Yara International Asa · OSL:YAR
Yara International Asa — Q3 2016 Earnings Presentation
43 slides from Yara International Asa's earnings presentation, Oct 21, 2016
Slide 1: Yara International ASA 2016 third quarter results
Yara International ASA 2016 third quarter results 21 October 2016
Slide 2: Safe operations is our first priority
Safe operations is our first priority 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours 2) OFD and Galvani included in statistics from January 2016 IR – 21 October 2016 2
Slide 3: Summary third quarter
Summary third quarter Weaker results due to lower fertilizer commodity prices Strong growth in premium product deliveries, especially in Brazil Strong Industrial result IR – 21 October 2016 3
Slide 4: Earnings per share
Earnings per share* EPS excluding currency and special items 14.56 7.41 11.23 10.51 10.59 10.22 6.37 9.58 8.52 2.65 9.14 8.26 8.04 7.97 8.17 7.62 7.03 7.74 6.74 6.69 6.18 5.66 6.40 5.62 3.97 2.65 3.46 1.58 3.00 0.23 2013 2014 2015 2016 Annual NOK 20.67 27.59 29.38 24.46 *Average number of shares for
Slide 5: Normal start to the European season, slow in the US
Normal start to the European season, slow in the US Million tons N West Europe Million tons N US 1.8 5.0 +2% 4.5 -13% 1.6 4.0 1.4 3.5 1.2 3.0 1.0 2.5 0.8 2.0 0.6 1.5 0.4 1.0 0.2 0.5 0.0 0.0 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 Domestic production Imports Domestic production Im
Slide 6: Yara Improvement Program: significant progress during third quarter
Yara Improvement Program: significant progress during third quarter towards full program launch first quarter 2017 2Q 2016 presentation • All units working to establish and detail improvement initiatives • Several large-impact initiatives have started execution, with positive results so far • Work s
Slide 7: Plant productivity improvement and portfolio optimization will make upstream positioning more robust
Example: Production Plant productivity improvement and portfolio optimization will make our upstream positioning more robust Systemic assessment across Yara Production Intensive rollout with up to three parallel groups of organization identified a number of improvement areas implementations for the
Slide 8: Brazil: focus on premium products and solutions drives growth
Brazil: focus on premium products and solutions drives growth Brazil 3Q fertilizer deliveries Yara Brazil 3Q premium product deliveries Kilotons Kilotons 12,000 +6% 600 Thousands 10,000 8,000 500 6,000 +100% 4,000 2,000 400 0 Kilotons 3Q12 3Q13 3Q14 3Q15 3Q16 300 4,000 +11% Thousands 3,000 200 2,000
Slide 9: Brazil: unrivalled market presence and farmer-centric strategy
Brazil: unrivalled market presence and farmer-centric strategy Unrivalled presence: 28 sites in 11 states Farmer-centric strategy drives growth > 20,000 growers using Yara solutions Yara (offices, production, blending > 200 Yara agronomists and 600 sales and distribution of fertilizers, port represe
Slide 10: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and amortization (EBITDA) EBITDA excluding special items NOK millions 7,884 4,614 5,742 5,489 4,794 5,179 4,625 5,055 3,958 4,227 5,055 4,103 5,050 4,184 3,830 4,002 4,528 4,185 4,149 4,039 3,318 3,964 3,508 3,591 3,004 3,504 3,223 2,968 2,363 1,858 2013 2
Slide 11: EBITDA development
EBITDA development NOK millions 7,884 3,233 223 2,641 3,004 156 241 857 EBITDA 3Q15 Special Volume Price/Margin Energy costs Currency Other EBITDA 3Q16 items translation IR – 21 October 2016 11
Slide 12: Lower prices mainly impact Production segment
Lower prices mainly impact Production segment 6,221 EBITDA (NOK millions) 2,937 EBITDA excluding special items 1,534 1,502 1,519 1,502 894 432 403 857 432 403 Crop Nutrition Industrial Production 3Q15 3Q16 IR – 21 October 2016 12
Slide 13: Natural gas cost in Europe
Natural gas cost in Europe Yara European gas & oil cost Change in spot energy cost USD/ NOK MMBtu millions 400 350 8.0 200 7.0 0 6.0 (200) (151) 5.0 (400) (300) (600) 4.0 (588) (800) (704) 3.0 (1,000) (923) 2.0 (1,200) (1,042) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 TTF
Slide 14: Lower European nitrate premiums in new season
Lower European nitrate premiums in new season Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 700 100 90 600 80 500 70 60 400 Nitrate premium 50 300 above urea 40 Value above 200 ammonia 30 Value above gas 20 100 Yara EU gas co
Slide 15: Lower commodity phosphate margins, solid compound NPK premiums
Lower commodity phosphate margins, solid compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 Weighted average global premium above blend cost 400 Value above 300 raw material Nitrate premium, CIF inland Germany 300 NH3, fob Black Sea *0.22 Ur
Slide 16: Net interest-bearing debt development
Net interest-bearing debt development NOK millions 10,390 26 114 32 210 9,698 3,146 2,836 Net debt Cash earnings* Investments Yara dividend Net operating Foreign Other Net debt Jun 16 (net) and share capital change currency Sep 16 buy-backs translation loss * Operating income plus depreciation and a
Slide 17: Yara growth project pipeline adds ~5 NOK earnings per share by 2020
Yara growth project pipeline adds ~5 NOK earnings per share by 2020 at current market prices Profitable growth through expansions and M&A Incremental earnings at current prices1 (NOK/share) 5.3 CN/NPK expansion Porsgrunn (2H 2017) 4.0 Expand premium products NPK expansion Uusikaupunki (2H 2016)
Slide 18: Prospects
Prospects Supportive farm margin outlook overall, with higher prices for several crops Urea capacity increases in US and North Africa partially displacing Chinese exports Improved pre-buying incentives in Europe, but some markets impacted by poor harvests Continued growth in Brazil, but four
Slide 19: Acquisition of Tata Chemicals' urea and distribution business in India
Acquisition of Tata Chemicals’ urea and distribution business in India provides footprint to accelerate premium product growth Integrated world scale urea plant in Babrala, Uttar Pradesh • ~0.7 million tons ammonia production • ~1.2 million tons urea production • Commissioned in 1994 World-class ope
Slide 20: Additional information
Additional information IR – 21 October 2016
Slide 21: Strong growth pipeline
Strong growth pipeline Capex plan1 16.2 Production growth 2015 - end 20185 NOK bn 14.4 1.3 Cost&capacity improvements 14.2 0.9 M&A Finished fertilizer Ammonia 1.4 3.3 0.4 Committed growth 23.3 3.3 Maintenance Mill.tons 9.0 0.7 9.0 0.5 7.0 2.3 7.2 0.7 4.2 6.2 1.3 2.1 1.2 6.0 5.5 5.4 5.6 18.9 0.8 2015
Slide 22: Production
Production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 2,000 5,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accounted investees IR – 21 Octobe
Slide 23: Yara 3Q fertilizer sales by market and product
Yara 3Q fertilizer sales by market and product Kilotons 3,190 3Q15 3Q16 2,930 2,085 2,100 582 619 526 427 577 591 235 322 Europe Brazil Latin America North America Asia Africa 1,603 1,750 1,419 1,415 1,448 1,347 1,101 998 1,210 913 236 229 234 279 Compound NPK1 Blend NPK Nitrate Urea Other products
Slide 24: Fertilizer deliveries
Fertilizer deliveries Kilotons 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 Europe Outside Europe IR – 21 October 2016 24
Slide 25: Fertilizer deliveries by product and source
Fertilizer deliveries by product and source Kilotons 1,750 1,603 1,582 1,488 1,415 1,448 1,419 1,101 998 913 236 229 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – 21 Octobe
Slide 26: YaraMila and YaraBela deliveries
YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Yara-produced YaraBela deliveries Kilotons Kilotons 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 800 800 600 600 400 400 200 200 0 - 3Q12 3Q13 3Q14 3Q15 3Q16 3Q12 3Q13 3Q14 3Q15 3Q16 Outside Europe Europe
Slide 27: Strong premium product deliveries
Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 3,500 499 3,000 2,500 2,000 303 305 300 302 250 236 1,500 231 CAGR 8% 148 1,000 128 84 85 84 500 41 37 0 3Q12 3Q13 3Q14 3Q15 3Q16 Asia Brazil Latin Africa North America excl. America Outside Europ
Slide 28: Value-added and distribution make up larger part of Yara's contribution
Value-added and distribution make up larger part of Yara’s contribution Total Yara contribution 11,000 10,000 9,000 8,000 7,000 Trade 6,000 5,000 Upgrade & distribution 4,000 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16
Slide 29: AdBlue deliveries
AdBlue deliveries Kilotons 500 450 400 350 300 250 200 150 100 50 0 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 IR – 21 October 2016 29
Slide 30: Industrial volume development
Industrial volume development Kilotons 892 889 893 866 849 852 864 859 847 819 816 815 829 577 571 572 540 541 538 511 482 432 456 438 374 364 367 382 380 364 385 339 361 346 333 328 308 242 207 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Industrial N-chemicals Environmental pro
Slide 31: Debt/equity ratio
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.22 0.20 0.17 0.16 0.15 0.14 0.13 0.13 0.12 0.12 0.11 0.08 0.08 0.07 0.06 0.06 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2011 2012 2013 2014 2015 2016 IR – 21 October 2016 31
Slide 32: Yara stocks
Yara stocks Kilotons Finished fertilizer Bunge Fertilizer included from 3Q 2013 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR – 21 October 2016 32
Slide 33: Reduced exports from China amid lower prices…
Reduced exports from China amid lower prices… Declining urea pricing Chinese exports and urea price Black Sea USD/t Kilotons USD/t 450 2,400 550 430 2,200 500 410 2,000 450 390 1,800 400 370 350 1,600 350 330 1,400 300 310 1,200 290 250 1,000 270 200 800 250 150 600 230 400 100 210 190 200 50 170 0
Slide 34: …and increased production elsewhere
…and increased production elsewhere Gross capacity additions, excl. China (mill. tonnes urea1) 7.4 6.9 Nigeria 0.7 Nigeria 0.7 Russia 0.3 Iran 0.5 Russia 0.3 Iran 0.5 Algeria 1.2 Algeria 1.2 4.5 Russia 0.3 4.1 Iran 0.5 USA 2.5 Nigeria 1.3 USA 1.7 USA 0.9 Russia 0.4 ~3 Mt India 0.7 consumption Brazil
Slide 35: The new season starts with reduced Chinese urea production
The new season starts with reduced Chinese urea production Million tons Chinese urea production Domestic urea balance Million tons 7.0 14 12.9 -11% 6.8 11.6 15/16 12 11.1 6.6 14/15 1.8 9.9 6.4 10 1.7 6.2 8 6.0 16/17 5.8 6 5.6 4 5.4 2 5.2 5.0 0 Production Export Export Domestic Domestic Production Ju
Slide 36: Increasing coal prices
Increasing coal prices CIF ARA1 December 2016 ($/mt) China anthracite prices September 2016 (RMB/mt) 1) Amsterdam, Rotterdam, Antwerp Source: CME Group, China Fertilizer Market Weekly IR – 21 October 2016 36
Slide 37: European producers' nitrate stocks
European producers’ nitrate stocks Index June 2007 = 1 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 16/17 10/11 11/12 12/13 13/14 14/15 15/16 Source: Fertilizers Europe, Yara estimate for September IR – 21 October 2016 37
Slide 38: Energy cost
Energy cost Yearly averages 2009 – 2013, quarterly averages for 2014-16 with forward prices* for 4Q16 and 1Q17. 11.0 11.4 11.3 10.7 10.5 9.2 9.8 8.5 9.2 9.4 7.6 7.5 7.6 7.5 7.0 8.2 8.0 8.0 8.1 7.6 8.1 6.6 7.0 6.2 6.6 7.0 6.8 5.8 6.9 6.5 5.0 4.9 5.2 6.5 5.4 4.6 6.1 5.9 5.1 5.3 4.7 5.7 5.7 4.2 5.2 5.3
Slide 39: Global grain balance
Global grain balance Grain consumption and production Days of consumption in stocks Million tons Days 2,600 95 2,550 90 2,500 2,450 85 2,400 2,350 80 2,300 75 2,250 2,200 70 2,150 2,100 65 2,050 60 2,000 1,950 55 07 08 09 10 11 12 13 14 15 16E 17F 07 08 09 10 11 12 13 14 15 16E 17F Consumption Produ
Slide 40: Non-commercials' net long position in corn
Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: US Commodity Futures Trading Commission IR – 21 October 2016 40
Slide 41: Weak grain production economics, affecting particularly P and K demand
Weak grain production economics, affecting particularly P and K demand Index FAO price index 300 250 200 150 100 50 0 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – 21 October 201
Slide 42: Key value drivers – quarterly averages
Key value drivers – quarterly averages TTF day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea CAN cif Germany (USD/t) granular fob Egypt (dotted line, USD/t) 6.4 5.5 4.3 4.2 268 281 250 270 257 255 249 4.1 233 207 198 208 183 193 197 166 3Q15 4Q15 1Q16 2Q16 3Q16 3Q15 4Q15 1Q16 2Q16 3Q16 3
Slide 43: 10-year fertilizer prices – monthly averages
10-year fertilizer prices – monthly averages USD/t Ammonia fob Black Sea USD/t CAN cif Germany 1,000 500 800 400 600 300 400 200 200 100 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 USD/t Urea prilled fob Black Sea/Urea granular fo