Yara International Asa · OSL:YAR
Yara International Asa — Non-Deal Roadshow (March 2012)
43 slides from Yara International Asa's roadshow presentation, Mar 28, 2012
Slide 1: Yara International ASA – HSBC Roadshow Edinburgh
Yara International ASA Thor Giæver, IR HSBC Roadshow Edinburgh 28 March 2012
Slide 2: A business strategy geared for global optimization
1 A business strategy geared for global optimization Downstream Upstream Industrial Supply & Trade Scale advantages + Unique flexibility + Unrivalled presence IR – Date: 2012-03-28
Slide 3: Yara – the leader in nitrogen fertilizers
2 Yara – the leader in nitrogen fertilizers Global no 1 in NPK Global no 1 in ammonia Global no 1 in nitrates complex fertilizer Production capacity* (mill t) Production capacity* (mill t) Production capacity* (mill t) 9 7 8 8 6 7 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 Yara
Slide 4: Yara creates substantial value over and above the commodity nitrogen margin
3 Yara creates substantial value over and above the commodity nitrogen margin Nitrogen upgrading margins Phosphate upgrading margins NPK blend premium USD/t USD/t USD/t 700 800 700 700 650 600 Nitrate premium above urea Margin 600 600 above blend 500 cost 550 500 Value above 400 500 raw material Val
Slide 5: Food prices at high levels despite drop in fourth quarter
4 Food prices at high levels despite drop in fourth quarter FAO price index Index 250 200 150 100 50 0 1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 Cereals Price Index Food Price Index Yearly avg Food price index Source: FAO IR – Date: 2012-03-28
Slide 6: Continued strong price incentives necessary to avoid inventory decline
5 Continued strong price incentives necessary to avoid inventory decline Grain production and consumption Days of consumption in stocks Million tons Days 2,300 120 2,250 110 2,200 Production 100 2,150 2,100 90 2,050 Consumption 80 2,000 70 1,950 60 1,900 1,850 50 1,800 40 98 00 02 04 06 08 10 12F 98
Slide 7: Projected nitrogen capacity additions outside China in line with historical consumption growth
6 Projected nitrogen capacity additions outside China in line with historical consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity World Excluding China World Excluding China 2011 China 46% Pakistan 34% 1.6% (2.0%) 1.4% (1.5%) Pakistan 18% Iran 17% 2012 China 64
Slide 8: Lower Chinese urea exports in 2011
7 Lower Chinese urea exports in 2011 Accumulated urea exports Urea price and export tax Kilotons USD per ton Export tax 8,000 900 200 % 7,000 2010 800 180 % 700 160 % 6,000 Urea fob Black Sea 140 % 2007 600 5,000 Export tax 120 % 2008 500 4,000 100 % 2009 400 3,000 2011 80 % 300 60 % 2,000 200 40 %
Slide 9: Demand-driven Chinese domestic urea price since mid 2011
8 Demand-driven Chinese domestic urea price since mid 2011 RMB/t 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 Urea price ex works Anthracite price Higher coal prices, increased focus on emission control and energy efficiency has led to higher domestic urea prices Source: China Fertilizer Mark
Slide 10: Current domestic price and 2012 tariff implies swing price of USD 430 fob China
9 Current domestic price and 2012 tariff implies swing price of USD 430 fob China USD/t 800 765 700 600 500 430 400 370 335 300 200 100 0 CMD 2011 Anthracite price Domestic price Domestic price & 2012 system & 2012 system & 110% tax Cash cost Inland transport Tax Producer margin Series5 IR – Date: 2
Slide 11: Yara creates substantial value over and above the commodity nitrogen margin
10 Yara creates substantial value over and above the commodity nitrogen margin Nitrogen upgrading margins Phosphate upgrading margins NPK blend premium USD/t USD/t USD/t 700 800 700 700 650 600 Nitrate premium above urea Margin 600 600 above blend 500 cost 550 500 Value above 400 500 raw material Va
Slide 12: Global downstream player with sales to 150 countries
Global downstream player with sales to 150 countries 48% Europe 9.4 mill tons North America 15% 2.9 mill tons Asia 12% 2.3 mill tons Africa 6% 1.2 mill tons 19% Latin America 3.8 mill tons Yara plants Joint venture plants Sales offices Development programs R&D Units IR – Date: 2012-03-28
Slide 13: Nitrate premium is mainly a function of crop prices and marketing effort
12 Nitrate premium is mainly a function of crop prices and marketing effort CAN price, USD/t Wheat price, USD/t 450 400 400 350 350 300 300 250 250 200 200 150 150 100 100 50 50 0 0 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 Adjusted urea* Nitrate premium, USD/t Wheat price * Urea fob Bla
Slide 14: Nitrates’ agronomic advantage has higher value for cash crops than for commodity crops
13 Nitrates’ agronomic advantage has higher value for cash crops than for commodity crops Crop value with nitrates Increase in crop production value €/ha Index using nitrates instead of urea 3,500 1,200 3,192 1,016 3,000 1,000 2,500 800 2,000 1,553 600 1,500 400 1,000 500 200 100 0 0 Wheat/UK Orange
Slide 15: European deliveries lagging last season
14 European deliveries lagging last season USA West Europe Million tons Million tons 4.5 9.0 8.0 4.0 -18% 7.0 3.5 6.0 3.0 5.0 2.5 4.0 2.0 3.0 1.5 2.0 1.0 1.0 0.5 0.0 0.0 2H07 2H08 2H09 2H10 2H11 2H07 2H08 2H09 2H10 2H11 Production Net imports Domestic Imports Source: Yara estimate for fertilizer del
Slide 16: Good NPK development
15 Good NPK development NPK volumes NPK margins* Kilotons USD/t 2,000 180 1,800 160 1,600 140 1,400 120 1,200 100 1,000 80 800 60 600 400 40 200 20 0 0 1Q 2Q 3Q 4Q 4Q Full year 2010 2011 2010 2011 * Product from Porsgrunn, Glomfjord, Ravenna and Montoir sold in Europe IR – Date: 2012-03-28
Slide 17: 2011 earnings per share highest so far
16 2011 earnings per share highest so far NOK per share 45 41.99 Healthy grain fundamentals and 40 farm margins led to strong demand for all nutrients 35 30.24 30 28.27 Supply constraints as China halved 25 exports due to a tighter domestic 20.63 market and higher coal prices 20 15 13.88 13.08
Slide 18: Yara financial scenarios
17 Yara financial scenarios Last 4 5-year avg. to Chinese Demand- NOK quarters 30 Sep 20112) swing driven EBITDA1) 14,800 15,200 13,500 23,600 Depreciation -2,600 -2,600 -2,600 -2,600 Interest expense -800 -700 -700 -700 Income before tax 11,400 11,900 10,200 20,300 Tax -2,400 -2,800 -2,100 -4,500 N
Slide 19: Strong cash-generation
18 Strong cash-generation Net interest-bearing debt / equity ratio (end of period) 0.9 0.84 0.8 0.75 0.7 0.63 0.6 0.57 0.56 0.49 0.5 0.40 0.38 0.4 0.34 0.28 0.32 0.3 0.27 0.22 0.20 0.2 0.12 0.12 0.1 0.0 2008 2009 2010 2011 IR – Date: 2012-03-28
Slide 20: We aim to increase own-produced and JV volumes by 8 million tons by 2016
19 We aim to increase own-produced and JV volumes by 8 million tons by 2016 Million tons External OPP/JV sales 30 25 20 In the five years 15 to 2016, Yara’s OPP/JV sales 10 will grow by 5 40% 0 2010 Qafco, Sluiskil Remaining 2016 and Porsgrunn expansions IR – Date: 2012-03-28
Slide 21: Basis for Yara’s profitable growth ambitions
20 Basis for Yara’s profitable growth ambitions Yara Strong earnings through the cycle A scalable business model giving synergies CROGI 25 % 20 % 15 % 10 % 5% 0% 2004 2005 2006 2007 2008 2009 2010 L12M Long term target Industry-leading acquisition track-record Valuation and capital discipline In a
Slide 22: More information can be found at www.yara.com
21 More information can be found at www.yara.com IR – Date: 2012-03-28
Slide 23: Earnings per share
22 Earnings per share* NOK EPS excluding currency and special items 20 14.93 10.91 15 12.86 12.42 11.84 9.63 10.02 10 7.73 6.68 5.27 5.42 4.93 5 3.88 3.06 1.21 0 -5 -7.27 -10 2008 2009 2010 2011 Annual NOK 28.27 13.08 30.24 41.99 * Average number of shares for 4Q 2011: 286.0 million (4Q 2010: 288.4
Slide 24: Earnings before interest, tax, depreciation and amortization (EBITDA)
23 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 20,000 17,917 18,163 18,000 16,000 15,315 14,000 12,000 10,000 8,441 8,000 6,618 6,472 6,108 6,000 5,549 4,000 2,000 0 2004PF 2005 2006 2007 2008 2009 2010 2011 EBITDA EBITDA ex special items IR – Date: 2012-03-28
Slide 25: Fourth-quarter net debt development
24 Fourth-quarter net debt development NOK millions 6,000 441 5,539 5,500 175 4,961 2,523 297 5,000 786 4,500 2,039 329 4,000 3,500 3,000 2,500 304 2,000 Net interest- Cash earnings** Dividends Net operating Praxair Investments Share buy- Foreign Other Net interest- bearing debt received from capita
Slide 26: Strong European 2Q deliveries despite drought
25 Strong European 2Q deliveries despite drought European nitrogen deliveries Kilotons 2,500 2,000 1,500 1,000 500 - 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Average IR – Date: 2012-03-28
Slide 27: European producer nitrate stocks increased in 4Q
26 European producer nitrate stocks increased in 4Q 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 11/12 07/08 08/09 09/10 10/11 Source: Fertilizers Europe IR – Date: 2012-03-28
Slide 28: Quarterly urea trade
27 Quarterly urea trade Million tons 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Source: IFA, Iran from GTIS IR – Date: 2012-03-28
Slide 29: Fertilizer volumes
28 Fertilizer volumes Kilotons Outside Europe Europe 7,000 6,284 6,017 6,000 2,575 5,474 5,481 3,015 5,210 5,216 5,129 4,742 4,882 4,791 4,759 2,910 4,914 2,543 4,970 4,834 5,000 2,658 2,765 2,146 2,715 2,290 2,355 2,514 2,617 4,239 2,180 2,412 4,000 3,496 2,280 3,710 1,540 3,000 3,002 2,983 2,937 2
Slide 30: Yara 4Q fertilizer sales by market and product
29 Yara 4Q fertilizer sales by market and product 2011: 4.2 million tons (2010: 4.9 million tons) Kilotons 4Q10 4Q11 3,000 2,401 2,500 1,960 2,000 1,500 997 949 1,000 631 611 516 487 370 500 233 0 Europe Latin America Asia North America Africa Kilotons 3,000 4Q10 4Q11 2,000 1,685 1,547 1,287 1,170 1
Slide 31: Yara – production volume
30 Yara – production volume* Finished fertilizer 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 2008 2009 2010 2011 2008 2009 2010 2011 Urea Nitrates NPK CN UAN * Including share of equity-accounted investees IR – Date: 2012-03-28
Slide 32: Spot natural gas versus Yara average
31 Spot natural gas versus Yara average Yearly averages 2005 – 2010, quarterly averages for 2011-12 with forward prices* for 1Q12 and 2Q12 USD per MMBtu 14 12.0 12 11.1 10.9 10.8 10.6 10.5 10.1 10 8.6 8.3 8.3 9.6 8 7.5 7.6 7.6 7.0 7.8 7.8 6.6 6 5.4 5.6 5.7 5.6 4 4.8 4.4 2 0 2005 2006 2007 2008 2009
Slide 33: Yara nitrate sales
32 Yara nitrate sales Share of annual sales 12% 10% 8% 6% 4% 2% 0% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 10/11 Avg 05/06-09/10 seasons IR – Date: 2012-03-28
Slide 34: Yara production capacities
33 Yara production capacities Million tons product 10.0 8.0 6.0 Outside Europe Europe 4.0 2.0 0.0 Ammonia Nitrate NPK Urea IR – Date: 2012-03-28
Slide 35: Yara Crop nutrition program helps potato growers in Vietnam
34 Yara Crop nutrition program helps potato growers in Vietnam Source: PepsiCo Vietnam, 2011 IR – Date: 2012-03-28
Slide 36: Nitrate-based fertilizers are superior to urea both agronomically and environmentally
35 Nitrate-based fertilizers are superior to urea both agronomically and environmentally The agronomical efficiency of nitrates is The carbon footprint is lower than for Urea superior to urea Nitrogen recovery (% of AN) Lifecycle carbon footprint (kg CO2 eq/kg N) 100 12 75 8 50 4 25 0 0 AN Urea UAN
Slide 37: NPKs have significant cash crop share, while nitrates mainly serve commodity crops
36 NPKs have significant cash crop share, while nitrates today mainly serve commodity crops 4,700 150 2,571 Commodity crops 70 866 Cash crops NPK Nitrate NPK Nitrate Europe North America 10 NPK Nitrate 191 Asia 450 343 100 NPK Nitrate NPK Nitrate Africa Latin America IR – Date: 2012-03-28
Slide 38: Focus on key investment value drivers ensures value-creating growth
37 Focus on key investment value drivers ensures value-creating growth Typical source of value Key investment creation Attractive Attractive Selected examples value driver capital cost/ operating cash entry fee flow Distressed seller Rostock Non-core divestiture Belle Plaine Typically Advantageo
Slide 39: Yara sensitivities
38 Yara sensitivities Operating Income EBITDA EPS* USD million USD million USD Urea sensitivity +100 USD/t 944 1,095 2.8 …of which pure Urea 304 422 1.2 …of which Nitrates 367 391 1.0 …of which NPK 198 207 0.5 Nitrate premium +50 USD/t 439 467 1.2 …of which pure Nitrates 273 294 0.8 Hub gas Europe +
Slide 40: Yara financial scenarios
39 Yara financial scenarios Last 4 5-year avg. to Chinese Demand- NOK quarters 30 Sep 20112) swing driven EBITDA1) 14,800 15,200 13,500 23,600 Depreciation -2,600 -2,600 -2,600 -2,600 Interest expense -800 -700 -700 -700 Income before tax 11,400 11,900 10,200 20,300 Tax -2,400 -2,800 -2,100 -4,500 N
Slide 41: Price and currency assumptions in scenarios
40 Price and currency assumptions in scenarios Last 4 5-year avg. to Chinese Demand- quarters 30 Sep 11 swing* driven** Ammonia fob Black Sea (USD/t) 459 366 450 550 Urea prilled fob Black Sea (USD/t) 386 342 360 510 Nitrate premium , USD/t 94 77 62 68 Phos rock fob North Africa (USD/t) 164 158 200
Slide 42: Key value drivers – quarterly averages
41 Key value drivers – quarterly averages Zeebrugge day ahead(USD/MMBtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 9.5 600 450 9.6 377 384 376 378 9.4 9.2 484 400 500 446 318 9.2 9.0 9.0 408 350 9 400 359 354 300 8.8 250 8.6 300 8.3 200 8.4 200 150 8.2 8 100 100 7.8 50 7.6 0 0 4Q 10
Slide 43: 10-year fertilizer prices – monthly averages
42 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 20 20 20 20 20 20 20 20 20 20 20 0 01 02 03 04 05 06 07 08 09 10 11 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Urea prilled fob Black Sea DAP fob