Yara International Asa · OSL:YAR
Yara International Asa — Q2 2017 Earnings Presentation
45 slides from Yara International Asa's earnings presentation, Jul 18, 2017
Slide 1: Yara International ASA 2017 second quarter results
Yara International ASA 2017 second quarter results 18 July 2017
Slide 2: Safe operations is our first priority
Safe operations is our first priority 4.5 TRI (Total recordable injuries 12-month rolling)1 4.0 3.5 3.0 2.5 2.0 1.5 Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June '16 '17 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatmen
Slide 3: Summary second quarter
Summary second quarter Results reflect lower commodity margins Strong finished fertilizer production, but lower ammonia production Continued growth in Industrial deliveries Improvement program on track IR – 18 July 2017 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 6.29 2.65 9.58 8.26 9.12 8.17 7.62 7.03 7.74 6.74 6.19 6.18 6.40 4.95 3.97 3.43 1.58 2.90 3.00 2.56 1.58 -1.22 2014 2015 2016 YTD 2017 Annual NOK 27.59 29.38 23.25 8.75 *Average number of shares for 2Q 20
Slide 5: Higher finished fertilizer production; lower ammonia production
Higher finished fertilizer production; lower ammonia production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 +1% -7% 5,000 2,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2014 2015 2016 2017 2014 2015 2016 2017 Urea Nitrates NPK CN UAN SSP - based fertilizer 1)
Slide 6: Brazil: focus on premium products and solutions drives growth
Brazil: focus on premium products and solutions drives growth Brazil season-to-date (1H) fertilizer deliveries Season-to-date premium product deliveries Kilotons Kilotons 15,000 +0% 900 Thousands +23% 800 10,000 700 5,000 600 0 500 Kilotons 1H13 1H14 1H15 1H16 1H17 4,000 400 Thousands 3,000 +6% 300
Slide 7: 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 5,179 5,489 4,794 5,055 5,055 3,958 4,625 5,050 4,227 3,830 4,002 4,528 4,185 3,508 3,591 3,964 3,335 2,992 3,504 3,004 3,216 2,873 2,968 2,474 2,015 2014 2015 2016 YTD
Slide 8: EBITDA development
EBITDA development NOK millions 5,489 107 477 556 255 1,412 200 2,992 EBITDA 2Q16 Volume Price/Margin Energy costs Currency Special Other EBITDA 2Q17 translation items IR – 18 July 2017 8
Slide 9: Lower prices mainly impact Production segment
Lower prices mainly impact Production segment EBITDA excluding special items EBITDA 2,120 (NOK millions) 1,923 1,693 360 1,531 1,412 1,330 1,005 373 Crop Nutrition Industrial Production 2Q16 2Q17 IR – 18 July 2017 9
Slide 10: Net interest-bearing debt development
Net interest-bearing debt development NOK millions 16,831 155 200 2,732 14,454 2,238 2,742 1,214 Net debt Cash earnings* Net operating Investments (net) Yara dividend Foreign currency Other Net debt Mar 17 capital change translation loss Jun 17 * Operating income plus depreciation and amortization,
Slide 11: Natural gas cost
Natural gas cost Yara European natural gas cost Change in global natural gas cost USD/ NOK MMBtu millions 7.0 1,000 6.5 800 600 187 6.0 330 169 255 400 5.5 543 200 382 180 5.0 180 150 75 0 4.5 (251) (200) 4.0 (704) (400) 3.5 (1,042) (600) 3.0 (800) 2.5 (1,000) 2.0 (1,200) 2Q16 3Q16 4Q16 1Q17 2Q17 3Q
Slide 12: European nitrate premiums in line with a year earlier
European nitrate premiums in line with a year earlier Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 700 100 90 600 80 500 70 Nitrate 60 400 premium above urea 50 300 Value above 40 ammonia 200 Value 30 above gas 20 100 Yara E
Slide 13: Solid commodity phosphate margins and compound NPK premiums
Solid commodity phosphate margins and compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 Weighted average global 400 premium above blend cost 300 Value above Nitrate premium, CIF inland Germany raw material 300 Urea, CIF inland Germany 200 N
Slide 14: Four strategic responses shape our approach to the market
Four strategic responses shape our approach to the market Strengthened and aligned brand positioning Develop farmer centric solutions that Actively develop aligned market channels commercially integrate knowledge, digital that enable knowledge sharing with the farmer tools and services to our produc
Slide 15: Digital Farming: Yara to step up its investment in digital farming solutions
Digital Farming: Yara to step up its investment in digital farming solutions IR – 18 July 2017 15
Slide 16: Cornerstones of our Crop Nutrition digital strategy
Cornerstones of our Crop Nutrition digital strategy Our offer Our customers Our plan We stand for world- We target all farmers We will step up our leading crop nutrition wanting to step up development plans and knowledge – which is efficiency and yield capabilities through a also our core digi
Slide 17: Our key focus will be to advance our digital offering within three areas
Our key focus will be to advance our digital offering within three areas Upgrade MyYara features with more convenience of use Reinvent our digital Intensify two-way interaction with farmers customer experience Roll out solutions faster globally Professional Farmers Re-launch N-sensor with hi
Slide 18: Illustrative example for Brazil – Farmer and Yara benefits from our advanced digital offerings
Illustrative example for Brazil – Farmer and Yara benefits from our advanced digital offerings Example Yara gets Farmer gets Analytics Highest quality crop engine Benefits from nutrition services "Marketing 2.0" ▪ Precision nutrition Professional N-sensor ▪ Direct learning about planning cereals far
Slide 19: Strong urea over-supply outside China
Strong urea over-supply outside China Egypt 0.9 Capacity additions, excl. China Indonesia 0.8 8.1 Saudi Arabia 0.5 (mill. tonnes urea1) Malaysia 0.3 Nigeria 0.7 Bangladesh 0.1 Russia 0.1 Argentina 0.1 Vietnam 0.1 India 0.7 Romania -0.8 Iran 1.4 Bolivia 0.5 Azerbaijan 0.5 Turkmenistan 0.3 5.1 Indones
Slide 20: Non-Chinese fob prices reduced to displace Chinese urea exports
Non-Chinese fob prices reduced to displace Chinese urea exports Increasing 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 1,800 370 400 1,600 350 350 330 1,400 300 310 1,200 290 250 1,000 270 200 800 250 150 600 230 400 100 21
Slide 21: Yara has expected commodity nitrogen over-supply, and has focused its growth pipeline on premium & industrial products
Yara has expected commodity nitrogen over-supply, and has focused its growth pipeline on premium & industrial products Growth focused on premium & industrial Pipeline tonnes by product (kt)1 1,000 Uusikaupunki NPK (3Q 2016) Expand premium products Porsgrunn/Glomfjord CN/NPK (4Q 2017) 500 Rio Gr. 250
Slide 22: Yara Improvement Program well on track, despite plant outages
Yara Improvement Program well on track, despite plant outages Program progress Financial benefits Annualized EBITDA improvement, $MM, vs. 2015 baseline, 2017 2018 2019 2020 at 2015 prices 500 Start: Today End: 2016 2020 Program progressing according to plan 120 150 64 90 Yara Productivity System
Slide 23: Major improvement and growth investments in 2017; main earnings improvement from 2018 onwards
Major improvement and growth investments in 2017; main earnings improvement from 2018 onwards Improvement and growth capex1 (BNOK) Improvement program EBITDA improvement2 (MUSD) Committed expansions + M&A 11.8 1,150 1,000 1.4 500 650 450 300 Improvement program: 250 650 550 + 350 MUSD cost improveme
Slide 24: Additional information
Additional information IR – 18 July 2017
Slide 25: Growth and capex pipeline
Growth and capex pipeline Capex plan1 Production growth 2015 - 20202 NOK bn 17.9 Finished products3 Ammonia 1.7 Cost&capacity improvements 2) 14.2 M&A Mill.tons 24.0 3.3 9.0 Committed growth 1.5 0.4 Maintenance 2.5 10.7 1.2 7.1 1.7 6.9 1.2 0.3 7.7 7.0 0.4 3.1 19.2 0.7 1.3 0.2 0.2 0.5 0.3 0.7 1.1 1.6
Slide 26: Improvement and growth investments; earnings and sensitivities
Improvement and growth investments; earnings and sensitivities EBITDA improvement1 (MUSD) Improvement program: Impact2 of +100 USD/t price change (NOK/share) 1,150 1,000 500 450 0.8 650 0.5 300 250 650 550 104 150 350 40 100 Ammonia Urea 2016 2017 2018 2019 2020 Growth: Impact2 of +100 USD/t price c
Slide 27: 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 2010 2011 2012 2013 2014 2015 2016 2017 Europe Outside Europe IR – 18 July 2017 27
Slide 28: Yara 2Q fertilizer deliveries by market and product
Yara 2Q fertilizer deliveries by market and product Kilotons 2,292 2Q16 2Q17 2,039 2,165 1,986 1,143 961 633 653 569 586 298 302 Europe Brazil Latin America North America Asia Africa 1,189 1,363 1,326 1,239 1,150 1,207 1,132 1,124 1,116 1,136 483 465 343 355 Compound NPK1 Blend NPK Nitrate Urea Othe
Slide 29: Fertilizer deliveries by product and source
Fertilizer deliveries by product and source Kilotons 1,494 1,562 1,363 1,326 1,239 1,136 1,132 1,189 1,124 1,116 483 465 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – 18 Ju
Slide 30: Strong premium product deliveries
Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 4,000 406 3,500 360 349 327 3,000 294 296 279 2,500 248 2,000 204 201 204 CAGR 147 1,500 4% 1,000 83 48 52 500 0 2Q13 2Q14 2Q15 2Q16 2Q17 Asia Brazil Latin Africa North America excl. America Outsi
Slide 31: YaraMila (compound NPK) and YaraBela (nitrate) 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 - 2Q13 2Q14 2Q15 2Q16 2Q17 2Q13 2Q14 2Q15 2Q16 2Q17 Outside Europe Europe
Slide 32: Industrial volume development
Industrial volume development Kilotons 967 939 892 900 912 849 852 864 859 847 866 815 829 663 637 640 577 571 572 540 541 538 511 482 456 438 380 364 385 361 346 333 328 310 299 177 171 152 135 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Industrial N-chemicals Environmental pro
Slide 33: AdBlue deliveries
AdBlue deliveries Kilotons 600 500 400 300 200 100 0 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 IR – 18 July 2017 33
Slide 34: Debt/equity ratio
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.22 0.18 0.17 0.17 0.15 0.16 0.14 0.13 0.13 0.11 0.07 0.08 0.08 0.06 0.06 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2012 2013 2014 2015 2016 2017 IR – 18 July 2017 34
Slide 35: Yara stocks
Yara stocks Kilotons Finished fertilizer Bunge Fertilizer included from 3Q 2013 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR – 18 July 2017 35
Slide 36: Seasonal deliveries stable in Europe, down in USA
Seasonal deliveries stable in Europe, down in USA Million tons N West Europe Million tons N US 9.0 20.0 -5% +1% 8.0 18.0 7.0 16.0 6.0 14.0 12.0 5.0 10.0 4.0 8.0 3.0 6.0 2.0 4.0 1.0 2.0 0.0 0.0 12/13 13/14 14/15 15/16 16/17 12/13 13/14 14/15 15/16 16/17 Domestic Imports Production Net imports Source:
Slide 37: Chinese urea production suffering from increased production costs, domestic demand lower this season
Chinese urea production suffering from increased production costs, domestic demand lower this season Chinese urea production Domestic urea balance Million tons Million tons 7.0 80 15/16 70.8 70 14/15 -14% 6.5 59.4 60 57.2 11.3 51.3 50 6.0 6.0 40 5.5 30 20 5.0 10 16/17 0 4.5 Export Export Domestic Do
Slide 38: Increased coal prices drove nitrogen prices higher
Increased coal prices drove nitrogen prices higher Coal price in China (fob Qinhuangdao 5500, RMB/mt) China anthracite and urea prices (RMB/mt) 800 700 2017 2016 600 500 400 300 2015 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IHS, CFMW IR – 18 July 2017 38
Slide 39: 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 12/13 13/14 14/15 15/16 Source: Fertilizers Europe, Yara estimate for June IR – 18 July 2017 39
Slide 40: Energy cost
Energy cost Yearly averages 2009 – 2015, quarterly averages for 2016-17 with forward prices* for 3Q17 and 4Q17. 11.0 11.4 10.7 10.5 9.1 9.2 9.4 7.6 8.2 8.1 7.1 6.5 6.6 8.0 8.0 6.6 6.4 5.6 5.6 6.9 5.3 5.4 5.0 4.6 4.9 5.8 5.0 5.3 5.7 5.4 5.0 4.7 5.5 5.3 4.8 4.2 4.4 4.2 4.7 4.5 4.7 4.4 4.4 4.3 4.0 4.0
Slide 41: Reduction in grain inventories expected for this season
Reduction in grain inventories expected for this season Grain consumption and production Days of consumption in stocks Million tons Days 2,650 95 2,600 2,550 90 2,500 85 2,450 2,400 80 2,350 2,300 75 2,250 2,200 70 2,150 65 2,100 2,050 60 2,000 1,950 55 08 09 10 11 12 13 14 15 16 17E 18F 08 09 10 11
Slide 42: 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 Jan-17 Source: US Commodity Futures Trading Commission IR – 18 July 2017 42
Slide 43: Relatively weak grain and food production economics
Relatively weak grain and food production economics 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 1/2017 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – 18 July 2017 43
Slide 44: 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) 5.8 5.4 5.0 4.3 4.2 265 233 242 231 198 208 183 193 206 190 201 197 184 198 166 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 2
Slide 45: 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 USD/t Urea prilled fob Black Sea/Urea granular fo