Yara International Asa · OSL:YAR
Yara International Asa — Q1 2017 Earnings Presentation
47 slides from Yara International Asa's earnings presentation, Apr 27, 2017
Slide 1: Yara International ASA 1Q17 results roadshow
Yara International ASA 1Q17 results roadshow Torgeir Kvidal, CFO Kjetil Storås, Investor Relations
Slide 2: Summary first quarter
Summary first quarter Weaker results reflecting lower margins Strong finished fertilizer production, but lower ammonia production Strong Industrial result Improvement program on track IR – 26 April 2017 2
Slide 3: 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 3,504 3,004 3,216 2,968 2,474 2,015 2014 2015 2016 YTD 2017 Annual
Slide 4: EBITDA development
EBITDA development NOK millions 5,055 95 784 738 9 124 279 3,216 EBITDA 1Q16 Volume Price/Margin Energy costs Currency Special Other EBITDA 1Q17 translation items IR – 26 April 2017 4
Slide 5: Strong finished fertilizer production; lower ammonia production
Strong finished fertilizer production; lower ammonia production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 +4% -6% 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 1Q fertilizer deliveries Yara 1Q premium product deliveries Kilotons Kilotons 8,000 +4% 500 Thousands +8% 6,000 450 4,000 400 2,000 350 0 300 Kilotons 2013 2014 2015 2016 2017 250 2,000 200 Thousands 1,500 0% 150 1,000 100 500 50 0
Slide 7: Strong Industrial volume development
Strong Industrial volume development Kilotons Kilotons AdBlue deliveries +17% 500 1,800 450 1,600 400 1,400 350 1,200 300 1,000 250 800 200 600 150 400 100 200 50 0 0 1Q16 1Q17 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 Other (ex. CO2) Industrial N-chemicals Environmental products IR – 2
Slide 8: Natural gas cost
Natural gas cost Yara European natural gas cost Change in global natural gas cost USD/ NOK MMBtu millions 7.0 1,000 730 6.5 800 187 530 6.0 600 430 400 180 5.5 180 543 200 350 5.0 250 0 4.5 (251) (200) 4.0 (704) (400) (923) (1,042) 3.5 (600) 3.0 (800) 2.5 (1,000) 2.0 (1,200) 1Q16 2Q16 3Q16 4Q16 1Q17
Slide 9: 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 Nitrate 60 400 premium above urea 50 300 Value above 40 ammonia Value 30 200 above gas 20 100 Yara EU gas co
Slide 10: Capacity additions outside China exceed consumption growth
Capacity additions outside China exceed consumption growth… Capacity additions, excl. China 8.2 (mill. tonnes urea1) Nigeria 0.7 Russia 0.1 Iran 1.8 Egypt 0.9 India 0.7 Indonesia 0.8 Bolivia 0.5 Saudi Arabia 0.5 Azerbaijan 0.4 Malaysia 0.3 5.1 Turkmenistan 0.3 Bangladesh 0.1 Indonesia 0.3 Argentina
Slide 11: Higher costs have reduced Chinese urea production and exports
…but higher production and logistical costs have significantly reduced Chinese urea production and exports Chinese urea production Chinese exports and urea price Black Sea Million tons Kilotons USD/t 7.0 2,400 550 15/16 2,200 500 6.5 14/15 2,000 450 1,800 400 1,600 350 6.0 1,400 300 1,200 250 5.5 1,
Slide 12: Program is still in early phase, but well on track
Program is still in early phase, but well on track Program progress Financial benefits 2017 2018 2019 2020 Annualized EBITDA improvement, $MM, vs. 2015 baseline, at 2015 prices Start: Today End: 2016 2020 500 Program progressing according to plan: Productivity system pilots rolled out 150 and im
Slide 13: The Yara Productivity System roll-out is showing good results
The Yara Productivity System roll-out is showing good results Record production for Uusikaupunki1 and Sluiskil Estimated improvement potential confirmed Improvement potential in first 3 plants Total production at site, thousand tonnes1 (Sluiskil, Uusikaupunki and Belle Plaine) Expansion Base product
Slide 14: Major improvement and growth investments in 2016-2017
Major improvement and growth investments in 2016-2017; main earnings improvement from 2018-2020 Improvement and growth capex1 (BNOK) Improvement program EBITDA improvement (MUSD) Growth 12.2 1,100 950 1.4 500 700 Improvement program: 350 600 + 350 MUSD cost improvement 164 +150 MUSD volume improveme
Slide 15: Additional information
Additional information IR – 26 April 2017
Slide 16: 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 '16 Feb Mar Apr May June Jul Aug Sep Oct Nov Dec Jan '17 Feb Mar 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per o
Slide 17: 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 2.65 9.58 9.16 8.26 8.17 7.62 7.03 7.74 6.74 6.19 6.18 6.40 5.01 3.97 3.46 1.58 3.00 1.66 -1.22 2014 2015 2016 YTD 2017 Annual NOK 27.59 29.38 23.25 6.19 *Average number of shares for 1Q 2017: 273.2
Slide 18: Strong growth and profitability track record
Strong growth and profitability track record 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 9.5 %
Slide 19: 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 – 26 April 2017 19
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 (2015/16 season volume) NPK blends Standard products 19% (Urea, UAN, Ammonia) 36% 24% Specialty 21% (CN, Compound NPK, Differentiated products Fertigation) (CAN, AN) IR – 26 April 2017 20
Slide 21: Sustaining profitable growth and competitive edge within three focus areas
Sustaining profitable growth and competitive edge within three focus areas Implications of market outlook Strategic response 1 • Increased relative strength of integrated Organic growth and Shape the markets where we are business model market development present, and grow our positions • Reduced tra
Slide 22: 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 23: 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 24: 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 25: Brazil: focus on premium products and solutions drives growth
Brazil: focus on premium products and solutions drives growth Brazil 2016 fertilizer deliveries Yara premium product deliveries Kilotons Kilotons 40,000 +13% 1,800 Thousands 30,000 1,600 +57% 20,000 1,400 10,000 1,200 0 1,000 Kilotons 2012 2013 2014 2015 2016 10,000 800 Thousands 8,000 +14% 600 6,00
Slide 26: Yara growth project pipeline adds ~6 NOK earnings per share by 2020
Yara growth project pipeline adds ~6 NOK earnings per share by 2020 at current market prices Profitable growth through expansions and M&A Incremental earnings at current prices1 (NOK/share) CN/NPK expansion Porsgrunn (2H 2017) 6.1 4.2 Expand premium products NPK expansion Uusikaupunki (2H 2016)
Slide 27: Growth and capex pipeline
Growth and capex pipeline Capex plan1 Production growth 2015 - 20202 NOK bn 18.8 Finished products3 Ammonia 1.9 Cost&capacity improvements 2) M&A Mill.tons 24.1 14.2 3.5 9.0 Committed growth 1.5 Maintenance 2.6 0.4 11.0 1.2 7.3 1.7 1.2 0.3 6.9 7.6 7.0 0.4 3.5 19.2 0.7 0.2 1.4 0.2 0.3 0.7 0.5 1.1 1.6
Slide 28: Yara 1Q fertilizer deliveries by market and product
Yara 1Q fertilizer deliveries by market and product Kilotons 2,733 2,754 1Q16 1Q17 1,589 1,562 735 756 429 469 400 525 342 293 Europe Brazil Latin America North America Asia Africa 1,536 1,445 1,511 1,308 1,175 1,158 879 863 786 672 354 320 283 299 Compound NPK1 Blend NPK Nitrate Urea Other products
Slide 29: 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 – 26 April 2017 29
Slide 30: Fertilizer deliveries by product and source
Fertilizer deliveries by product and source Kilotons 1,536 1,445 1,511 1,308 1,175 1,158 1,068 971 879 863 354 320 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – 26 April 20
Slide 31: 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 - 1Q13 1Q14 1Q15 1Q16 1Q17 1Q13 1Q14 1Q15 1Q16 1Q17 Outside Europe Europe
Slide 32: Strong premium product deliveries
Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 4,000 433 3,500 401 3,000 292 305 296 2,500 225 229 2,000 199 197 188 CAGR 172 180 1,500 9% 1,000 500 33 30 46 0 1Q13 1Q14 1Q15 1Q16 1Q17 Asia Brazil Latin Africa North America excl. America Outsi
Slide 33: Value-added and distribution make up larger part of Yara's contribution
Value-added and distribution make up larger part of Yara’s contribution NOK millions Total Yara contribution 11,000 10,000 9,000 8,000 Trade 7,000 6,000 5,000 Upgrade & distribution 4,000 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3
Slide 34: AdBlue deliveries
AdBlue deliveries Kilotons 500 450 400 350 300 250 200 150 100 50 0 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 IR – 26 April 2017 34
Slide 35: Debt/equity ratio
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.18 0.17 0.17 0.15 0.16 0.14 0.13 0.13 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 2012 2013 2014 2015 2016 2017 IR – 26 April 2017 35
Slide 36: Net interest-bearing debt development
Net interest-bearing debt development NOK millions 14,454 584 649 1,167 12,802 2,555 2,136 Net debt Cash earnings* Investments (net) Net operating Foreign currency Other Net debt Dec 16 capital change translation loss Mar 17 * Operating income plus depreciation and amortization, minus tax paid, net
Slide 37: 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 – 26 April 2017 37
Slide 38: Season to date deliveries up in Europe, down in USA
Season to date deliveries up in Europe, down in USA Million tons N West Europe Million tons N US 7.0 16.0 +3% -5% 6.0 14.0 5.0 12.0 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: Yara estimate f
Slide 39: Chinese urea production suffering from increased production costs
Chinese urea production suffering from increased production costs, domestic demand lower this season Million tons Chinese urea production Domestic urea supply Million tons 7.0 60 15/16 51.7 14/15 50 6.5 42.7 -13% 41.8 40 9.1 37.2 6.0 4.6 30 5.5 20 5.0 10 16/17 4.5 0 Production Export Export Domestic
Slide 40: Increasing coal prices drove nitrogen prices higher
Increasing 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 – 26 April 2017 40
Slide 41: 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 March IR – 26 April 2017 41
Slide 42: Energy cost
Energy cost Yearly averages 2009 – 2014, quarterly averages for 2015-17 with forward prices* for 2Q17 and 3Q17. 11.0 11.4 10.7 10.5 9.1 9.2 9.4 7.6 7.6 7.5 8.1 7.0 6.5 6.6 8.2 8.0 8.0 7.0 6.2 6.6 6.8 5.3 5.5 5.5 6.9 6.5 5.8 5.0 4.6 4.9 5.4 5.0 5.7 5.9 5.7 5.4 5.0 4.7 5.3 4.2 5.2 5.3 4.7 4.8 4.2 4.4
Slide 43: Balanced grain market forecasted for this season
Balanced grain market forecasted for this season, stable stock-to-use ratio, despite a record crop 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 07
Slide 44: 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 – 26 April 2017 44
Slide 45: 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 – 26 April 2017 45
Slide 46: 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 4.3 4.2 265 249 4.1 233 233 242 231 207 198 208 183 193 206 197 184 166 1Q16 2Q16 3Q16 4Q16 1Q17 1Q16 2Q16 3Q16 4Q16 1Q17 1
Slide 47: 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