Yara International Asa · OSL:YAR
Yara International Asa — Q3 2017 Earnings Presentation
51 slides from Yara International Asa's earnings presentation, Oct 23, 2017
Slide 1: Yara International ASA 3Q17 results roadshow
Yara International ASA 3Q17 results roadshow Torgeir Kvidal, CFO Nina Kleiv, Investor Relations
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 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep '16 '17 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medica
Slide 3: Summary third quarter
Summary third quarter Strong production performance Improvement program ahead of schedule Results reflect lower commodity fertilizer margins IR – October 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 3.21 1.58 2.90 3.00 2.60 2.56 1.58 -1.22 2014 2015 2016 YTD 2017 Annual NOK 27.59 29.38 23.25 11.35 *Average number of share
Slide 5: Higher finished fertilizer and ammonia production
Higher finished fertilizer and ammonia production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 +8% +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) Including sha
Slide 6: Yara Improvement Program ahead of schedule
Yara Improvement Program ahead of schedule Program progress Financial benefits Annualized EBITDA improvement, USD million, vs. 2015 2017 2018 2019 2020 baseline, at 2015 prices 500 Start: Today End: 2016 2020 Program still progressing according 210 to plan, with benefits ahead of target 120 150 64
Slide 7: Yara Productivity System in practice
Base production (excluding effect of Yara Productivity System in practice planned maintenance stops) Total production at site, thousand tonnes Uusikaupunki 292 3321 262 +14% Sluiskil 1,476 1,444 1,505 +2% Belle Plaine 490 535 439 +9% 3Q15 3Q16 3Q17 IR – October 2017 7 1 Includes 58kt production volu
Slide 8: EBITDA: Higher energy cost and weaker US dollar more than offset higher deliveries
EBITDA: Higher energy cost and weaker US dollar more than offset the impact of higher deliveries NOK millions 36 439 357 3,004 214 379 144 2,386 EBITDA 3Q16 Volume Price/Margin Energy costs Currency Special Other EBITDA 3Q17 translation items IR – October 2017 8
Slide 9: Higher natural gas cost expected for the next two quarters
Higher natural gas cost expected for the next two quarters Yara European natural gas cost Change in global natural gas cost USD/ NOK MMBtu millions 8.0 1,000 800 7.0 600 187 410 6.0 169 400 100 543 161 200 382 310 5.0 212 130 0 4.0 (251) (200) (400) (704) 3.0 (600) 2.0 (800) 3Q16 4Q16 1Q17 2Q17 3Q17
Slide 10: Higher European nitrate premiums
Higher European nitrate premiums Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 600 90 80 500 70 400 Nitrate 60 premium above urea 50 300 Value above 40 ammonia 200 30 Value above gas 20 100 Yara EU gas cost *20 10 0 0 3Q14 1Q
Slide 11: 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 300 200 NH3, fob Black Sea *0.22 U
Slide 12: Strong urea oversupply outside China
Strong urea oversupply outside China…… Capacity additions, excl. China 7.2 (mill. tonnes urea) Nigeria 0.7 Egypt 0.6 Russia 0.2 Indonesia 0.5 India 0.9 Saudi Arabia 0.5 Iran 1.4 Bolivia 0.5 Malaysia 0.3 Azerbaijan 0.5 Bangladesh 0.1 Vietnam 0.1 4.7 Turkmenistan 0.3 Indonesia 0.1 Romania -0.8 Kuwait
Slide 13: Higher domestic price and lower exports from China offsetting oversupply
….but higher domestic price and lower exports from China are offsetting oversupply elsewhere Increasing urea pricing Chinese exports USD/t Kilotons 390 2,400 370 2,200 350 2,000 1,800 330 1,600 310 1,400 290 1,200 270 1,000 250 800 230 600 210 400 190 200 170 0 Urea fob Black Sea Urea prilled fob Ch
Slide 14: China domestic pricing and utilization
China domestic pricing and utilization China anthracite and urea prices (RMB/mt) Urea plant utilization rate (%) Source: CFMW IR – October 2017 14
Slide 15: Import catch-up need in India
Import catch-up need in India Calendar year Season-to-date (Apr – Aug) +2.7% + 3% +1.5% 32.5 31.5 29.6 29.7 30.2 - 2% 29.4 Million 12.1 Million 11.8 tonnes 26.9 27.3 tonnes 26.4 25.5 24.4 9.9 23.5 23.7 9.7 22.6 22.3 23.0 22.7 21.5 22.0 20.8 20.7 19.7 20.1 20.0 2005 2016 2016 2017 Production Sales IR
Slide 16: Major improvement and growth investments in 2017; earnings improvement from 2018
Major improvement and growth investments in 2017; main earnings improvement from 2018 onwards1 Improvement and growth capex2 (BNOK) Improvement program EBITDA improvement3 (MUSD) Committed expansions + M&A 11.4 1,100 850 1.3 500 600 450 Improvement program: 250 300 600 + 350 MUSD cost improvement 10
Slide 17: Additional information
Additional information IR – 18 July 2017
Slide 18: Integrated business model creates value through scale, flexibility and value chain presence
Integrated business model creates value through scale, flexibility and value chain presence IR – October 2017 18
Slide 19: We sold 34.1 million tonnes of products and solutions globally in 2016
We sold 34.1 million tonnes of products and solutions globally in 2016 9.4 3.1 4.7 1.0 Europe 2.1 North 41.4% 0.2 America 12.1% Asia 6.6% 2.2 1.2 0.3 0.3 Africa 4.4% Latin America ex. Brazil 7.3% Sales figures mill. tonnes 9.2 Fertilizers 0.4 Industrial products & solutions %= total sales Brazil 28.
Slide 20: Differentiated product portfolio represents a key source of competitive edge
Differentiated product portfolio represents a key source of competitive edge Fertilizer product portfolio (2016/17 season volume) NPK blends Standard products 19% (Urea, UAN, Ammonia) 34% 26% Specialty 21% (CN, Compound NPK, Differentiated products Fertigation) (CAN, AN) IR – October 2017 20
Slide 21: Strong growth and profitability through the cycle
Strong growth and profitability through the cycle Average cash return on gross investment (CROGI) Average annual shareholder return of 23%1 well above the Yara CROGI target of 10% NOK/share 400 0 160 22.8% 20.9% 350 140 0 300 17.4% 17.3% 120 16.1% 14.4% 100 250 0 14.1% 14.1% 13.3%14.0% 12.6% 80 200
Slide 22: Growth pipeline focused on premium and industrial products
Yara has expected commodity nitrogen oversupply, 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 23: Growth and capex pipeline
Growth and capex pipeline Capex plan1 Production growth 2015 - 20203 NOK bn 16.5 Finished products4 Ammonia Cost&capacity improvements 2) 1.5 M&A 14.2 Mill.tons 23.8 9.0 Committed growth 1.5 3.5 Maintenance 0.4 2.3 1.2 10.9 1.6 1.2 0.3 7.0 0.4 6.9 6.3 0.7 0.2 7.5 19.2 0.2 3.0 0.7 1.3 0.3 1.1 0.4 1.6
Slide 24: Improvement and growth investments; earnings and sensitivities
Improvement and growth investments; earnings and sensitivities1 EBITDA improvement2 (MUSD) Improvement program: Impact3 of +100 USD/t price change (NOK/share) 1,100 850 500 0.7 600 450 0.4 300 250 600 104 150 400 300 40 100 Ammonia Urea 2016 2017 2018 2019 2020 Growth: Impact3 of +100 USD/t price ch
Slide 25: Yara Improvement Program targets sustained improvement of minimum $500MM EBITDA
Yara Improvement Program targets sustained improvement of minimum $500MM EBITDA, plus cash benefits USD$MM, vs. 2015 baseline and 2015 prices 500 ~450 Production volume ~30% Sustained ~300 Consumption factor ~15% EBITDA ~150 ~30% Variable unit cost improvement 641 Fixed cost ~25% Sustained capex Sus
Slide 26: The improvement program is organized into concrete projects
The improvement program is organized into concrete projects across the company Improve safety, customer Support function Standardize processes in supply Yara Productivity responsiveness, reliability, cost, chain and finance to improve efficiency and EBITDA target1 System productivity and quality on
Slide 27: Volume and energy consumption improvement targets
Volume and energy consumption improvement targets Ammonia production, Finished fertilizers production, thousand tonnes thousand tonnes 6,471 ~18,7001 ~6,4001 ~700 Production ~400 17,961 volume 697 243 5,755 17,348 2015 2016 2020 2015 2016 2020 Energy consumption, Mmbtu (HHV2) per tonne Ammonia Ammon
Slide 28: Yara has invested for the long term in Brazil
Yara has invested for the long term in Brazil; Bunge acquisition brought critical mass in distribution Volume (MM tons) 9.3 8.2 7.8 3.2 3.3 2.8 2.7 2.4 2.2 2.2 1.8 2.0 1.7 1.8 1.3 1.5 0.8 0.5 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Acquisition Acquisition Acquisition Divestment Acquisi
Slide 29: Yara Brazil today: unrivalled market presence and farmer-centric strategy
Yara Brazil today: 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, p
Slide 30: Crop Value Index – a key guide to our approach
Crop Value Index – a key guide to our approach What is CVI: Crop revenue High value, Low volume Fertilizer costs Double price premium for high quality 2% yield increase= +1200 USD/ha Take the position in cash crop – but not enough scale Key parameters: Quality and yield Build positions for crop with
Slide 31: Brazil: focus on premium products and solutions drives growth
Brazil: focus on premium products and solutions drives growth Brazil season-to-date fertilizer deliveries Brazil season-to-date premium product deliveries Kilotons Kilotons 30,000 +1% 1,600 Thousands 25,000 +21% 20,000 3Q 1,400 15,000 1,200 3Q 10,000 1H 5,000 1,000 0 Kilotons 2013 2014 2015 2016 201
Slide 32: 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 2,728 3,216 2,873 2,968 2,474 2,386 2,015 2014 2
Slide 33: Lower net interest-bearing debt
Lower net interest-bearing debt as cash earnings and currency effects more than offset investments NOK millions 139 16,831 745 16,476 2,900 2,142 229 Net debt Cash earnings* Net operating Investments (net) Foreign currency Other Net debt Jun 17 capital change translation loss Sep 17 * Operating inco
Slide 34: Debt/equity ratio
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.22 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 – October 2017 34
Slide 35: 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 – October 2017 35
Slide 36: Yara 3Q fertilizer deliveries by market and product
Yara 3Q fertilizer deliveries by market and product Kilotons 3,190 3,325 3Q16 3Q17 2,100 2,123 619 650 655 591 557 427 322 404 Europe Brazil Latin America North America Asia Africa 1,750 1,545 1,419 1,473 1,468 1,473 1,463 1,194 1,190 913 229 281 279 284 Compound NPK1 Blend NPK Nitrate Urea Other pr
Slide 37: Fertilizer deliveries by product and source
Fertilizer deliveries by product and source Kilotons 1,750 1,747 1,545 1,468 1,473 1,419 1,473 1,469 1,194 913 229 281 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – October
Slide 38: Strong premium product deliveries
Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 4,000 618 3,500 517 3,000 2,500 398 2,000 305 300 302 268 250 1,500 CAGR 236 16% 1,000 128 117 85 84 78 500 37 0 3Q13 3Q14 3Q15 3Q16 3Q17 Asia Brazil Latin Africa North America excl. America Outsi
Slide 39: YaraMila and YaraBela deliveries
YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Yara-produced YaraBela deliveries Kilotons Kilotons 1,600 1600 1,400 1400 1,200 1200 1,000 1000 800 800 600 600 400 400 200 200 0 0 3Q13 3Q14 3Q15 3Q16 3Q17 3Q13 3Q14 3Q15 3Q16 3Q17 Outside Europe Europe Outs
Slide 40: AdBlue deliveries
AdBlue deliveries Kilotons 600 500 400 300 200 100 0 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 IR – October 2017 40
Slide 41: Industrial volume development
Industrial volume development Kilotons 967 939 938 892 900 912 866 849 852 864 859 847 866 816 815 829 663 637 640 618 577 571 572 540 541 538 511 482 456 438 432 382 380 385 367 361 346 364 339 333 328 310 299 177 171 172 152 135 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
Slide 42: 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 – October 2017 42
Slide 43: Normal start to the European fertilizer season, slow in USA
Normal start to the European fertilizer season, slow in USA like last season West Europe USA Million tons N Million tons N +1% 1.8 4.5 1.6 4.0 +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 3Q13 3Q14 3Q15 3Q16 3Q17 3Q13 3Q14 3Q15 3Q16 3Q17 Domestic Imports Domestic Net imports S
Slide 44: 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 17/18 12/13 13/14 14/15 15/16 16/17 Source: Fertilizers Europe, Yara estimate for September IR – October 2017 44
Slide 45: Chinese urea production and domestic balance
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 46: 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 600 2016 500 400 300 2015 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IHS, CFMW IR – October 2017 46
Slide 47: Energy cost
Energy cost Yearly averages 2009 – 2015, quarterly averages for 2016-18 with forward prices* for 4Q17 and 1Q18. 11.0 11.4 10.7 10.5 9.1 9.2 9.4 7.6 8.1 7.1 6.9 8.2 6.5 6.5 6.6 8.0 8.0 6.6 5.7 6.3 6.9 6.4 5.6 6.2 5.0 4.9 5.3 4.6 5.8 5.0 5.5 5.7 5.4 4.7 5.5 5.4 5.3 5.1 4.8 4.2 4.4 4.2 4.7 4.6 4.4 4.4
Slide 48: Reduced inventories expected for the 2017/18 season
Reduced inventories expected for the 2017/18 season Grain consumption and production Days of consumption in stocks Million tons Days 2,650 100 2,600 95 2,550 2,500 90 2,450 2,400 85 2,350 80 2,300 2,250 75 2,200 70 2,150 2,100 65 2,050 60 2,000 1,950 55 08 09 10 11 12 13 14 15 16 17E 18F 08 09 10 11
Slide 49: 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 – October 2017 49
Slide 50: Relatively weak grain economics
Relatively weak grain 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 – October 2017 50
Slide 51: 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 5.5 5.4 5.0 4.2 265 233 242 234 231 206 190 201 207 198 205 183 193 166 184 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 3