Yara International Asa · OSL:YAR
Yara International Asa — Debt Investor Presentation (December 2014)
49 slides from Yara International Asa's debt investor presentation, Dec 8, 2014
Slide 1: Yara International ASA Company Presentation
Yara International ASA Company Presentation 8-9 December 2014
Slide 2: Agenda
Agenda Group overview Market fundamentals Business strategy Financial policy and funding Appendix Page 2
Slide 3: Yara at a glance
Group overview Yara at a glance Established as Norsk Hydro in 1905, demerged as Yara International ASA in 2004 Number of employees 23.7 million tons Revenues and other > 10 000 Fertilizer income (2013) Operations in more than 3.2 million tons NOK 85.1 50 countries Industrial products Billion Sales t
Slide 4: Strong cash flow in 2014
Group overview Strong cash flow in 2014 NOK bn. 4.9 0.6 0.3 3.3 2.8 0.2 8.4 5.2 1.9 1.0 NIBD Cash Dividends Net Investments Share buy- Yara Currency Other NIBD end 2013 earnings from EAI operating backs and dividend gain/(loss) Q3 2014 capital redemption change Page 4
Slide 5: Yara – the leader in ammonia and value-added nitrogen fertilizers
Group overview Yara – the leader in ammonia and value-added nitrogen fertilizers Grain Global no 1 in ammonia Grain Global no 1 in nitrates Global no 1 in NPK (complex fertilizer) Production capacitities1 (mill. tonnes) 9 7 8 8 7 6 7 6 5 6 5 5 4 4 4 3 3 3 2 2 2 1 1 1 0 0 0 Yara CF GDF Agrium PCS Yar
Slide 6: Yara operates an integrated business model with leading positions globally
Group overview Yara operates an integrated business model with leading positions globally Downstream Upstream Industrial Supply & Trade Scale advantages + Unique flexibility + Unrivalled presence Page 6
Slide 7: Resilience in earnings through upgrade of commodity products
Group overview Resilience in earnings through upgrade of commodity products Contribution margin NOK mill. 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 Commodity Upgrade & distribution + trade Page 7
Slide 8: Strong returns and solid balance sheet through the cycle
Group overview Strong returns and solid balance sheet through the cycle CROGI1 (12 months rolling average) 25% 20% 15% 10% 5% 0% 2004 05 06 07 08 09 10 11 12 13 L4Q Ex special items Long-term target 1) Cash Return on Gross Investment= (EBITDA-tax)/Gross accumulated investments 2) Net interest bearin
Slide 9: Scale and flexibility in production
Group overview Scale and flexibility in production Upstream Downstream Industrial Upstream Downstream Industrial Yara plant JV plant Belle Plaine Glomfjord Kokkola Silinjärvi Uusikaupunki Porsgrunn Köping Cartagena Billingham Trinidad Brunsbüttel Ince Hull Rostock Le Havre Sluiskil Montoir Tertre An
Slide 10: Yara's high ammonia and cost flexibility gives downside protection
Group overview Yara’s high ammonia and cost Upstream Downstream Industrial flexibility gives downside protection Upstream Downstream Industrial Total cost base1 L4Q, NOK Bn High ammonia flexibility mill. tonnes 72 Fixed 7 3.6 5.2 Variable 65 1.6 1.3 Urea Land-locked nitrates 0.3 L4Q European Flexibl
Slide 11: Scale and flexibility in downstream operations
Group overview Scale and flexibility in downstream Upstream Downstream Industrial operations Upstream Downstream Industrial Sales volumes 2013 Bunge (Brazil): • Sales to ~150 – Blending & distribution countries 43% business, closed 3Q13 • 24 mill. tonnes globally – USD 50 million annual synergies
Slide 12: Crop knowledge and end user interaction are key to Downstream strategy
Group overview Crop knowledge and end user inter- Upstream Downstream Industrial action are key to Downstream strategy Upstream Downstream Industrial Yara crop nutrition program significantly …providing higher returns for improves results compared with traditional farmer Vietnam coffee growers and Y
Slide 13: Downstream has delivered stable nitrate and NPK premiums
Group overview Downstream has delivered stable Upstream Downstream Industrial nitrate and NPK premiums Upstream Downstream Industrial European nitrate premium1 NPK premium above blend2 USD/t CAN USD/t 160 700 140 600 120 500 NPK price 100 400 Weighted average global premium above blend cost 80 300 N
Slide 14: Industrial segment mitigates cyclicality and seasonality
Group overview Industrial segment mitigates cyclicality Upstream Downstream Industrial and seasonality Upstream Downstream Industrial Sales (2013) Business unit Key products kilo tonnes NOK bn. Multiple chemical applications for N-Chemicals healthcare, food, pharmaceutical, car ~3,200 6.7 industries
Slide 15: Industrial has delivered solid growth
Group overview Upstream Downstream Industrial Industrial has delivered solid growth Upstream Downstream Industrial Sales volumes EBITDA (excl. special items) mill. tonnes NOK mill. 6.5 6.3 +7.3%1 1,384 +7.1%1 5.7 1,248 5.5 5.2 4.7 4.6 1,059 1,065 1,068 1,003 3.9 854 3.8 3.5 744 770 3.3 685 639 2004
Slide 16: Agenda
Agenda Group overview Market fundamentals Business strategy Financial policy and funding Appendix Page 16
Slide 17: Global megatrends profoundly impact Yara's businesses
Market fundamentals Global megatrends profoundly impact Yara’s businesses Global growth Urbanization Climate change Globalization Resource scarcity Page 17
Slide 18: Robust consumption growth provides basis for food price growth
Market fundamentals Robust consumption growth provides basis for food price growth Grain consumption FAO price index (2002-2004=100) mill. tonnes 240 2,500 220 200 +2.7% 2,000 180 +2.1% 160 1,500 140 120 100 1,000 80 60 500 40 20 0 0 1960 65 70 75 80 85 90 95 00 05 10 2014 1990 1995 2000 2005 2010 2
Slide 19: The World depends on Chinese exports
Market fundamentals The World depends on Chinese exports World urea trade (mill. tonnes) 44.8 43.0 40.5 39.3 18.4% 16.1% China 17.4% 10.3% 89.7% 83.9% 81.6% RoW 82.6% 2010 2011 2012 2013 Page 19
Slide 20: Projected nitrogen capacity additions outside China lower than trend consumption growth
Market fundamentals Projected nitrogen capacity additions outside China lower than trend consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Algeria 2014 1.5% Egypt Saudi Arabia 2015 2.1% USA USA 2016 2.3% India Nigeria 2017 2.2%
Slide 21: China sets the floor on Urea pricing
Market fundamentals China sets the floor on Urea pricing USD/mt Urea fob Black Sea Urea price China (inland proxy price) 600 500 400 300 200 100 0 Source: China Fertilizer Market Week, International publications Page 21
Slide 22: Chinese urea: stable production despite significant capacity increase
Market fundamentals Chinese urea: stable production despite significant capacity increase Chinese production Chinese exports Black Sea mill. tonnes mill. tonnes USD/t 7,0 2,00 550 12/13 Jul-Oct 5.5 mt 14/15 (5.2 mt Jul-Oct last year) 13/14 500 1,75 6,0 Year-to-date 9.6 mt 450 (6.5 mt year-to-date la
Slide 23: Market risk factors
Market fundamentals Market risk factors Upside risks • Crop failure / increased food prices • Increased global LNG trade / lower European natural gas prices • China: increased emphasis on energy efficiency and/or emissions, increased cost of capital, increased export tariffs, increase in anthracite
Slide 24: Agenda
Agenda Group overview Market fundamentals Business strategy Financial policy and funding Appendix Page 24
Slide 25: Key focus areas
Business strategy Key focus areas Operational Excellence – Safety first - non-negotiable – Reliability is the best productivity investment Knowledge Margin – Drive fertilizer and industrial product portfolio towards greater product differentiation and higher margin segments Global Scale and Optimiza
Slide 26: Yara is well-positioned to grow profitably
Business strategy Yara is well-positioned to grow profitably Size and diversity - World’s largest nitrogen fertilizer producer - Diversified business portfolio - Unique economies of scale providing large synergies Solid financial profile - Strong performance and balance sheet Risk management - Well-
Slide 27: Multiple growth options; de-bottlenecking and regional M&A currently most attractive
Business strategy Multiple growth options; de-bottlenecking and regional M&A currently most attractive Reconfiguration/expansion at existing sites, potential for 1 increased NPKs, nitrates and CN Pursue medium-size/regional M&A, likely highest probability 2 of success in current environment Secure l
Slide 28: Value-added expansions in the Nordics to meet increasing demand
Business strategy Value-added expansions in the Nordics to meet increasing demand Norway Sweden Finland • 250 kt NPK and Calcium Nitrate • Nitric acid upgrade and expansion • 250 kt NPK expansion In (CN) expansion in Porsgrunn in Køping Uusikaupunki, Finland - Enables further 185 kt • Strong long-te
Slide 29: Being a major player in Brazil is of strategic importance to Yara
Business strategy Being a major player in Brazil is of strategic importance to Yara Size Potential Fertilizer growth Brazil already is one of the most important Brazil has by far the greatest reserve of Brazilian fertilizer demand is expected to agricultural producers potential arable land grow at >
Slide 30: Yara has gained a solid position in the fast-growing Latin American market
Business strategy Yara has gained a solid position in the Acquisition fast-growing Latin American market MUSD cost (EV) Bunge OFD Galvani August 2013 October 2014 December 2014 750 377 3181 • Brazil’s largest • Value-add fertilizer • Three phosphate downstream company production, significant mining
Slide 31: Potential joint investment in world-scale ammonia plant on US Gulf coast
Business strategy Potential joint investment in world-scale 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 integrat
Slide 32: Agenda
Agenda Group overview Market fundamentals Business strategy Financial policy and funding Appendix Page 32
Slide 33: Financial Policy and Targets
Financial policy and funding Financial Policy and Targets “Track-record of proactive management of its credit Baa2 stable by Moody’s reflecting financial profile in step with the development of the underlying Commitment to flexibility market” - Moody’s, July 2014 BBB/Baa2 rating BBB positive out
Slide 34: Debt overview per 3Q 2014
Financial policy and funding Debt overview per 3Q 20141 Debt maturity profile Available at year end2 NOK bn. 19.3 Maturity on utilized 13.8 12.1 12.0 11.6 10.0 3.3 3.3 1.7 0.1 0.1 0.1 0.5 Gross interest- 2014 2015 2016 2017 2018 >2019 bearing debt Sep 2014 Secured vs unsecured debt3 Bonds vs Bank de
Slide 35: Thank you
Thank you co YARA Knowledge grows Page 35
Slide 36: Agenda
Agenda Group overview Market fundamentals Business strategy Financial policy and funding Appendix Page 36
Slide 37: A global business with a balanced product portfolio
Appendix A global business with a balanced product portfolio Revenue FY 2013 5% EU & Other Europe 13 % Latin America 42 % North America 14 % Asia & Australasia 26 % Africa Fertilizer volumes YTD1 2014 5% EU & Other Europe 8% 13 % Latin America 38 % North America Asia & Australasia 36 % Africa Brazil
Slide 38: Three leading global businesses
Appendix Three leading global businesses Upstream Downstream Industrials Supply & Trade Upstream Downstream Industrial Backbone of manufacturing Complete fertilizer portfolio Innovative solutions based Global optimization of system. on ammonia production and energy and raw material Knowled
Slide 39: Upstream-overview
Appendix Upstream-overview Key financials Highlights World’s largest producer of ammonia, nitrates and NPKs, with (NOK million) YTD1 2014 YTD1 2013 Change FY2013 production in 15 countries; providing foundation for Yara’s Fertilizer and Industrial solutions Revenue 29,027 30,540 -5.0% 39,495 35%
Slide 40: Downstream - overview
Appendix Downstream - overview Key financials Highlights Global leading supplier of crop nutrition, with sales in more than 120 (NOK million) YTD1 2014 YTD1 2013 Change FY2013 countries Revenue 53,570 48,392 10.7% 63,860 Global #1 in specialty fertiliser targeting high margin cash crop segments
Slide 41: Industrial - overview
Appendix Industrial - overview Key financials Highlights Leading position in nitrogen applications in non-agricultural markets (NOK million) YTD1 2014 YTD1 2013 Change FY2013 – mainly environmental solutions and nitrogen oxide abatement Revenue 10,800 10,319 4.7% 13,864 World #1 producer of AdBl
Slide 42: Supply & Trade – global optimization
Appendix Supply & Trade – global optimization Biggest industrial buyer of Third single biggest buyer of Significant market natural gas in Europe P&K globally share on trade Gas consumption, MMBtu 2012 raw material purchases (mt) 2012 annual trade volumes (mt) 185 5.3 21.3 43 115 3.0 2.8 19 11 25 3.3
Slide 43: Leading global position in ammonia trade
Appendix Leading global position in ammonia trade Europe 6.1 4.9 5.1 • Yara-operated ammonia fleet unrivalled giving scale and Available Demand flexibility Americas 2.5 Middle East / Africa 2.3 Asia • Operate 18 ships 1.5 1.1 0.7 Available Demand Available Demand • Total shipping capacity of ~260 Av
Slide 44: Yara – Upstream capacities
Appendix Yara – Upstream capacities Annual production capacity1) Ammonia Nitric Acid Phos. Acid3) Phos. rock SSP Urea Nitrates NPK CN UAN Sluiskil Netherlands 1,8 1,5 1,2 1,9 0,6 Brunsbuttel Germany 0,7 0,6 Porsgrunn Norway 0,5 1,5 2,1 0,8 Ferrara Italy 0,6 0,5 Le Havre France 0,4 0,3 Yara Trinidad
Slide 45: Reduced exposure to oil and European gas
Appendix Reduced exposure to oil and European gas Yara’s geographic energy exposure Yara’s feed-stock contract structure Europe 100% NAT GAS 90% 15% 80% 25% 70% 60% 90% 80% 50% 70% 65% 55% 40% 30% 20% -10% -20% -20% -20% 10% -30% 0% NON 2006 2007 2008 2009 2012 2006 2009 2010 2012 2013 GAS Europe RO
Slide 46: Gas & oil cost
Appendix Gas & oil cost Yearly averages 2009–2010, quarterly averages for 2011–15 with forward prices1 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
Slide 47: Cash return policy 40-45% of net income, minimum 30% dividend
Appendix Cash return policy 40-45% of net income, minimum 30% dividend 37% 28% Overall target including buy-backs 40-45% 10% 3% Minimum 30% dividend 34% 34% 10% 7% 9% 11% 25% 23% 19% 3% 18% 18% 16% 17% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Numbers reflect cash returns executed in a calendar y
Slide 48: Solid financial position
Appendix Solid financial position Debt/equity1 Q1 Q2 Q3 Q4 0.49 0.38 Maintaining BBB credit 0.32 0.27 0.22 rating is key to growth 0.20 0.12 0.08 financing ability 0.12 0.06 0.06 0.07 0.06 0.06 0.08 0.02 0.05 0.01 Ability to execute -0.04 medium-size M&A 2010 2011 2012 2013 2014 Ability to exe
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C(( moans! YARA Knowledge grows Page 49
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