Yara International Asa · OSL:YAR
Yara International Asa — Bernstein (September 2017)
61 slides from Yara International Asa's conference presentation, Sep 28, 2017
Slide 1: Yara International ASA
Yara International ASA Bernstein 28 Sep 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 July '16 '17 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical tre
Slide 3: 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 – September 2017 3
Slide 4: 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 5: 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 – September 2017 5
Slide 6: 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 7: Major improvement and growth investments in 2016-2017; main earnings improvement from 2018-2020
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 8: Market
Market IR – September 2017 8
Slide 9: 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 10: Chinese urea production suffering from increased production costs
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 11: China domestic pricing and utilization
China domestic pricing and utilization Source: CFMW IR – September 2017 11
Slide 12: 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 13: 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 – September 2017 13
Slide 14: 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 15: China: increased coal prices drove nitrogen prices higher
China: 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 – September 2017 15
Slide 16: 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 17: 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 – September 2017 17
Slide 18: 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 19: 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
Slide 20: Growth & Improvement
Growth & Improvement IR – September 2017 20
Slide 21: Sustaining profitable growth and competitive edge within three focus areas
Sustaining profitable growth and competitive edge within three focus areas Organic growth and Continuous improvement Profitable step growth market development Bunge OFD Tata Urea Shape the markets where we are present and grow our positions Drive growth through M&A, as Fit for the future and well as
Slide 22: Growth pipeline focused 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 23: 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 24: 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 25: Benefits are realized through improvements to core value drivers
Benefits are realized through improvements to core value drivers Value driver How we improve How we know Increase production in our existing plants by ~400 kt additional ammonia and ~700 Volume1 improving reliability kt additional finished fertilizer production by 20206 Reduce spend on consumption f
Slide 26: 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 27: 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 28: The improvement program is organized into concrete projects across the company
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 29: 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 30: Business model and strategy
Business model and strategy IR – September 2017 30
Slide 31: Our global presence is unique within our industry
Our global presence is unique within our industry ~15 000 The number of people we employ +160 The number of countries we sell to +60 The number of countries we operate in 300 million 50 million 240 million 15 million people our products citizens our products tons of grains our The number of help to
Slide 32: Strategy execution is focused on improving our Competitive Edge
Strategy execution is focused on improving our Competitive Edge Knowledge Crop nutrition expertise Margin Knowledge-based industrial applications Global presence and scale Product stream optimization Global Operational Competitive Optimization Excellence edge and Scale Raw material efficiency Scale
Slide 33: Integrated business model at work in Brazil
Integrated business model at work in Brazil: combining differentiated product portfolio with strong market presence 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 60
Slide 34: 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 35: Brazil: continued growth into 2017
Brazil: continued growth into 2017 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 2,000 200 1,000 100 0 0 1H1
Slide 36: 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 – September 2017 36
Slide 37: Financial
Financial IR – September 2017 37
Slide 38: Financial discipline and active risk management guides our strategy
Financial discipline and active risk management guides our strategy Financial Policy Financial Targets Financial discipline will be the basis for the Long-term credit rating target development of Yara’s global leadership Mid investment grade (minimum Baa2/BBB) position Relative competitivene
Slide 39: Cash return target range 40-45% of net income
Cash return target range 40-45% of net income Dividend and buy-backs1 per share Share of net income 15.5 64% 0.5 14.1 13.8 57% 1.1 0.8 16% 53% 6% 11.9 48% 48% 48% 47% 6% 11.0 1.9 6% 1.0 41% 12% 6% 32% 25% 7.4 30% 15.0 0.4 7% 13.0 13.0 26% 5.4 5.5 23% 51% 5.3 21% 48% 47% 7% 19% 43% 4.5 0.8 10.0 10.0
Slide 40: European nitrate premiums
European nitrate premiums 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 EU gas cost *20 10 0 0 2Q14 4
Slide 41: Phosphate upgrading margins and compound NPK premiums
Phosphate upgrading 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 NH3, fo
Slide 42: 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 43: 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 44: 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 – September 2017 44
Slide 45: 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 46: 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 47: Production and Deliveries
Production and Deliveries IR – September 2017 47
Slide 48: Ammonia and finished fertilizer production
Ammonia and finished fertilizer 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) Including share of e
Slide 49: 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 – September 2017 49
Slide 50: 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 51: 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 – Septe
Slide 52: Premium product deliveries
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 Outside Euro
Slide 53: 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 54: 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 55: 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 – September 2017 55
Slide 56: 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 – September 2017 56
Slide 57: Operating segments
Operating segments IR – September 2017 57
Slide 58: Our business segments - Production
Our business segments - Production Our aspiration is to have the best safety performance, lowest production costs, best reliability and highest quality in the Chemicals industry, made possible by the most qualified, motivated, and satisfied work force driving continuous productivity improvement, com
Slide 59: Our business segments - Crop Nutrition
Our business segments - Crop Nutrition Our aspiration is to be the leading provider of sustainable crop nutrition solutions, supporting farmer profitability through knowledge, quality and productivity. • Global and local agronomic, marketing and sales knowledge • Presence in 57 countries and sales t
Slide 60: Our business segments - Industrial
Our business segments - Industrial Our aspiration is to make life safer, healthier and easier by leveraging our industry leading products, assets, technology and knowledge. • Reagents and solutions to reduce emissions from plants, ships, trucks and cars • Nitrate-based chemicals with applications ra
Slide 61: Our business segments – Supply Chain
Our business segments – Supply Chain Our aspiration is to create value by leveraging Yara’s knowledge and scale through global procurement, optimization of assets and efficient supply chain operations. • Unique ammonia trade and logistics worldwide • Purchase of energy, potassium, and phosphate rock