Yara International ASA · OSL:YAR
Yara International ASA — Investor Day (November 2005)
17 slides from Yara International ASA's investor day presentation, Nov 30, 2005
Slide 1: Agenda
Agenda z Introduction z Fertilizer market z Yara business model and strategy z Financial performance and scenarios z Business segments z Outlook and interactive feedback Date: 2005-11-30 Page: 7 7
Slide 2: Drivers of increased demand for Yara's products
Drivers of increased demand for Yara’s products z Fertilizer demand drivers Population growth/Reduction of hunger Economic growth – More meat consumption in developing countries – Focus on diets rich in proteins – Higher consumption of fruit and vegetables Biofuels – High energy prices increas
Slide 3: Fertilizer consumption driven by growth in emerging markets
Fertilizer consumption driven by growth in emerging markets Million tonnes nutrients 180 160 World 140 120 Developing 100 80 60 40 Developed 20 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004E In 2004 the world market for fertilizer was approximately USD 1
Slide 4: Grain stocks-to-use at 30-year low supporting high demand for fertilizer
Grain stocks-to-use at 30-year low supporting high demand for fertilizer Million tonnes Stocks 700 40% Percent 600 35% 30% 500 25% 400 20% 300 15% 200 10% 100 5% 0 0% 2006E 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 Source: US Department of Agriculture (USDA), Novembe
Slide 5: Grain prices close to historical averages
Grain prices close to historical averages 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/tonne USD/tonne 220 350 200 300 180 160 250 140 200 120 100 150 95 95 96 97 98 99 00 01 02 03 04 96 97 98 99 00 01 02 03 04 05 05 19 19 19 19 19 20 20 20 20 20 19 19 19 19
Slide 6: Increasing grain forward prices due to low inventories
Increasing grain forward prices due to low inventories Approximate nitrogen consumption per hectare in the United States Index 130 Corn (150 kg N/ha) 125 120 Wheat (75 kg N/ha) 115 Rice (150 kg N/ha) 110 Soybeans (30 kg N/ha) 105 100 95 90 85 80 Jun-06 Jul-06 Nov-06 Jan-06 May-06 Aug-06 Dec-05 Feb-0
Slide 7: Fertilizer prices above historical averages, mainly reflecting high energy prices
Fertilizer prices above historical averages, mainly reflecting high energy prices 10-year fertilizer prices – yearly averages until 2004 Ammonia fob Caribbean CAN cif Germany USD/tonne USD/tonne 300 200 250 150 200 150 100 100 50 50 0 0 1995 1997 1999 2001 2003 9M05 1995 1997 1999 2001 2003 9M05 USD
Slide 8: High energy prices increase the importance of biofuels going forward
High energy prices increase the importance of biofuels going forward World production Million gallons z In USA, 13% of corn crop is used for 10,000 ethanol production this year 9,000 8,000 7,000 z Ethanol is well-established in Brazil, 6,000 where roughly half of sugar production 5,000 is used for e
Slide 9: Potential industry concerns
Potential industry concerns Weaknesses and risks Industry mitigating factors z Over-investment at the high z Industry participants more rational, private part of the cycle investments replacing state funds z Fragmented industry z Spin-offs from chemical/energy companies are being followed by consoli
Slide 10: Potential concerns related to Yara
Potential concerns related to Yara Weaknesses and risks Yara mitigating factors z Exposure to cyclical raw z Operational excellence; high proportion material and end product of stable Downstream and Industrial prices activities z Spread between natural gas z US gas prices could remain higher for pri
Slide 11: New natural gas price regime in US lifts floor prices of nitrogen fertilizer
New natural gas price regime in US lifts “floor prices” of nitrogen fertilizer 350 300 250 Urea fob US Gulf (granular) USD/tonne 200 Cash cost 150 US Gulf* 100 50 0 1999 2000 2001 2002 2003 2004 9M05 2006 2007 * Future cash costs based on Henry Hub forward price for gas as of 9 November 2005 Source:
Slide 12: Yara has favorable gas cost due to production in low-cost gas areas and Europe
Yara has favorable gas cost due to production in low-cost gas areas and Europe Yearly averages 1995 – 2004, forward prices after 3Q 2005* USD/MMBtu 12 US spot gas (Henry Hub) 10 8 European spot gas 6 (Zeebrugge Hub) 4 Yara’s global 4.2 3.2 3.5 energy cost 2 2.6 2.5 2.3 (weighted average) 0 1995 1996
Slide 13: Brazilian urea import back to 2003 level
Brazilian urea import back to 2003 level kt urea 2,000 2004 1,800 2003 1,600 1,400 1,200 1,000 800 2005 600 400 200 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Global Trade Information Services (GTIS) Date: 2005-11-30 Page: 19 After the record-breaking 2004, drought and a stronger loca
Slide 14: Chinese urea exports 60% below last year
Chinese urea exports 60% below last year 4,500 4,000 2004 3,500 3,000 2,500 kt product 2,000 2003 1,500 1,000 2005 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -500 Source: BOABC Date: 2005-11-30 Page: 20 Export restrictions have caused a significant drop in Chinese urea exports in 2005. A
Slide 15: New capacity 2004-2009 is similar to historic consumption growth rates, except for China
New capacity 2004-2009 is similar to historic consumption growth rates, except for China Global urea capacity Year Driving regions growth estimate (excluding closures) World Excluding China World Ex. China 2004 2.9% 1.2% China 73% Qatar 49% Qatar 13% Indonesia 39% 2005 2.9% 2.3% China 49% Oman 45% O
Slide 16: Market consultants differ on future capacity expansions in China
Market consultants differ on future capacity expansions in China Year Chinese urea capacity growth estimate (excluding closures) Fertecon British Sulphur 2005 4.2% (2,080kt) 7.2% (3,020kt) 2006 10.7% (5,487kt) 5.4% (2,438kt) 2007 3.2% (1,827kt) 2.2% (1,050kt) 2008 9.3% (5,425kt) 3.8% (1,810kt) 2009
Slide 17: No dramatic change in global capacity utilization expected next few years
No dramatic change in global capacity utilization expected next few years Urea capacity utilization* 100% Technical constraints, 95% imprecise data etc. ~90-95% 90% Excluding obsolete plants 85% 84% 80% 75% 70% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E 2006E 2007E 2008E 2009E * Forward