Yara International Asa · OSL:YAR
Yara International Asa — Investor Day (February 2018)
55 slides from Yara International Asa's investor day presentation, Feb 8, 2018
Slide 1: Capital Markets Day and 4Q 2017 results
Yara International ASA Capital Markets Day and 4Q 2017 results Thursday 8 February 2018
Slide 2: Safety is our first priority
Safety is our first priority Safety is our license to operate, and our first responsibility as a company, to make sure our employees work safely and return home safely, every day. Despite significant growth in recent years, acquiring several new businesses and now employing more than 16,000 employee
Slide 3: Summary fourth quarter EBITDA development
Summary fourth quarter EBITDA development: improved margins offset higher energy cost and weaker US dollar Yara’s underlying earnings per share were 2.3 NOK higher than a year earlier, and the increase mainly reflects EBITDA excluding special items was 15% higher compared with fourth quarter 2016, a
Slide 4: Our leading global footprint and differentiated product portfolio set us apart
Our leading global footprint and differentiated product portfolio set us apart Yara’s margins are influenced by the supply / demand situations for crops, commodity fertilizer and premium fertilizer Yara is an integrated crop nutrition company with an industrial portfolio. Our global fertilizer marke
Slide 5: Steady growth in grain consumption, but grain prices are below the 5-year average
Steady growth in grain consumption, but grain prices are below the 5-year average Global grain stocks are stable, leaving weather as a key driver of grain price development Global grain production is forecasted to be the second strongest on record for the current season, 2017/18. Excluding China, gl
Slide 6: Urea gaining market share in the nitrogen product mix
Urea gaining market share in the nitrogen product mix Apparent consumption outside China increased by 2.6% in 2016, Global supply grew more, compensated by lower Chinese export 2016 was a relatively slow year for global apparent nitrogen consumption (excluding China), growth of 0.7% comparing to a 1
Slide 7: The surge of new capacity is past its peak
The surge of new capacity is past its peak ~2/3 of the world’s ammonia capacity is more than 30 years old We support the view by CRU that actual supply increase for 2017 was considerably lower than for 2016, and If well maintained, plants last a long time, some are in addition revamped and upgraded.
Slide 8: Growth in global urea production driven by new plants
Growth in global urea production driven by new plants; output from existing plants has fallen Higher domestic price and lower exports from China are offsetting oversupply elsewhere Over the 2010-2016 period, 0.8% annual increase in new production was needed to offset declines From mid 2016, urea pri
Slide 9: Unclear if supply is sufficient to cover Chinese urea demand this season
Unclear if supply is sufficient to cover Chinese urea demand this season Premium product margins typically contain both commodity and premium elements On a season over season comparison, supply may look ok, as domestic supply is still up 3% by end December, Premium products are key in Yara’s portfol
Slide 10: Improving agricultural productivity is fundamental to achieve the SDGs
Improving agricultural productivity is fundamental to achieve the SDGs: Yara is uniquely positioned to contribute Agriculture accounts for ~25% of the world’s greenhouse gas emissions, and more than 50% of this results from land use change. Improving productivity of the land already converted to foo
Slide 11: Sustainability represents a huge business opportunity
Sustainability represents a huge business opportunity Yara believes that a positive contribution to the society is a pre-requisite to succeed over time Last year’s report from the Business Sustainability Development Commission laid out the potential within For Yara, there is no trade-off between wha
Slide 12: Sustainability has long been integrated in Yara's way of working
Sustainability has long been integrated in Yara’s way of working Yara is investing in solutions for NOx abatement in transportation Urea and Ammonia are used as reagent for NOx abatement in road transport (AdBlue), maritime transport Yara has already done a lot to reduce the emissions both from our
Slide 13: Our strategy and targets are guided by our mission and vision
Our strategy and targets are guided by our mission and vision Yara’s solutions improve food production per hectare, delivered through products with lower emissions per ton Yara has shaped our mission and vision to underline that sustainability is an integrated in Yara’s way of working. For Yara, inc
Slide 14: Yara takes a holistic view of the climate impact of its operations
Yara takes a holistic view of the climate impact of its operations Yara’s integrated business model is unique within the fertilizer industry Despite relatively high emissions related to application of fertilizer, using fertilizer to intensify agriculture Yara’s globally integrated model separates it
Slide 15: Strategy execution is focused on strengthening competitive edge
Strategy execution is focused on strengthening competitive edge Two main responses to strengthen our competitive edge Competitive raw material costs is a strong advantage for certain plants (e.g. Belle Plain) but to less degree for Yara strategy execution follows two main levers: Improve our busines
Slide 16: Strengthening competitive edge through improving returns and profitable growth
Strengthening competitive edge through improving returns Strengthening our competitive edge through profitable growth The Yara Improvement Program is all about improving returns, with initiatives that improve all Yara’s four Growth can strengthen Yara’s competitive edge in several ways. sources of c
Slide 17: Yara has four different priority areas for growth
Yara has four different priority areas for growth Yara is deliberately building premium positions in the world’s most important agriculture markets Yara has a relative wide scope for step growth. This implies that we are widely monitoring for potential Yara has been successful in our deliberate stra
Slide 18: Innovation is crucial in protecting current position
Innovation is crucial in protecting current position and developing Yara’s long-term competitiveness Yara is innovating with a purpose at all steps of our value chain Yara innovates with a purpose, and is an integrated way of what we do. In order to remain relevant for our Yara is innovating through
Slide 19: Integrated business model and innovation drive premiums above commodity value
Yara’s integrated business model and innovation approach drives premiums above commodity value Yara Improvement Program The premiums Yara achieves in both fertilizer and industrial product markets are a result of its product We launched the Yara Improvement one year ago. The difficult market situati
Slide 20: Yara Improvement Program – 2017 status
Yara Improvement Program – 2017 status Delivering value across the company The Yara Improvement Program has so far delivered 242 million US dollars of annual sustained benefits, well ahead of our 2017 target of 150 million US dollars. In addition, we have captured a total of 126 million US The progr
Slide 21: The Yara Productivity System (YPS) is a structured way of working
The Yara Productivity System (YPS) is a structured way of working applied across operations and A major effect of YPS is sustainable long term improvements to reliability knowledge work YPS drives long term improvements to the reliability of our production. We measure the bottom line impact Last yea
Slide 22: We can see the impact of YPS across the segment
We can see the impact of YPS across the segment Led by our project office, YPS for capital projects is in progress and showing results 2017 has been a year of great achievements. YPS has delivered sustainable improvements of more than 150 YPS is about how we operate our daily business. This includes
Slide 23: Value optimization for smaller on-site projects and R&D
A key part of YPS for projects is to conduct value optimization for our portfolio of smaller on-site projects YPS makes R&D more productive, both shortening time to impact and allowing more focus on improving our plants YPS for capital projects brings the concept of value engineering to our sites. T
Slide 24: YPS is our framework for continuous improvement
YPS is our framework for continuous improvement – Developed across three dimensions Improvement example: � Reduction in weekly cleaning time of blending machine to bring increase of 6.2 kt / year in Rio Grande � It is a change in the way we work and a change in mindset. It is a way of working that i
Slide 25: Root cause problem solving and Industry 4.0 technologies
Improvement example: � Yara applies several Industry 4.0 technologies with more to come Root Cause Problem Solving to improve reliability for plant start-up in Belle Plaine � Yara Birkeland – the first ever zero emissions, autonomous ship – is one well known example of Yara In Belle Plaine a dedicat
Slide 26: New cross-functional operating model will provide sustainable impact
New cross-functional operating model will provide sustainable impact Procurement excellence is much more than a one off initiative to improve. It’s about introducing new ways of working to enable continuous improvements going forward. In order to sustain the change we are working along three dimensi
Slide 27: Variable cost improvements have contributed ~90 USD million
Variable cost improvements have contributed ~90 USD million Procurement Excellence 2018 – Tangible results around the globe - Packaging So far, our procurement initiative has improved the variable unit costs with roughly 90 million US dollars In Brazil we purchase bags annually at a total cost of ap
Slide 28: Procurement Excellence – MRO, warehouses and terminals
Procurement Excellence 2018 – Tangible results around the globe - MRO Procurement Excellence 2018 – Tangible results around the globe – Warehouses and terminals We have approximately 180 third party owned warehouses and terminals in Europe with an annual spend of In Yara Safety is the highest priori
Slide 29: Strategy recap – continuing the journey closer to the farmer
Strategy recap – continuing the journey closer to the farmer Deciding where to focus and how to win is key to profitable growth At the last Capital markets day we presented our farmer centric strategy. Farmer needs are not static. The agriculture industry is impacted by global and local trends that
Slide 30: Our Crop roadmaps move our strategy into action
Our Crop roadmaps move our strategy into action Yara has delivered a growth of 5% in Premium Products and aim for continued growth despite challenging markets The crop roadmap is our main vehicle to engage the whole Crop Nutrition organization and move our farmer centric growth strategy into action.
Slide 31: Creating value above commodities; experience in India
We create value above commodities by focusing on the market segments that best match our offering More than 20 years experience in India, enabling a crop focused growth agenda The crop roadmaps deliver volume growth, but even more importantly value growth. Yara started operations in India more than
Slide 32: Acquisition of Tata Chemicals' fertilizer business expands our footprint
Acquisition of Tata Chemicals’ fertilizer business expands our footprint, enabling accelerated premium Yara’s knowledge grows yields, profitability and living standards in India product growth This slide illustrates how we typically approach a market: The recent completion of the acquisition of Tata
Slide 33: Taking a leading position in digitalization
Taking a leading position in digitalization is key to delivering our farmer centric strategy Digitization, big data, and precision sensors are disrupting agriculture The core of our Crop Nutrition strategy is to go even deeper in the market with crop specific, farmer The future of farming is being d
Slide 34: Digital disruption can unlock multiple benefits for the farmer
Digital disruption can unlock multiple benefits for the farmer Yara has a long and successful innovation history to build on As a consequence, the farmer has many more opportunities to optimize: Yara has been an innovation-driven company for more than 100 years, and an early mover in the field of -
Slide 35: Stepping up our digital activities
We are significantly stepping up our digital activities. Cornerstones of our Crop Nutrition Digital Strategy Yara sees substantial value in digital farming and therefore took a strategic decision to step up its activities, Our Digital Strategy is built upon the strengths of Yara, along four dimensio
Slide 36: Our ability to holistically create value will set us apart
Our ability to holistically create value will set us apart Where we stand: rapid expansion of our activities in Digital Farming To maximize the value from our investments, we will capture value in three areas We started the implementation of our ambitious strategy 6 months ago, and have been signifi
Slide 37: We have launched 4 Digital Hubs
We have launched 4 Digital Hubs as centers of gravity for our efforts We are building new capabilities in Yara Our Digital Farming team is centered around 4 Digital Hubs – i.e., competence centers that host our new We are adding new capabilities, that enable the build-up of an at-scale digital busin
Slide 38: We are working in an agile way
We are working in an agile way Ramp-up of digital solutions We have implemented a new way of working within these solution teams, that is based on the dynamics of In line with the build up of our capabilities, we are step-by-step broadening the work on digital solutions and successful digital start-
Slide 39: Adapt-N – expanding our position in digital farming
Adapt-N – expanding our position in digital farming Benefits for Yara In November 2017 Yara completed the acquisition of Agronomic Technology Corp (ATC), which operates The benefits from Yara‘s digital Strategy span far: Adapt-N, a leading nitrogen recommendation platform in the US that improves far
Slide 40: Roadmap – Digital Farming
Roadmap – Digital Farming Our Digital Aspiration As we are at the start of implementing our strategy, 2018 is focused on innovating the new digital business We are convinced about the opportunities from digitization in farming and are committed to our journey models and developing our capabilities f
Slide 41: High on-going Yara growth investment activity
High on-going Yara growth investment activity Yara has expected commodity nitrogen oversupply, and has focused its growth pipeline on premium & industrial products Yara’s 2017 capex ended lower than previously guided (16.5 BNOK), mainly reflecting the closing of the Tata Chemical urea business in Ja
Slide 42: NPK and calcium nitrate expansion; Freeport ammonia plant
350 kt NPK and Calcium Nitrate expansion in Porsgrunn and Glomfjord, Norway (investment highlights '® Project adds 200 kt calcium nitrate and 50 kt compound NPK ‘annual capacity in Porsgrunn, ‘¢ Enables further 70 KINPK and 36 Kt calcium nitrate annual ‘capacity in Glomfjord through optimization ‘©
Slide 43: TAN plant in Pilbara; Salitre phosphate project
330 kt technical ammonium nitrate (TAN) plant in Pilbara, Australia Business case MIGMIQNES earroq 2018 prices, USOm, 80%) (investment highlights ‘© SV with Orica (50%/50%) ‘© Plant ideally located in the world's biggestiron ore mining region ‘A distribution and marketing joint venture is establishe
Slide 44: Yara Improvement Program effects
Yara Improvement Program effects The Yara Improvement Program is defined as annual improvements to the company compared to the baseline year of 2015. To that end, the 2020 target of 500 million US dollars, and quarterly and annual status reports, are based on 2015 values applied to the improved prod
Slide 45: Significant positive impact from the improvement program in 2017
Significant positive impact from the improvement program in 2017 Price and currency scenario assumptions Yara delivered weaker 2017 compared with a year earlier. EBITDA excluding special items decreased 18% The “5-year average” assumes fertilizer prices, energy prices and currency rates equal to the
Slide 46: Price sensitivities linked to capacities
Price sensitivities linked to capacities The basis for the sensitivities is Yara’s capacity for the different product groups. The nitrogen component in NPKs are included in the CAN price sensitivity. The sensitivities are long-term (>1 year) and ignore any correlation between the different parameter
Slide 47: Yara will change to USD as reporting currency
Yara will change to USD as reporting currency as of first quarter 2018 Higher prices offset higher energy cost Historical figures will be presented at yara.com. Yara’s 2017 EPS excluding special items and currency ended at USD 1.8 in 2017. The updated run rate scenario gives an EPS of USD 2.7. The c
Slide 48: Run rate EPS scenarios and growth through the cycle
2015 prices, committed growth and Yara Improvement Program add 3.2 USD to run rate EPS Strong growth and profitability through the cycle Yara’s 2017 EPS excluding special items and currency ended at USD 1.8 in 2017, while the updated run rate Yara’s growth strategy has over time generated good retur
Slide 49: Major improvement and growth investments in 2018
Major improvement and growth investments in 2018; main earnings improvement from 2019 onwards On the left hand side we have added together the investments we are making both in the Yara Improvement Program and for our committed expansion and growth projects. On the right hand side we show the combin
Slide 50: Sensitivity tables reflecting 2018 production capacities
Sensitivity tables reflecting 2018 production capacities Price sensitivities including committed growth projects The basis for the sensitivities is Yara’s capacity for the different product groups. The nitrogen component in The committed growth projects will impact the sensitivities as shown in this
Slide 51: NPK expansion in Uusikaupunki; Sluiskil value-add expansion
250 kt NPK expansion in Uusikaupunki, Finland (Business cave highligh [nvesiment hightights ws iis rn + Strong NPK demand gronth outside Europe presents solid business.case I rcjecito stan now oranuttor aces -260 anna capacty ee ae = = ‘© Completed 2H 2016, UK NPK production producing at full Voture
Slide 52: Nitric acid expansion in Köping; Tata Chemicals acquisition
Nitric acid expansion in Keping, Sweden [Business case highlights — [lnvesimant highlights + Nive acid upgrade and expansion in Koping «+The imestment includes the construction ofa new nitric acid plant ‘Strong long term fundamentals for mining and cil explosives industries 20% IRR at 2016 prices Es
Slide 53: Rio Grande expansion and operational improvement
Rio Grande expansion and operational improvement See + Consolidation of 3 sites reduces fixed cost and maintenance. . as “ * investments meen | | 2 sent es tise sett pany = = = = + improved satya wer unt cet ie erie sinirenesieae e e omer es ‘conditions + Start up 2Q 2020 First full eamings effect 2
Slide 54: Production volume improvements have contributed over 100 million
Production volume improvements have contributed over 100 million in 2015 terms Increased production has contributed more than 100 million US dollars in 2015 terms, and about 65 million US dollars when 2017 margins are applied to the same volumes. The volume improvements are measured against the prod
Slide 55: Procurement Excellence — Variable unit cost
Procurement Excellence — Variable unit cost Procurement benefits calculation methodology Calculation methodology } on Knowledgegrows, Improvements measured against the most Direct relevant industry benchmarks categories + Benchmark publications and product details Improvements are specified to ensur