Yara International Asa · OSL:YAR
Yara International Asa — Investor Day (March 2016)
119 slides from Yara International Asa's investor day presentation, Mar 1, 2016
Slide 1: Capital Markets Day
Yara International ASA Capital Markets Day 1 March 2016
Slide 2: Agenda
Agenda 08:30 Welcome Business model (15 mins) Svein Tore Holsether, President & CEO Crop Nutrition (25 mins) Terje Knutsen, Head of Crop Nutrition Research & Development (10 mins) Anke Kwast, Head of Product & Application R&D Brazil (20 mins) Lair Hanzen, Head of Yara Brasil 09:40 Coffee break (30 m
Slide 3: Business model
Business model 3
Slide 4: Safety is at the core of our operations and our license to operate
Safety is at the core of our operations and our license to operate How our facility in Paranagua, Brazil, works with safety Core beliefs about safety • Safety culture drives performance • All accidents are preventable • Safety is everyone's responsibility Daily Routine Toolbox Root cause analysis Me
Slide 5: 2014-2015: Growing and integrating assets, and re-focusing segment strategies
2014-2015: Growing and integrating assets, and re-focusing segment strategies New Industrial Acquisition of Value added New Crop Full ownership of strategy 60% stake in capacity Nutrition strategy Yara Pilbara Galvani in Brazil expansion ammonia Finalized Finalized Building of new Divestment of Orga
Slide 6: First days focused on getting to know the company and industry
First 100 days focused on getting to know the company and industry Town hall meetings Site visits Investor meetings Customer visits 1:1 conversations Meeting with partners IR – 01 March 2016 6
Slide 7: Responding to global challenges is an integral part of our business model and strategy
Responding to global challenges is an integral part of our business model and strategy Our business is uniquely positioned to provide shared value for shareholders and society IR – 01 March 2016 7
Slide 8: 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 – 01 March 2016 8
Slide 9: Four main sources of competitive edge
Four main sources of competitive edge CROP NUTRITION EXPERTISE KNOWLEDGE-BASED INDUSTRIAL APPLICATIONS KNOWLEDGE MARGIN RAW MATERIAL EFFICIENCY GLOBAL OPERATIONAL GLOBAL PRESENCE AND SCALE PROCESS EFFICIENCY COMPETITIVE OPTIMIZATION EXCELLENCE PRODUCT STREAM OPTIMIZATION LEAN SUPPLY CHAIN EDGE AND S
Slide 10: Yara's products, solutions and knowledge create value for customers, shareholders and society
Yara’s products, solutions and knowledge create value for customers, shareholders and society 3Q2015 1Q2015 “Yara’s fertilizer increases “The N-sensor together with the “We need to make sure that our my yield by 20-30% and N-tester ensures that the fertilizer is product is the best they can get, imp
Slide 11: Strong track record of profitable growth
Strong track record of profitable growth Cash return on gross investments Annual shareholder return of 25%1 above the Yara CROGI target of 10% NOK/share 400 22.8 % 20.9 % 350 300 17.4 % 17.3 % 16.1 % 250 14.1 %14.4 %14.1 % 14.0 % 13.3 % 12.6 % 200 10% target 8.5 % 150 100 50 0 2004 '05 '06 '07 '08 '
Slide 12: Strong base, with further improvement potential
Strong base, with further improvement potential Strong base: Improvement opportunities: • Integrated business model • Safety • Strong unified brand • Production regularity • Dedicated and motivated • Employee alignment employees • Operational cost • Unrivalled knowledge base • Organizational set-up
Slide 13: Organizational adjustments shift emphasis towards operations
Organizational adjustments shift emphasis towards operations CEO Svein Tore Holsether CLO CFO Trygve Faksvaag Torgeir Kvidal Partner Production Supply Chain Crop Nutrition Industrial Brazil Operations Petter Østbø Tove Andersen Terje Knutsen Yves Bonte Alvin Rosvoll Lair Hanzen • Manufacturing • Pro
Slide 14: Crop Nutrition
Crop Nutrition 14
Slide 15: Evolved focus and aspiration
Evolved focus and aspiration Farmer Crop Product Asset Market depth Farmer centric solutions and tools Build crop solutions • Our next strategic step to build Yara’s Build product • Crop knowledge knowledge margin reputation Sell what we produce • Product portfolio • High quality products • Applicat
Slide 16: Our aspiration is to be the leading provider of sustainable crop nutrition solutions
“Our aspiration is to be the leading provider of sustainable crop nutrition solutions, supporting farmer profitability through knowledge, quality and productivity IR – 01 March 2016 16
Slide 17: Four principles guide our aspiration
Four principles guide our aspiration Farmer The farmer is at the centre of a consistent knowledge based profitability approach, as we aim at being the farmer’s crop nutrition partner Sustainable Crop Crop nutrition solutions incorporating precision farming, and Nutrition Solutions adapted to farmer
Slide 18: Crop Nutrition has dual focus, but differentiation is our core
Crop Nutrition has dual focus, but differentiation is our core Low differentiation: SCALE CFR sales Cost efficiency, complexity reduction, advantageous sourcing In-market distribution Yara differentiation: DEPTH Crop Knowledge Product portfolio Application competence Distributor alignment Brand visi
Slide 19: 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 20: Segmentation will focus our efforts and resources
Segmentation will focus our efforts and resources Farmer Segmentation Crop Segmentation Distributor Alignment • Identify the needs and buying • Key focus crops in a country or • Identify the needs and buying criteria region criteria, • Develop offers and Value • Based on crop attractiveness and • Pr
Slide 21: Four strategic responses shape our approach to the market
Four strategic responses shape our approach to the market Strengthened and aligned brand positioning Develop farmer centric solutions that Actively develop aligned market channels commercially integrate knowledge, digital tools that enable knowledge sharing with the farmer and services to our produc
Slide 22: …while three shape our organizational approach
…while three shape our organizational approach Strengthened and aligned brand positioning Direct our organization towards value selling Increase productivity through cost efficient via higher farmer interaction and knowledge of logistics, standardized processes and capital farmer needs efficiency Dr
Slide 23: Case: Farmer centric approach, Northern Germany
Case: Farmer centric approach, Northern Germany Strengthened and aligned brand positioning Develop farmer centric solutions that Actively develop aligned market channels commercially integrate knowledge, digital tools that enable knowledge sharing with the farmer and services to our product portfoli
Slide 24: Integrate farm data, define focus farms and farmer centric actions
Case: Farmer centric approach, Northern Germany Integrate farm data, define focus farms and farmer centric actions CROP SEGMENTS IDENTIFY FARMER SEGMENTS IR – 01 March 2016 24
Slide 25: Integrate farm data, define focus farms and farmer centric actions
Case: Farmer centric approach, Northern Germany Integrate farm data, define focus farms and farmer centric actions TARGET SPECIFIC FARMER SEGMENTS TARGETED VALUE PROPOSITION CROP PROGRAM (products) TOOLS & SERVICES (application) IR – 01 March 2016 25
Slide 26: MyYara Crop Nutrition Farm Management System
“MyYara” Crop Nutrition Farm Management System Nutrient Management MyYara Broad Acre Crops Gateway to Yara ImageIT Engagement platform N-Sensor Recommendations Water Analytics sensor Algorithms Agronomy 3rd party Data data Rules processing Automatic Fertigation Management Fertilizer portfolio Open F
Slide 27: Mobilizing and engaging employees, partners and customers…
Mobilizing and engaging employees, partners and customers… «Our aspiration is to be the leading provider of sustainable crop nutrition solutions, supporting farmer profitability through knowledge, quality and productivity». 80 local townhall meetings, Strategy in action with distributors and farmers
Slide 28: …systematically breaking down the strategy into action plans per crop
…systematically breaking down the strategy into action plans per crop 56 Country quantitative roadmaps per key crop - Long term volume targets per group Integrated roadmaps • Focus and priorities 206 Key crop/country qualitative roadmaps • Targets - Crop specific strategies, actions and resource pla
Slide 29: Segmenting crops by volume and value
Segmenting crops by volume and value What is CVI: Crop revenue 50.0 Value Fertilizer costs 45.0 40.0 35.0 Niche Crop Grape 30.0 Cucumber Value Value Index 25.0 Avocado (CVI) Nuts 20.0 Pome fruit Tomato Tropical Fruit Growth 15.0 Potato Banana 10.0 Grassland Coffee 5.0 Maize Wheat - 1 10 100 1,000 10
Slide 30: Significant growth planned in all crop categories
Significant growth planned in all crop categories 6.3 Mill. tonnes 2.1 18 crops 11 crops 0.3 2.2 6 crops 1.8 Growth Value Niche Other Crops 2020 IR – 01 March 2016 30
Slide 31: Volume growth per crop
Volume growth per crop IR – 01 March 2016 31
Slide 32: People and competence: Strengthening commercial front end is the priority
People and competence: Strengthening commercial front end is the priority Central Central Increasing competence and presence in local markets is the key resource requirement for Crop Nutrition strategy Back-office/ Back-office/ Supply Chain Supply Chain Operations Develop demand creators and knowled
Slide 33: Key conclusion and summary
Key conclusion and summary • Farmer centric strategy will strengthen and sustain competitive edge • Crop-focused segmentation approach with stretched but achievable targets • Strengthen commercial front end • Lean sales & marketing IR – 01 March 2016 33
Slide 34: Research & Development
Research & Development IR – 01 March 2016 34
Slide 35: …be in the forefront of innovation and R&D
…be in the forefront of innovation and R&D Strengthened and aligned brand positioning Develop farmer centric solutions that Actively develop aligned market channels that commercially integrate knowledge, digital tools enable knowledge sharing with the farmer and services to our product portfolio Be
Slide 36: R&D is part of the foundation
Our commercial approach is just the tip of the iceberg R&D is part of the foundation IR – 01 March 2016 36
Slide 37: In order to be better, we have to be different
In order to be better, we have to be different Clear Knowledge Long-term Optimized Global Direction Based Aspiration Processes Networks • Focus on crop not • Scientific proof • Continuity - long • Innovation • Internal team work on soil • Calibrated tools breath • Yara Quality • External • Just in t
Slide 38: Potatoes: learning by intensive monitoring and visualization
Potatoes: learning by intensive monitoring and visualization Fast growth requires high rates and high Timing is key availability of nutrients Documentation of growth & nutrient uptake Date Static Yara N-Sensor for continuous monitoring Monitoring root growth with a scanner in the soil IR – 01 March
Slide 39: Potatoes: applying knowledge for profitable crop solutions
Potatoes: applying knowledge for profitable crop solutions Extra Benefit versus Cost with Fertigation Higher yield (t/ha) Yield value vers. fertilizer cost (€) (€) 70 16,000 2500 Yield Benefit/Cost-Ratio= 4.3 14,000 60 Yield 2000 12,000 10,000 50 1500 Fertigation 8,000 40 1000 6,000 4,000 30 500 Con
Slide 40: Potatoes: crop solutions with better quality and higher sustainability
Potatoes: crop solutions with better quality and higher sustainability Better quality (higher Ca) Lower water footprint (Liters/kg potato FM yield) 0.040 160 0.036 120 0.032 80 0.028 40 0.024 0.020 0 Conventional Fertigation Conventional Fertigation IR – 01 March 2016 40
Slide 41: Crop Nutrition Solutions: platform approach
Crop Nutrition Solutions: platform approach High Farmer sophistication Low Targeted solutions based on deep customer knowledge IR – 01 March 2016 41
Slide 42: Continue to build on what we have: Precision Farming
Continue to build on what we have: “Precision Farming” Estimated hectares with Yara N-Sensor Status 2015: N-Sensors in 35 countries based fertilizer application Poland 2,000,000 Czech Republic/ Slovakia 1,600,000 Denmark/Sweden France 1,200,000 Germany UK 800,000 Brazil 400,000 Baltic Countries Finl
Slide 43: Knowledge sharing with the grower: tools and services
Knowledge sharing with the grower: tools and services • Development of new and profitable solutions No limits – dare • Decision support for fine-tuning and optimization to be different • Documentation of Best Practice including The Yara key asset is creativity to find solutions Eco-Footprints based
Slide 44: Brazil
Brazil IR – 01 March 2016 44
Slide 45: Brazil will replace USA as the breadbasket of the world this century
Brazil will replace USA as the breadbasket of the world this century • Brazilian agribusiness sector has leading position in soft commodities: Water Technology Land Professional Climate Competitiveness 13% of global fresh water High and increasing Largest arable land area, Qualified and well High ra
Slide 46: Agribusiness is one of the pillars of Brazilian Economy
Agribusiness is one of the pillars of Brazilian Economy ~22% GDP 40% exports 1/3 labor force Brazilian Trade Balance USD Billion 100 83 80 75 79 77 80 55 63 60 60 39 43 50 34 Agribusiness 40 20 26 20 Other sectors (net) 6 4 Balance of trade 0 -0 -20 -1 -10 -7 -40 -35 -30 -43 -60 -48 -60 -80 -55 -80
Slide 47: Significant fertilizer growth, but still opportunities
Significant fertilizer growth, but still opportunities Fertilizer Deliveries Yield evolution (ton / hectare) 90’s 00’s 10’s Best practice 35 30.2 3.0 3.0 30 2.2 2.5 24.5 Soy 25 20.2 20 5.0 10.0 16.4 3.5 2.5 15 10.8 8.2 10 5 2.4 2.8 3.6 7.2 0 Wheat 1990 1995 2000 2005 2010 2015 The consumption of fer
Slide 48: Bunge acquisition brought critical mass in distribution
Bunge acquisition brought critical mass in distribution Volume (MM tons) 10 9 8 7 6 5 4 3 2 1 0 99 19 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Acquisition Acquisition Acquisition Divestment Acquisition 60% IR – 01 March 2016 48
Slide 49: Significant growth in Premium products, both volumes and margins
Significant growth in Premium products, both volumes and margins Volume kt Contribution margin per ton 2,500 2,000 Bunge acquisition effect 1,500 In house development 1,000 500 0 2008 2009 2010 2011 2012 2013 2014 2015 2016E 5 year ambition IR – 01 March 2016 49
Slide 50: Large scale, experienced teams and financial strength gives more opportunities to optimize operations
Large scale, experienced teams and financial strength gives more opportunities to optimize operations Main growing area in Cerrado, target area for Galvani expansion Yara Brasil operations Galvani operations (mining, fertilizer plant • Optimization of asset footprint and port) • Modernization of ble
Slide 51: Farmer centric approach
Farmer centric approach >200 Yara sales & marketing agronomists 700 sales representatives +22.000 customers +55.000 one-to-one (farmer interaction) 2.100 trainings 1.270 lectures >40% 650 general events Premium products Direct sales 600 trials Mainstream 550 field days 5.170 marketing events IR – 01
Slide 52: Yara Brasil Crop Nutrition one page Strategy
Yara Brasil Crop Nutrition “one page” Strategy Safety & Compliance License to operate Biggest & Best Safety TRI < 2,5 Sustainable CROGI Critical mass Premium &Volume Operational Competitive Optimization Excellence Raw Material Accurately plan and execute (S&OP - Double premium product business Fulfi
Slide 53: Continued organic growth investments in Brazil
Continued organic growth investments in Brazil1 190 160 110 130 100 150 100 10 60 120 Capex 30 60 10 70 50 p.a. 100 (mUSD) 70 60 30 20 40 40 30 30 30 2014 2015 2016 2017 2018 2019 2020 2021 - 2025 Expansion of blender in Rondonópolis New blender in Barcarena New blender New blender New blender New b
Slide 54: Why did we do Galvani? Brazil dependence on imports and its profile
Why did we do Galvani? Brazil dependence on imports and its profile Fertilizer consumption by nutrient Crop mix in Brazil results in relatively high P and K consumption NPK mix World Brazil Yara Nitrogen 61% 28% 25% Phosphate 23% 36% 40% Potash 16% 36% 35% Yara Brasil* Distribution/Production imbala
Slide 55: Galvani footprint highlights
Galvani footprint highlights Angico dos Dias Mine 200kt/y of rock Santa Quitéria Greenfield Project 800kt/y of rock CILEM Complex 500kt/y of GSSP Associated Sulfur Acid Salitre Mine & Chemical Greenfield Lagamar Mine Project 200kt/y of rock 1.200kt/y of rock CIP Complex 500kt/y of GSSP Associated Su
Slide 56: Fast and effective integration
Fast and effective integration Launched the Salitre project Business as is • Safety performance (from TRI of 9 to below 4 in one year) • Compliance and governance in place • Full scale operations adjusted to market • Financial performance • GSAP successfully implemented Salitre project progressing a
Slide 57: Salitre Project
Salitre nominal capacity Mining and Phosphate Concentrate: 1,200ktpa Sulfuric Acid: 850ktpa Phosphoric Acid: 200ktpa Salitre Project Granulated Fertilizers: 950ktpa Materializing according to plan Start up • Mining: Mid 2017 • Chemical: Mid 2018 Ramp up to 100% in 3 years Competitive Opex Ongoing ac
Slide 58: Simple, not necessarily easy way forward in Brazil
Simple, not necessarily easy Crop Nutrition way forward in Brazil • Sustainable YCN operation • Safety TRI < 2,5 • Sustainable CROGI • Critical mass Mining, Production & Industrial • Realize Galvani projects • Reduce Production gap • Expand Industrial IR – 01 March 2016 58
Slide 59: Yara Champion Program (Colombia)
Yara Champion Program (Colombia) Objective Encouraging Winner coffee profile Yara Champion is a loyalty sustainability The owners of Finca La Rivera, program rewarding farmers who pay absolute attention to detail follow our recommendations and YCP promotes responsible every day in order to create an
Slide 60: Industrial
Industrial IR – 01 March 2016 60
Slide 61: Be the leading supplier of industrial products, technologies and services
“Be the leading supplier of industrial products, technologies and services by leveraging Yara’s knowledge to make life safer, healthier and easier” IR – 01 March 2016 61
Slide 62: Industrial adds further value and stability to Yara's integrated business model
Industrial adds further value and stability to Yara’s integrated business model and core products Commodity products Technical AN/ Aqueous ammonia/food • Outlet across fertilizer Mining applications production/cosmetics/process regulation seasons CO2/drink • Diversification towards Anhydrous Ammonia
Slide 63: Four business lines with focused strategy and operations
Four business lines with focused strategy and operations Base Chemicals Environmental Solutions Mining Applications Gas and Industrial applications Abatement of emissions from Solutions to the Civil CO2 as gas, liquid and Dry ice Chemical applications for heavy duty vehicles explosives industry Key
Slide 64: Industrial has become a significant part of Yara
Industrial has become a significant part of Yara “Be Solid growth last 10 years… … with stable earnings the leading supplier of industrial Quarterly EBITDA, excl. non-recurring items (rebased to 1Q 2012=100) mill. tonnes products, technologies and services CAGR 250 by 7.2 6.8 leveraging Yara’s knowl
Slide 65: Delivering solutions for a cleaner environment: AdBlue in Oslo
Delivering solutions for a cleaner environment: Contributing to the solution for NOx emission abatement in Oslo with AdBlue Environmental Solutions – unique offering combining AdBlue, technology and services into total air abatement solution • 2200 kt reagent deliveries in 2015, 20% YoY growth • Sys
Slide 66: Delivering solutions for a cleaner environment: Nutriox
Delivering solutions for a cleaner environment: Preventing H2S emissions and odor from waste water systems with NutrioxTM NutrioxTM – technology solutions for preventive waste water odor control built around Calcium Nitrate • Nutriox™ provides H2S prevention for corrosion, odor and toxicity control
Slide 67: Targeting global market leadership in emission abatement
Targeting global market leadership in emission abatement Yara growth initiatives 2005 - 2016 Market growth 2015 - 2020 Revenue USD bn. Revenue USD bn. 2005 to date 2007 2011 2014 13.1 Invested > Aug: Yarwil Oct: acquired Jan: Acquired CAGR Other selected NOK 1 bn in own plants (JV with Wilh. Wilhelm
Slide 68: Several focused growth initiatives to be finalized in 2016
Several focused growth initiatives to be finalized in 2016 North America Significant AdBlue terminal upgrade Increased concentration and reduced Brunsbuttel AdBlue expansion (Q3 2016) logistic cost ~900 kt additional AdBlue LeHavre AdBlue expansion (Q1 2017) ~200 kt additional AdBlue Hanka Joint Ven
Slide 69: Driving operational improvement through Sales Excellence
Driving operational improvement through Sales Excellence Sales Excellence is a Central team to drive core value driver across implementation Yara Expected double-digit Significant involvement of EUR million margin commercial organization improvement within 1-2 Pilot program in Industrial years to es
Slide 70: Summary and key priorities for 2016
Summary and key priorities for 2016 • Safety • Optimizing Yara’s European assets • Geographical expansion • Expand value-add and solution concepts • Operational Excellence IR – 01 March 2016 70
Slide 71: Production
Production IR – 01 March 2016 71
Slide 72: We shall be the leading producer of mineral fertilizers and industrial nitrogen chemicals
“We shall be the leading producer of mineral fertilizers and industrial nitrogen chemicals, driving performance and process excellence in safety, reliability and resource management” IR – 01 March 2016 72
Slide 73: Yara is the world-leading producer of ammonia, nitrates, calcium nitrate and NPKs
Yara is the world-leading producer of ammonia, nitrates, calcium nitrate and NPKs and a growing portfolio of phosphates Global fertilizer Regional fertilizer Industrial Mining Yara Project office Productivity IR – 01 March 2016 73
Slide 74: Improving safety and diversifying portfolio
Combined Improving safety and diversifying portfolio Contractors Milion tons, TRIs Yara Europe-centric location Diversified product portfolio1 Safety improvement Europe ROW 21 12 Ammonia 9 Nitrates 6 9 Urea 6 9 NPK 5 6 SSP 2 3 UAN 1 CN 1 0 Europe ROW Phos. Rock 1 2012 2016 1. Including Yara's share
Slide 75: Safety integration new assets: Cartagena
Safety integration new assets: Cartagena TRI, 12 month rolling average, 2015 TRI rates in Cartagena post acquisition Example: ammonia tank refurbishment 30 2004 20 Contractors 10 Combined Yara 2015 0 January December IR – 01 March 2016 75
Slide 76: Productivity program and strategy under development
Productivity program and strategy under development Program status Example: Glomfjord energy efficiency • Culture of continuous improvement provides -25% good starting point 0.96 • Strategy and operations project initiated to identify further improvements 0.72 • Strategy and targets ready by Q3 GJ/t
Slide 77: Most Sluiskil units achieved production records last year
Most Sluiskil units achieved production records last year, with the three ammonia units alone achieving 39 MDR records Reformer Combined +40 5,195 5,235 Tpd Jan 2015 Feb 2016 2015 2016 IR – 01 March 2016 77
Slide 78: We work to secure the competitiveness of our assets by focusing on four areas
We work to secure the short and long term competitiveness of our assets by focusing on four areas Safety Reliability Productivity Project delivery IR – 01 March 2016 78
Slide 79: Supply Chain
Supply Chain IR – 01 March 2016 79
Slide 80: The Supply Chain segment creates value by leveraging Yara's knowledge and scale
“The Supply Chain segment creates value by leveraging Yara’s knowledge and scale through global procurement, optimization of production assets and efficient supply chain operations” IR – 01 March 2016 80
Slide 81: Supply Chain at a glance
Supply Chain at a glance • 79 billion NOK costs • 1,000 employees • 625,000 orders • 890,000 deliveries • 675 contracts • 1,100 suppliers • 14 ammonia vessels • 2,400 fixing of vessels per year (dry bulk) • 21 million tonnes raw materials and fertilizer shipped Note: 2015 figures IR – 01 March 2016
Slide 82: Supply Chain harvests economies of scale
Supply Chain harvests economies of scale Biggest industrial buyer of natural Third single biggest buyer of P&K gas in Europe globally 2015 gas consumption, Million MMBtu* 2015 P&K purchases (mt) 24.11 159 8.22 109 4.82 3.3 4.3 22 Phosphate Potash, MOP (rock equivalents 70 BPL) Europe Canada RoW Chin
Slide 83: Optimizing profit through daily, monthly and annual planning of product flows
Optimizing profit through daily, monthly and annual planning of product flows Margin USD/t Volume (by country) IR – 01 March 2016 83
Slide 84: Yara has embarked on a journey to transform its supply chain
Yara has embarked on a journey to transform its supply chain, to increase efficiency and effectiveness – some examples Created global functions for Centralized procurement of In-sourcing of AdBlue order Planning, Raw materials and land logistics in Europe processing and deliveries Maritime IR – 01 M
Slide 85: Focus forward is to continue the journey to supply chain expertise
Focus forward is to continue the journey to supply chain expertise and harvesting benefits from global procurement Dedicated Supply Chain Process excellence High performance culture organization Cost savings, scalability and increased customer satisfaction IR – 01 March 2016 85
Slide 86: Market update
Market update IR – 01 March 2016 86
Slide 87: For 2015/16, USDA calls for a modest increase in global grain stocks
For 2015/16, USDA calls for a modest increase in global grain stocks this season Grain consumption and production Days of consumption in stocks Million tons Days 2,550 90 2,500 2,450 85 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 08 09 10 11 12 13 14 15E 16F 07 0
Slide 88: China explains the increase in global grain stocks
China explains the increase in global grain stocks Grain stocks – China versus the rest Days of consumption in stocks Million tons Days 400 200 350 180 160 300 140 250 120 200 100 150 80 60 100 40 50 20 0 0 07 08 09 10 11 12 13 14 15E 16F 07 08 09 10 11 12 13 14 15E 16F China Rest of world Source: U
Slide 89: Weaker farm economics in USD, but nitrogen demand is still robust
Weaker farm economics in USD, but nitrogen demand is still robust, as yields would otherwise suffer immediately FAO price index Index 300 250 200 150 100 50 0 1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 Cereals Price Index Cereals 5 year avg. Food Price Index
Slide 90: Apparent nitrogen consumption ex. China
Apparent nitrogen consumption ex. China 105 100 million tons nitrogen 95 90 85 80 The trend from 2004-2014 shows a growth rate of 2.0%/year 75 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: IFA IR – 01 March 2016 90
Slide 91: Chinese production growth has enabled China to balance the global nitrogen market
Chinese production growth has enabled China to balance the global nitrogen market China has accounted for ~60% of world’s urea China export growth balancing the market production growth since 2004 China Urea export (Mt) World Urea production (Mt) 200 20 166 56% 150 15 14 14 124 66 +59% 100 42 10 8 7
Slide 92: Additional capacity will reduce dependency on Chinese export
Additional capacity will reduce dependency on Chinese export World urea capacity growth, ex China (Mt) 8.2 6.4 Others 4.5 4,2 3.5 ~3 Mt consumption growth 2015 2016 2017 2018 2019 Source: CRU, December 2015 IR – 01 March 2016 92
Slide 93: Chinese domestic urea price, logistics and export tax set the export price
Chinese domestic urea price, logistics and export tax set the export price USD/mt 600 Urea price China (inland proxy price) Urea fob Black Sea 500 400 300 200 100 0 Source: China Fertilizer Market Week, International publications IR – 01 March 2016 93
Slide 94: ~20 mt of export capacity above USD200/t cash cost
~20 mt of export capacity above USD200/t cash cost Urea cash cost ~15mill. tonnes (of ~20mt fob export port, USD/t globally) capacity with cash cost above USD200/t located in China 300 250 200 150 100 50 0 mill. tonnes 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 Source: Argus (December 2015) IR –
Slide 95: Energy prices expected to remain low for many years
Energy prices expected to remain low for many years USD/millbtu USD/ba 14 140 12 120 10 100 Brent crude oil 8 80 6 NW Europe hub gas 60 4 40 2 20 Henry Hub natural gas 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Forward prices 5 February 2016 IR – 01 March 201
Slide 96: Cost of new capacity
Cost of new capacity Example: Cost for 1 million tons Urea plant in USA Cost per ton Urea • 2000 mill USD Capex 200 $/t • 10% return Non-Energy 50 $/t cash costs Energy • 20 millbtu/ton ? $/t Total ? $/t IR – 01 March 2016 96
Slide 97: Financial update
Financial update IR – 01 March 2016 97
Slide 98: Yara generates robust earnings
Yara generates robust earnings Yara’s assets and product mix … ... generate robust CROGI1 over time BNOK 25% 140 • Production 22.8% 20.9% – Global ammonia production footprint 120 20% – Global scale and flexibility to optimize raw 17.4% 17.3% 14.4% 16.1% 100 material and product flows 15% 14.1% 14.1
Slide 99: Price and currency scenario assumptions
Price and currency scenario assumptions Ammonia fob Black sea, USD/t Urea fob Black sea, USD/t CAN cif Germany, USD/t 485 352 328 387 271 272 253 220 270 5Y avg 2015 avg Run rate 5Y avg 2015 avg Run rate 5Y avg 2015 avg Run rate NPK compound premium, USD/t1 DAP fob US Gulf, USD/t Phosphate rock fob
Slide 100: Price and currency scenario assumptions
Price and currency scenario assumptions European gas (TTF), USD/mmbtu Henry HUB, USD/mmbtu Yara’s European gas price, USD/mmbtu 8.7 3.5 9.9 6.5 2.6 7.1 1.8 4.0 4.5 5Y avg 2015 avg Run rate 5Y avg 2015 avg Run rate 5Y avg 2015 avg Run rate NOK per USD NOK per EUR NOK per BRL 8.7 9.5 2.80 8.1 8.9 8.1
Slide 101: Price sensitivities linked to capacities
Price sensitivities linked to capacities Operating income EBITDA EPS Parameter (MUSD) (MUSD) (USD) Urea + USD 10/t 43 53 0.15 1 ... of which pure urea 35 45 0.13 … of which UAN 8 8 0.02 CAN price + USD 10/t 96 96 0.26 2 … of which pure nitrates 59 59 0.16 … of which NPK 37 37 0.10 3 Compound NPK pre
Slide 102: Yara benefits from a stronger USD
Yara benefits from a stronger USD • Revenues and raw material costs are both ~ 85% USD-driven • Fixed cost base in EUR (~40%), NOK (~20%), BRL (~15%) and USD/other (~25%) Impact of 10% appreciation vs. NOK1 “Run-rate” vs. 2015-average2 EBITDA EBIT EPS NOK vs. FX % appreciation Fixed costs Impact on
Slide 103: Stronger USD and lower energy prices offset by lower commodity margins
Stronger USD and lower energy prices offset by lower commodity margins 35 31 1 7 15 7 Urea +2 NOK Value-add +3 NOK Pilbara minority +2 NOK 5 Lower EU gas price +7 NOK Primarily lower urea price Urea -7 NOK Ammonia -2 NOK CAN -4 NOK P-upgrade -2 NOK 2015 EPS (NOK)2 Divestments3 Price Currency Gas pri
Slide 104: Full cost scenario
Full cost scenario Example: Cost for 1 million Cost per ton Urea Scenario assumptions tons urea plant in USA Capex • 2000 mill USD ~200 $/t • Urea fob Black sea 300 USD/t • 10% return • Ammonia fob Black sea 365 USD/t Non-Energy ~50 $/t - Based on last 5 years average upgrade cash costs margin from
Slide 105: EPS of NOK 57 in full cost urea scenario
EPS of NOK 57 in full cost urea scenario 57 9 2 11 Ammonia 365 Nitrates - 295 35 USD/t, based on USD/t – based on last 5 year last 5 year average upgrade average nitrate Urea full cost margin (80 premium (85 300 USD/t USD/t). USD/t) Annual run rate Urea Ammonia Nitrates Run rate EPS EPS (NOK) at ful
Slide 106: Strong growth pipeline
Strong growth pipeline Capex plan Production growth 2015 - end 2018 18.0 Mill.tons Finished fertilizer Ammonia NOK bn Cost&capacity improvements 2.7 M&A 22.1 14.4 0.4 8.3 Committed growth 0.9 0.5 Maintenance 7.2 0.7 3.3 2.3 8.3 10.0 1.4 4.2 7.0 3.0 1.4 0.8 18.9 6.0 6.5 5.7 5.7 2015 2016 2017 2018 Pr
Slide 107: Capex mainly Euro and USD exposed
Capex mainly Euro and USD exposed Capex plan Currency exposure 18.0 NOK NOK bn Cost&capacity improvements million 2.7 18.0 M&A 14.4 0.4 0.6 0.9 Committed growth 1.0 Maintenance 3.3 8.3 10.0 1.4 7.0 4.2 7.0 3.0 10.0 1.4 0.8 6.0 6.5 5.7 5.7 3.2 7.0 2.1 9.4 2015 2016 2017 2018 Committed growth (NOKbn)1
Slide 108: Committed growth assuming full cost urea adds NOK 7 to EPS
Committed growth assuming full cost urea adds NOK 7 to EPS Estimated Projects Products completion 64 NPK expansion Uusikaupunki 1 250kt Mid 2016 1 57 6 Pilbara TAN 1 330kt TAN Mid 2016 (100%) 3 Handy-size New ammonia vessels and 2 mid-size 2016 LPG vessels 260kt Urea+S, Urea 8 Sluiskil 130kt CAN and
Slide 109: Status committed growth projects
Status committed growth projects Projects IRR CN/NPK expansion Porsgrunn Value add NPK expansion Uusikapunki Urea 8 Sluiskil Freeport ammonia BASF JV Commodity scale New ammonia vessels Pilbara – TAN Industrial Köping – TAN Structurally secure phosphate and potash Galvani Salitre sup
Slide 110: Proposed dividend NOK 15 per share
Proposed dividend NOK 15 per share Share of net income 64% • Proposed dividend of NOK 15 per share for 57% 2015, 51% of net income 16% 53% 6% 48% 48% 47% 6% • Long-term policy of distributing 40-45% of net 41% 12% income remains appropriate, given the 6% 32% 25% expected pipeline of future growth op
Slide 111: Going forward
Going forward 111
Slide 112: Yara's corporate strategy is based on its integrated business model
Yara’s corporate strategy is based on its integrated business model IR – 01 March 2016 112
Slide 113: Sustaining profitable growth and competitive edge within three focus areas
Sustaining profitable growth and competitive edge within three focus areas Implications of market Strategic response outlook 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 trad
Slide 114: Strategic adjustments to re-focus organic growth and market development efforts
1 Organic growth and market development Strategic adjustments to re-focus organic growth and market development efforts Crop Nutrition Industrial Phosphate & Potash • Farmer centric strategy; evolution, • Strengthen position as second leg • Secure long-term P & K supply not revolution of Yara • Prem
Slide 115: Key processes selected for company-wide improvement
2 Cost optimization Key processes selected for company-wide improvement Supply Chain Production Sales Excellence • Optimal and standardized • Increase plant reliability • Optimized sales processes processes • Improve energy efficiency • Improved support tools • Harmonized IT systems • Continuous imp
Slide 116: Strong rationale for creating value through further growth
3 Profitable step growth Strong rationale for creating value through further growth We are positioned to grow Expand premium product sales and supply Strong balance sheet Global presence Expand commodity scale based on attractive We can grow profitably full-cost growth opportunities Strong tra
Slide 117: …as demonstrated in recent corporate activity
3 Profitable step growth …as demonstrated in recent corporate activity OFD Greenbelt Fertilizers Expand premium products sales and CN/NPK expansion Porsgrunn West Sacramento import supply NPK expansion Uusikapuunki terminal Bunge (Crop Nutrition) Expand commodity scale based on Freepor
Slide 118: CEO priorities going forward
CEO priorities going forward Operations Profitable growth Positioning • Continue building culture where • Sharpen focus on growth in • Promote mineral fertilizer role in all accidents are preventable core business areas and solving global food challenges • Establish corporate geographies • Improve p
Slide 119: Knowiledge geaws (
4 Knowiledge geaws (