Yara International Asa · OSL:YAR
Yara International Asa — Q2 2020 Earnings Presentation
35 slides from Yara International Asa's earnings presentation, Jul 17, 2020
Slide 1: Yara International ASA 2020 Second quarter results
Yara International ASA 2020 Second quarter results 17 July 2020
Slide 2: Safety is our first priority
Safety is our first priority Ensuring a safe workplace for employees and partners with zero as our ambition TRI1 (12-month rolling) 5 4 3 2 1.3 1 0 2Q16 2Q20 1 Total Recordable Injuries per 1 million working hours 2
Slide 3: Continued growth in earnings and cash flow
Continued growth in earnings and cash flow Earnings improvement continuing Increased 2Q earnings and cash flow L12M EBITDA ex. special items (MUSD)1 • EBITDA1 up 8%, mainly reflecting improved margins and lower fixed cost 2 500 − Impact of weaker fertilizer prices more than offset by lower energy co
Slide 4: Lower urea and natural gas prices; resilient nitrate and NPK prices
Lower urea and natural gas prices; resilient nitrate and NPK prices Lower urea prices Lower natural gas prices Resilient nitrate and NPK prices Urea price development1 (USD/t) Spot gas prices1 (USD/Mmbtu) Yara realized CAN2 and NPK price3 (USD/t) -19% -12% -17% -60% 293 464 273 4.3 408 238 226 -34%
Slide 5: Improved margins and lower fixed cost
Improved margins and lower fixed cost ROIC2 EBITDA ex. special items (MUSD)1 588 3 546 42 37 110 70 Fixed cost: +23 Portfolio: -19 Other: -7 2Q19 Volume/Mix Price/Margin Energy costs Currency Other 2Q20 7.1% 9.0% 1) EBITDA ex. special items. For definition and reconciliation see APM section of 2Q 20
Slide 6: Improving cash flow trend – USD 1 billion rolling twelve months
Improving cash flow trend – USD 1 billion rolling twelve months Free cash flow before financing activities1 Comments USD millions, rolling 4 quarters Operations • Strategy execution driving Investments improved earnings and lower Free cash flow capital expenditure 1,008 863 845 • USD 1.2 billion fre
Slide 7: New organizational structure reinforces strategy execution
New organizational structure reinforces strategy execution Empowering local operations, strengthening accountability and driving customer centricity Yara International Svein Tore Holsether Corporate functions Industrial Solutions Farming Solutions Jorge Noval Lars Røsæg, Pablo Barrera Lopez, Kristin
Slide 8: Performance overview
Performance overview EBITDA ex. Special items EPS ex. currency and special items ROIC (USD millions) (USD per share) (12-month rolling) 546 588 1.06 0.77 7.3% 5.4% 2Q19 2Q20 2Q19 2Q20 2Q19 2Q20 Change in net operating capital Investments (net) Cash from operations (USD millions) (USD millions) (USD
Slide 9: Margin improvements in both Production and Sales and Marketing
Margin improvements in both Production and Sales and Marketing 2Q19 EBITDA ex. special items1 (MUSD) 2Q20 324 308 244 196 37 25 Production Sales and Marketing New Business • Focus on operational continuity • Improved results mainly reflect higher • Main Covid-19 impact on Maritime • Lower gas prices
Slide 10: Committed investments unchanged, phasing into 2021 may occur
Committed investments unchanged, phasing into 2021 may occur Capex plan1 USD Billions 2.2 Growth - acquisitions Cost&capacity improvements Growth - expansions Maintenance 0.7 1.6 0.0 0.5 1.2 0.6 1.1 1.0 0.4 0.2 0.5 0.2 0.2 0.2 0.1 0.8 0.8 0.7 0.6 0.6 2017 2018 2019 2020 2021 1) Committed investments
Slide 11: Lower net interest-bearing debt
Lower net interest-bearing debt 2Q development Comments USD millions • Cash earnings fully funded annual 3,723 dividend payment 3,577 19 449 401 • Operating capital release driven 219 by conversion of receivables in 139 Europe and seasonal prepayments in Brazil • Net debt/EBITDA3 ratio at 1.6, down
Slide 12: Yara's governance updated to reflect a holistic performance approach
Yara’s governance updated to reflect a holistic performance approach, driving sustainable value creation • Board Audit Committee expanded to Board Audit and Sustainability Committee • Sustainability Governance reporting directly to the CFO, utilizing existing reporting and control mechanisms to incr
Slide 13: Improvement program status: production volume KPIs
Improvement program status: production volume KPIs¹ Ammonia production volumes, kt annualized Comments Qtr, annualized 2023 target 8,900 • Sustaining operations through Covid-19 is the 12 month rolling top priority in 2020, to avoid prolonged L12M outages 7,591 • Overall, operations have run without
Slide 14: Production reliability: status and actions
Production reliability: status and actions Current status Focus going forward People and organization • Production volume growth last 3 years: ~1 mill. tonnes ammonia and • Operational excellence unit: stronger ~2.4 mill. tonnes finished products prioritization and plant focus • Operational Committe
Slide 15: Improvement program: non-volume KPIs
Improvement program: non-volume KPIs Ammonia energy efficiency Fixed costs1 Operating capital2 GJ/ton MUSD Days 34.1 33.9 33.6 32.7 2,314 2,291 2,272 2,314 115 116 104 90 2018 2019 L12M 2023 2018 2019 L12M 2023 2018 2019 L12M 2023 target target target • Recent efficiency improvement mainly • Cost re
Slide 16: Sales & Marketing performance in the quarter
Sales & Marketing performance in the quarter Slight decrease in premium Lower revenues mainly reflect Increased EBITDA driven by higher deliveries reflects early spring lower commodity fertilizer prices margins and cost savings phasing in Europe Volumes (Mt) Revenues (BUSD) EBITDA ex. SI (MUSD) -2%
Slide 17: Lower deliveries in Europe and North America partly offset by increases in Brazil
Lower deliveries in Europe and North America partly offset by increases in Brazil Total deliveries 2Q19 Mill. tonnes 2Q20 -10% 3.0 +10% 2.7 2.5 2.2 Commodity -10% -4% 1.2 +5% 1.0 0.9 0.9 -2% Premium* 0.6 0.6 0.4 0.4 OPP 2.8 2.4 0.8 0.8 0.6 0.6 0.7 0.6 0.3 0.3 0.2 0.2 Europe Brazil Asia North Latin A
Slide 18: Strong full-season performance in Europe
Strong full-season performance in Europe Accumulated nitrate premium over the season Comments MUSD • Yara’s full-season nitrate deliveries were 250 up 3%, with a higher realized premium 200 • Yara kept nitrate prices stable despite negative urea price trend 150 • Urea price trend impacted deliveries
Slide 19: Our long term targets; increased premium product deliveries and higher margins
Our long term targets; increased premium product deliveries and higher margins Increase premium product Increase YaraVita deliveries to Increase EBITDA margin deliveries by > 3.5 mill tonnes > 100 million units Premium products in mill. tonnes YaraVita in mill. units EBITDA margin in USD/tonne1 +27%
Slide 20: Strong growth in user adoption for digital farming
Strong growth in user adoption for digital farming Growing our reach in the professional segment Strong user adoption in smallholder segment Farmland under management1) Farmweather users Million Hectares Million Users 13.0 2.1 10.4 5.6 0.8 2.2 May May Dec May May May Dec May 2018 2019 2019 2020 AtFa
Slide 21: Farming Solutions - four strategic positions to secure leadership
Farming Solutions - four strategic positions to secure leadership Strategic positions: What it means: Secure intimate • Build a farmer & advisor platform aiming to deliver digital connectivity to 100 million hectares in connectivity to farm professional markets and 50 million hectares within smallho
Slide 22: The transformation can be viewed across key financial dimensions
The transformation can be viewed across 3 key financial dimensions Examples Change business model Transform channel New offering New region/ segment 2 Shift from traditional 1 Shift distributor sales to outcome- business to direct-to- “Shifting” existing Yara business based model farm online platfor
Slide 23: Attractive Yara prospects
Attractive Yara prospects Attractive industry Operating cash flow Focused long-term strategy fundamentals improvement • Growing population and dietary • Operating cash flow improving with • Crop nutrition focus; #1 market improvement drives demand cycle and Yara actions presence and #1 premium ferti
Slide 24: The hidden costs of the global food system exceed its market value
The hidden costs of the global food system exceed its market value USD trillions, at 2018 prices • The hidden costs of the global food system exceed the current market value of world output 10.0 • A correctly priced agricultural value chain represents a massive business opportunity for sustainable f
Slide 25: Appendix
Appendix 7/16/2020 25
Slide 26: Delivering on our Strategy, our KPIs and our Ambition
Delivering on our Strategy, our KPIs and our Ambition Advance operational excellence Create scalable solutions Drive innovative growth Improving margins and nitrogen use Building closeness to farmers through Delivering improved operations and efficiency through premium product scaling up digital far
Slide 27: Flat nitrogen upgrading margin, global NPK premium lower than last year
Flat nitrogen upgrading margin, global NPK premium lower than last year Nitrogen upgrading margins1 NPK premium over blend2 USD/t (monthly publication prices) USD/t 500 450 Yara’s NPK price 142 CAN CFR 260 134 Weighted average global premium above blend cost Urea Egypt 260 CFR proxy Nitrate premium,
Slide 28: Energy cost
Energy cost Quarterly averages for 2018-2020 with forward prices* for 3Q20 and 4Q20 8.1 9.4 8.2 8.4 8.2 7.8 7.4 6.1 6.6 6.3 5.5 6.1 6.0 4.8 4.3 4.3 3.0 3.8 3.9 4.0 3.2 3.7 4.3 4.0 4.2 2.4 3.7 3.8 3.3 4.1 3.1 2.9 2.9 2.9 2.8 2.5 2.3 2.3 2.4 1.9 2.0 1.7 1.7 1.8 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20
Slide 29: Increased grain stocks excluding China forecasted for the coming season
Increased grain stocks excluding China forecasted for the coming season, stable FAO grain price index Grain stocks ex. China (left axis) and grain prices (right axis) Mill. tonnes Index 380 150 370 140 360 350 130 340 120 330 110 320 310 100 300 90 290 280 80 11 12 13 14 15 16 17 18 19 20E 21F Sourc
Slide 30: Yara stocks
Yara stocks Finished fertilizer Mill. tonnes 8 Other Compound NPK Nitrates Urea 0 Q2-16 Q2-17 Q2-18 Q2-19 Q2-20 30
Slide 31: European producers' nitrate stocks
European producers’ nitrate stocks Index June 2007 = 1 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 19/20 14/15 15/16 16/17 17/18 18/19 Source: Fertilizers Europe 31
Slide 32: Nitrogen supply growth is forecast to reduce significantly
Nitrogen supply growth is forecast to reduce significantly Global urea capacity additions ex. China (mill. tonnes) India Algeria Others Russia USA Production 6.7 Iran Nigeria 5.0 4.9 4.2 3.5 3.4 3.1 2.7% consumption growth 2.5 1.5 1.2 0.4 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source
Slide 33: Lower Chinese prices negatively affecting global urea prices
Lower Chinese prices negatively affecting global urea prices, global market also disconnecting for part of the quarter Urea price development1 (USD/t) 350 Urea fob Egypt Urea inland proxy China 170 Jul-16 Jun-20 1Source: BOABC, CFMW 33
Slide 34: Alternative performance measures
Alternative performance measures Alternative performance measures are defined, explained and reconciled to the Financial statements in the APM section of the Quarterly report on pages 33-38 34
Slide 35: 7/16/2020
7/16/2020 35