest adjusted for foreign exchange gain / (loss)* NOK million 1,200 1,047 972 1,000 798 784 808 800 724 574 600 467 340 400 200 0 2003 2004 2005 Accumulated NOK mill 2,178 3,288 1,047 USD mill 309 489 167 * After tax IR – Date: 2005-05-06
Slide 5: Earnings per share
5 Earnings per share* NOK 4.50 3.94 4.00 3.50 3.08 2.90 3.00 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 2.90 * Average number of shares for 1Q 2005: 316.4 million IR – Date: 2005-05-06
Slide 6: Earnings per share adjusted for foreign exchange gain / (loss)
6 Earnings per share adjusted for foreign exchange gain / (loss)* NOK 3.50 3.31 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 3.31 * After tax ** Average number of shares outstanding in 1Q 2005: 316.4 million IR – Date: 2005-05
Slide 7: Net interest-bearing debt / equity ratio
7 Net interest-bearing debt / equity ratio Per quarter 0.80 0.68 0.70 0.60 0.50 0.44 0.45 0.37 0.36 0.40 0.30 0.20 0.10 0.00 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 IR – Date: 2005-05-06
Slide 8: Overall fertilizer market development
8 Overall fertilizer market development z Global fertilizer demand continued the strong growth z West European fertilizer volumes lower than first quarter 2004, mainly at the expense of imports, while local producers gained market share z Chinese exports significantly curtailed, primarily due to exp
Slide 9: Fertilizer price development during quarter
9 Fertilizer price development during quarter z Urea prices were stable in January and February, but has since then increased substantially. Strong demand around the world, combined with reduced Chinese export, has created a very tight market z Ammonia prices increased as the quarter progressed, aft
Slide 10: Listed gas prices US and Europe
10 Listed gas prices US and Europe Yearly averages 1994 – 2004, quarterly averages for 2005 with forward prices 2Q – 4Q 2005* USD/MMBtu 9 8 7 US spot gas price 6 (Henry Hub) European spot gas price 5 (Zeebrugge Hub) 4 Yara’s global 3.5 3.6 energy cost 3 3.2 (weighted average) 2 1 0 1995 1996 1997 19
Slide 11: Urea price compared to production cost in US Gulf
11 Urea price compared to production cost in US Gulf – quarterly averages 300 250 Urea fob US Gulf (granular) 200 Cash cost USD/tonne US Gulf* 150 100 50 0 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q * Future cash costs base
Slide 12: Strong organic growth in differentiated products
12 Strong organic growth in differentiated products Industrial Specialty fertilizer sales environmental applications USD Thousand million tonnes 900 500 458 773 450 433 750 394 646 400 600 533 350 300 450 250 200 300 150 150 100 50 0 0 2002 2003 2004 2002 2003 2004 IR – Date: 2005-05-06
Slide 13: In addition to organic growth, Yara seeks several types of step growth
13 In addition to organic growth, Yara seeks several types of step growth z Fertilizer and Industrial market growth z Upstream production based on low cost gas z Consolidation adding scale and synergies IR – Date: 2005-05-06
Slide 14: Recent strategic growth investments for the fertilizer market of the future
14 Recent strategic growth investments* for the fertilizer market of the future z Increased ownership in SQM, Chile z Letter of intent for Qafco-5, Qatar z Acquisition of minority stake in Rossosh, Russia z Acquisition of minority stake in Burrup, Australia Investments improve competitiveness of bot
Slide 15: Burrup – Acquisition of minority stake in world's largest ammonia plant
15 Burrup – Acquisition of minority stake in world’s largest ammonia plant under construction • Acquisition of 30% of Australian company Burrup Holdings • World’s largest single ammonia plant at 760,000 tonnes per year • Competitively priced stranded gas favorably located close to core Asian markets
Slide 16: IFRS introduced from this quarter
16 IFRS introduced from this quarter z All accounting figures since 1 Jan 2004 have been restated to IFRS (International Financial Reporting Standards), earlier figures are according to Norwegian GAAP z Most important changes are Balance sheet now includes real value of pension obligations Major
Slide 17: Earnings before interest, tax, depreciation and amortization (EBITDA)
17 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK million 2,000 1,866 1,800 1,582 1,565 1,600 1,456 1,484 1,477 1,400 1,206 1,200 1,062 947 1,000 800 600 400 200 0 2003 2004 2005 Accumulated NOK mill 4,671 6,108 1,866 USD mill 664 909 297 IR – Date: 2005-05-06
Slide 18: Income statement
18 Income statement NOK million 1Q 2005 1Q 2004 Operating revenues 10,943 10,897 Operating income 1,271 1,049 Share of net income in non-consolidated investees 214 142 Interest income and other financial income 43 30 Interest expense and net foreign exchange gain / (loss) (304) 155 Income before tax
Slide 19: Net interest bearing debt first quarter 2005
19 Net interest bearing debt first quarter 2005 NOK million 8,000 7,584 7,000 6,000 5,000 188 302 4,399 4,199 1,441 257 273 1,167 4,000 3,000 2,000 1,000 0 Net Interest Net Interest Earnings* Net Operating Investments Dividends Foreign Other Net Interest Bearing Debt Bearing Debt Capital Received**
Slide 20: EBITDA and operating income
20 EBITDA and operating income Individual operating segments EBITDA (NOK million) 1Q 2005 1Q 2004 Upstream 1,004 961 Downstream 665 566 Industrial 207 164 Other and eliminations (9) (109) Yara total 1,866 1,582 Operating income (NOK million) 1Q 2005 1Q 2004 Upstream 627 653 Downstream 512 396 Indust
Slide 21: Variance analysis Yara group
21 Variance analysis Yara group NOK million USD million* EBITDA first quarter 2005 - actual 1,866 297 EBITDA first quarter 2004 - pro forma 1,582 229 Variance EBITDA in NOK 284 - Currency conversion NOK vs. USD 145 - Variance EBITDA 429 68 Volume (31) (5) Price/margin 435 69 Effect of long position
Slide 22: Downstream – first quarter
22 Downstream – first quarter z Strong financial results z Improved margins beyond effect of temporary drop in price of ammonia (ammonia is a raw material for Downstream production) z Reduced volumes in Europe primarily due to cold weather, but Yara gained market share at the expense of imports z Ne
Slide 23: Downstream – EBITDA
23 Downstream – EBITDA NOK million 700 665 595 573 600 566 566 526 477 500 400 370 301 300 200 100 0 2003 2004 2005 Accumulated NOK mill 1,833 2,142 665 USD mill 260 319 106 IR – Date: 2005-05-06
Slide 24: Downstream – Sales volume fertilizer
24 Downstream – Sales volume fertilizer Europe Outside Europe Thousand tonnes 5,305 5,029 5,114 4,956 4,934 4,996 4,807 4,742 5,000 2,175 2,871 2,498 4,726 2,775 2,195 2,564 2,664 2,171 2,094 4,000 3,000 3,130 2,762 2,648 2,616 2,555 2,370 2,332 2,000 2,032 2,158 1,000 0 2003 2004 2005 Accumulated F
Slide 25: Downstream – Net operating capital turnover
25 Downstream – Net operating capital turnover* External operating revenues / External net operating capital 6 5 4.7 4.6 4.6 4.6 4.6 4.5 4.2 4.3 4.3 4 3 2 1 0 2003 2004 2005 * 12-month rolling average IR – Date: 2005-05-06
Slide 26: Downstream – Variance analysis
26 Downstream – Variance analysis First quarter NOK million USD million* USD/tonne** EBITDA 2005 - actual 665 106 22 EBITDA 2004 - pro forma 566 82 17 Variance EBITDA in NOK 99 Conversion (NOK vs. USD) 52 Variance EBITDA 151 24 5 Volume (88) (14) (3) Margin 232 37 8 Divestments 35 6 1 Other (29) (5)
Slide 27: Industrial – first quarter
27 Industrial – first quarter z Strong financial results z Improved prices and margins for technical nitrates z Improved margins also on N-chemicals due to temporary drop in ammonia price IR – Date: 2005-05-06
Slide 28: Industrial – EBITDA
28 Industrial – EBITDA NOK million 250 211 207 201 200 170 164 165 161 156 156 150 100 50 0 2003 2004 2005 Accumulated NOK mill 688 696 207 USD mill 98 104 33 IR – Date: 2005-05-06
Slide 29: Industrial – Variance analysis
29 Industrial – Variance analysis First quarter USD NOK million million* EBITDA first quarter 2005 - actual 207 33 EBITDA first quarter 2004 - pro forma 164 24 Variance EBITDA in NOK 42 Conversion (NOK vs. USD) 15 Variance EBITDA 57 9 Volume (10) (2) Margin 74 12 Other (8) (1) Total variance explain
Slide 30: Upstream – First quarter
30 Upstream – First quarter z Strong financial results z Increased energy cost and weaker dollar roughly compensated by development in fertilizer prices While urea and nitrate prices increased, the average ammonia price dropped relative to same period last year z Positive effect of net long ammoni
Slide 31: Upstream – EBITDA
31 Upstream – EBITDA NOK million 1,200 1,004 961 965 1,000 925 910 800 738 564 600 412 400 348 200 0 2003 2004 2005 Accumulated NOK mill 2,249 3,573 1,004 USD mill 320 531 160 IR – Date: 2005-05-06
Slide 32: Upstream – Production volume
32 Upstream – Production volume* Thousand tonnes Ammonia Finished fertilizer 3,500 3,134 3,180 3,087 3,100 2,990 3,011 2,976 2,903 3,000 1,815 1,834 1,866 1,965 1,771 2,656 1,760 1,786 1,763 2,500 1,509 2,000 1,500 1,219 1,272 1,251 1,266 1,268 1,215 1,000 1,147 1,140 1,190 500 0 2003 2004 2005 Accu
Slide 33: Upstream – Variance analysis
33 Upstream – Variance analysis First quarter NOK million USD million* USD/tonne** EBITDA 2005 - actual 1,004 160 50 EBITDA 2004 – pro forma 961 139 44 Variance EBITDA in NOK 43 Conversion (NOK vs. USD) 88 Variance EBITDA 131 21 6 Volume 67 11 3 Price/Margin 145 23 7 Effect of long position 118 19 6
Slide 34: Fuel oil price has increased and is currently above historical regression line
34 Fuel oil price has increased and is currently above historical regression line with crude oil Historically good correlation between Higher fuel oil prices more in line with fuel oil and crude oil prices crude oil during first quarter 2005 Apr 2005 250 y = 3.68x + 36.62 300 60 R2 = 0.83 Nov 2004 D
Slide 35: Forward prices for LSFO in 2005 are flat, but change rapidly
35 Forward prices for LSFO in 2005 are flat, but change rapidly USD per tonne 300 Actual Price Forward 18 Feb 05 Forward 08 Apr 05 Forward 29 April 05 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Platts (LSFO 1% barges fob Rotterdam) IR – Date: 2005-05-06
Slide 36: Fuel oil prices important for Yara's 2005 energy costs
Fuel oil prices important for Yara’s 2005 energy costs* NOK million 1,400 ~1,200 Cost increase 2005 over 2004 1,200 4Q ~1,000 1,000 3Q 500 2Q 800 400 1Q 600 ~500 350 140 300 400 130 200 220 200 130 100 100 100 0 Based on forward Based on forward Based on forward market 18 Feb market 8 April market 2
Slide 37: Grain production 2005 expected to be high, but substantially lower than in 2004
37 Grain production 2005 expected to be high, but substantially lower than in 2004 Grain production … but decline in grain stocks in exceeding consumption in 2004… two of the world’s most populous mill. t mill. t countries continues 2100 800 2050 700 Global grain inventory 2000 600 Consumption 1950
Slide 38: Expected urea capacity growth estimates updated
38 Expected urea capacity growth estimates updated 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%) China: 31% Oman: 29% 2008 2.0% (new) China: 23% Aver
Slide 39: Prospects second quarter 2005
39 Prospects second quarter 2005 z Fertilizer prices currently at a higher level than second quarter 2004 z Strong demand in Asia supporting global supply-demand balance z Chinese export tax should positively support supply-demand balance z Yara’s European energy costs expected to be approximately N
Slide 40: Prospects full year 2005
40 Prospects full year 2005 z Food and Agriculture Organization of the UN expects global grain production to decline in 2005-2006, potentially leading to lower grain inventories z High forward price for US gas indicates continued high floor prices for ammonia and urea if a weakening of the supply-de
Slide 41: Additional information
4 YARA Additional information j Ai ¥ eee
Slide 42: Pro forma vs. actual financial figures
42 Pro forma vs. actual financial figures z All financial information up to the demerger (25 March 2004) and full year 2004 figures are pro forma z Figures after 25 March 2004 are actual z Pro forma figures have adjustments that illustrate the situation as if Yara were a stand-alone company prior to
Slide 43: Rossosh – Acquisition of minority stake in Russian fertilizer plant
43 Rossosh – Acquisition of minority stake in Russian fertilizer plant • Acquisition of 30% of stock, technology transfer and coordinated production, logistics and marketing of NPK • Production based on Yara’s own technology • Competitively priced energy and dry raw materials • Yara will initially m
Slide 44: Qafco-5 – Gas contract and Letter Of Intent
44 Qafco-5 – Gas contract and Letter Of Intent • Additional growth for what is already the world’s largest fertilizer producing site • Qafco-5: 1 million tonnes of ammonia and 1.1 million tonnes of urea • 25-year gas contract securing competitive long-term energy supply • Final decision expected in
Slide 45: SQM – Increased Yara ownership position
45 SQM – Increased Yara ownership position • Yara has had successful joint marketing of specialty fertilizer products with SQM since 2001 and ownership position since 2002 • Yara and partners increased ownership from 20.8% to 24.9% from December to January matching holding of other main owner • Incr
Slide 46: Key value drivers – quarterly averages
46 Key value drivers – quarterly averages Ammonia fob Caribbean (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 350 250 250 292 210 211 300 261 198 201 256 200 200 185 230 175 250 159 196 143 150 200 150 137 150 150 100 100 100 50 50 50 0 0 0 1Q 04 2Q 04 3Q 04 4Q 04 1Q05 1Q 04 2Q
Slide 47: Key value drivers – 10-year history
47 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 48: 10-year fertilizer prices – monthly averages
48 10-year fertilizer prices – monthly averages Ammonia fob Caribbean USD/tonne 300 250 200 150 100 CAN cif Germany USD/tonne 50 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 150 100 Urea prilled fob Black Sea 50 USD/tonne 300 0 250 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20
Slide 49: 10-year grain/oilseed prices – yearly averages
49 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 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Q1 Maize (US Gu
Slide 50: Share of net income in non-consolidated investees
50 Share of net income in non-consolidated investees 1Q 2005 1Q 2004 NOK million Actual Pro forma Qafco 171 73 Tringen 29 52 Other 13 17 Total 214 142 IR – Date: 2005-05-06
Slide 51: Consolidated balance sheets
51 Consolidated balance sheets NOK million 31 Mar 2005 31 Mar 2004 Deferred tax assets 1,364 1,172 Property, plant and equipment 7,300 7,606 Other non-current assets 3,612 3,173 Inventories 5,631 5,110 Receivables 7,357 7,677 Other current assets 1,590 1,187 Cash and cash equivalents 1,627 1,501 Tot
Slide 52: Definition of EBITDA and CROGI
52 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