Yara International Asa · OSL:YAR
Yara International Asa — Q4 2013 Earnings Presentation
39 slides from Yara International Asa's earnings presentation, Feb 12, 2014
Slide 1: Yara International ASA Fourth Quarter results 2013
0 Yara International ASA Fourth Quarter results 2013 12 February 2014 IR-Date: 2014-02-12
Slide 2: Summary fourth quarter
1 Summary fourth quarter Lower result reflecting weaker prices Weak commodity margins but robust value-added premiums Strong production and deliveries Proposed dividend NOK 10 per share, 48% of net income IR-Date: 2014-02-12
Slide 3: Earnings per share
2 Earnings per share* 12.86 EPS excluding currency and 12.42 11.84 special items 10.54 9.82 10.02 9.25 8.04 7.73 6.68 7.67 6.68 5.42 5.65 5.27 0.21 2010 2011 2012 2013 Annual NOK 30.23 41.99 37.21 20.63 * Average number of shares for 4Q 2013: 277.2 million (4Q 2012: 280.6 million). IR-Date: 2014-02-
Slide 4: Fertilizer market development
3 Fertilizer market development Farm economics support fertilizer demand, despite lower grain prices Chinese supply costs drive urea pricing, amid curtailments in East Europe and slow exports from North Africa Western Europe nitrogen fertilizer industry deliveries 8% higher, season to date 1%
Slide 5: Farm economics support fertilizer demand
4 Farm economics support fertilizer demand 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 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR-Date: 2014-02-12
Slide 6: Chinese urea production in line season to date, and lower exports in fourth quarter
Chinese urea production in line season to date, 5 and lower exports in fourth quarter Chinese urea production, million tons Chinese urea exports, Kilotons Urea price, USD/t 7.0 1,800 550 12/13 13/14 1,600 500 6.0 11/12 450 1,400 5.0 400 1,200 350 4.0 1,000 300 800 250 3.0 200 600 2.0 150 400 100 1.0
Slide 7: Strong production
6 Strong production Finished fertilizer Ammonia Kilotons Kilotons 6,000 2,000 1,900 5,000 1,800 1,700 4,000 1,600 3,000 1,500 1,400 2,000 1,300 1,200 1,000 1,100 0 1,000 2011 2012 2013 2011 2012 2013 * Including share of equity-accounted investees IR-Date: 2014-02-12
Slide 8: Industrial sales per business unit
7 Industrial sales per business unit Kilotons 1,400 1,200 1,000 800 CAGR 7% 600 400 200 0 2009 2010 2011 2012 2013 Process Chemicals TAN ES Automotive ES Industry & Maritime Nitrates Other IR-Date: 2014-02-12
Slide 9: Latin America growth & integration progress
8 Latin America growth & integration progress OFD (Colombia): – Integration preparation underway, with resource transfer from Bunge work – Closing expected mid 2014 Bunge (Brazil): – Integration completed – Result improvement expected going forward – USD 50 million synergies effective 2014 IR-Da
Slide 10: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and 9 amortization (EBITDA) NOK millions EBITDA excluding special items 6,587 5,444 4,982 4,966 4,281 4,310 4,103 4,129 3,995 3,455 3,591 3,251 3,307 2,992 2,486 1,835 Annual 2010 2011 2012 2013 NOK 15,315 18,163 16,970 13,266 millions IR-Date: 2014-02-12
Slide 11: EBITDA development
10 EBITDA development NOK millions 3,591 852 556 1,934 51 1,835 395 226 EBITDA Special Volume Price/margin Gas & oil Other Currency EBITDA 4Q12 items costs in 4Q13 Europe IR-Date: 2014-02-12
Slide 12: Fourth-quarter special items
11 Fourth-quarter special items • Other: - Contract derivative gain - Pension plan gain - Impairment / scrapping 71 -138 • Disputed Lifeco utility cost: - Strong increase in utility cost, is disputed by Yara -142 • Bunge integration cost: - Further USD 9 million and USD 7 million expected in in firs
Slide 13: Stable Downstream and Industrial earnings
12 Stable Downstream and Industrial earnings EBITDA (NOK millions) EBITDA excluding special items 2,569 1,002 718 684 292 282 Downstream Industrial Upstream 4Q12 4Q13 IR-Date: 2014-02-12
Slide 14: EBITDA per segment excl. special items
13 EBITDA per segment excl. special items EBITDA, NOK millions 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2011 2012 2013 Downstream Industrial Upstream IR-Date: 2014-02-12
Slide 15: Agronomic benefits justify nitrate premium
14 Agronomic benefits justify nitrate premium Nitrogen upgrading margins Nitrate premium, USD/t CAN USD/t 700 160 600 140 Nitrate premium above urea 120 500 Value 100 400 above ammonia 80 300 Value above gas 60 200 40 100 Yara EU gas cost *20 20 0 0 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 4Q09
Slide 16: Stable NPK premiums
15 Stable NPK premiums Phosphate upgrading margins1 NPK premium over blend2 USD/t USD/t 700 700 600 600 500 500 Value above Weighted average global raw material premium above blend cost 400 400 Nitrate premium NH3, fob Black Sea *0.22 300 300 Urea, fob Black sea 200 200 MOP, cfr NWE 100 Rock, fob NA
Slide 17: Lower forward gas cost in Europe
16 Lower forward gas cost in Europe Yara European gas & oil cost Spread between Yara and Zeebrugge USD/ USD/ MMBtu MMBtu 13.0 2.1 12.0 11.0 1.4 10.0 1.1 9.0 0.9 0.9 0.8 0.8 8.0 0.6 7.0 6.0 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Zeebrugge (1-month lag) Yara Eu
Slide 18: Increased fertilizer deliveries
17 Increased fertilizer deliveries Kilotons 1,378 1,389 1,429 1,298 1,233 1,206 1,143 477 337 371 247 153 4Q12 4Q13 4Q12 4Q13 4Q12 4Q13 4Q12 4Q13 4Q12 4Q13 4Q12 4Q13 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced Total IR-Date: 2014-02-12
Slide 19: Yara stocks, including Bunge Brazil from 3Q
18 Yara stocks, including Bunge Brazil from 3Q Kilotons Bunge Fertilizer Finished fertilizer included from 3Q 2013 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Other Compound NPK Nitrates Urea IR-Date: 2014-02-12
Slide 20: Net interest-bearing debt development
19 Net interest-bearing debt development NOK millions 3,519 3,378 79 253 1,072 63 209 1,554 1,070 10 249 Net debt Cash Dividends Net Funding Acquisition Other Yara Share FX loss Other Net debt Sep 13* earnings** and cash operating Yara of Bunge investments buy backs / Dec 13* from equity capital Pil
Slide 21: Proposed dividend improves capital efficiency
20 Proposed dividend improves capital efficiency 37% 28% Above-target dividend 48% Overall target 40-45% 10% proposed, to improve capital efficiency 3% Minimum 30% dividend 34% 34% 10% 9% 11% Growth ambition remains in 7% 25% 23% place, but focus for 2014 on 18% 19% 3% 18% organic growth and int
Slide 22: 2014 investment plans
21 2014 investment plans Total • Smaller growth initiatives: NOK 13 billion - Gains in scale • Pilbara nitrate plant construction: 2.5 - Expected commissioning mid to late 2015 0.8 • OFD acquisition: 3.0 - Acquisition closing expected mid 2014 1.4 • Productivity improvements: - Range of smaller proj
Slide 23: Prospects
22 Prospects Farm economics support fertilizer demand, low grain stocks Marginal urea profitability in China; Chinese coal price and export tax regime are key for global urea pricing going forward Capacity outside China: limited greenfield additions next 2 years apart from Algeria Strong dem
Slide 24: Cautious start to the US season, Europe in line
23 Cautious start to the US season, Europe in line USA West Europe Million tons N Million tons N 4.5 9.0 --11% 4.0 8.0 +1% 7.0 3.5 6.0 3.0 5.0 2.5 4.0 2.0 3.0 1.5 2.0 1.0 1.0 0.5 0.0 0.0 2H08 2H09 2H10 2H11 2H12 2H13 2H08 2H09 2H10 2H11 2H12 2H13 Production Net imports Domestic Imports Source: Yara
Slide 25: Additional information
24 Additional information IR-Date: 2014-02-12
Slide 26: Fertilizer volumes
25 Fertilizer volumes Kilotons 7,000 6,284 6,341 6,104 6,146 6,017 5,884 6,000 5,474 5,296 5,437 5,256 5,179 5,253 5,297 5,210 5,216 5,129 4,970 5,013 5,044 4,882 4,914 5,000 4,763 4,742 4,791 4,759 4,834 4,239 4,000 3,496 3,000 2,000 1,000 0 2007 2008 2009 2010 2011 2012 2013 Europe Outside Europe
Slide 27: Yara 4Q fertilizer sales by market and product
26 Yara 4Q fertilizer sales by market and product 2013: 6.2 million tons (2012: 5.0 million tons) Kilotons 4Q12 4Q13 2,301 2,398 2,152 1,252 793 773 500 607 198 215 Europe Latin America Asia North America Africa 1,378 1,389 1,429 1,233 1,206 1,298 1,143 477 547 337 247 153 168 183 NPK compounds NPK
Slide 28: NPK and nitrate deliveries
27 NPK and nitrate deliveries Yara-produced NPK deliveries Yara-produced nitrate deliveries Kilotons Kilotons 1,300 1,700 1,200 1,500 1,100 1,300 1,000 900 1,100 800 900 700 700 600 500 500 4Q09 4Q10 4Q11 4Q12 4Q13 4Q09 4Q10 4Q11 4Q12 4Q13 IR-Date: 2014-02-12
Slide 29: Value-added upgrading and distribution make up larger part of Yara's contribution
28 Value-added upgrading and distribution make up larger part of Yara’s contribution Total Yara contribution NOK millions 9,000 8,000 7,000 6,000 Trade 5,000 4,000 Fertilizer upgrade & distribution 3,000 2,000 1,000 Commodity overseas Commodity Europe 0 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 IR-Dat
Slide 30: European producer nitrate stocks
29 European producer nitrate stocks Index June 2007=1 1.8 1.6 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 13/14 08/09 09/10 10/11 11/12 12/13 Source: Fertilizers Europe IR-Date: 2014-02-12
Slide 31: Yara production volume
30 Yara production volume* Finished fertilizer and industrial products Ammonia Kilotons Kilotons 5,000 2,500 4,500 4,000 2,000 3,500 3,000 1,500 2,500 2,000 1,000 1,500 1,000 500 500 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Urea Nitrates NPK CN UAN SSP - based fertilizer * Including sha
Slide 32: Gas & oil cost
31 Gas & oil cost Yearly averages 2009 – 2010, quarterly averages for 2011-13 with forward prices* for 1Q14 and 2Q14 USD per MMBtu 14 11.9 12 11.1 11.4 11.5 11.2 11.4 10.9 10.8 11.0 11.0 10.8 10.8 10.1 10.4 10 8 7.6 8.3 8.6 8.3 8.3 8.5 6.6 7.9 8.1 8.1 8.3 7.7 7.5 7.8 7.5 6 7.6 5.7 4 4.8 2 0 2009 201
Slide 33: Debt/equity ratio
32 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.75 0.63 0.57 0.56 0.49 0.38 0.32 0.27 0.20 0.22 0.12 0.12 0.08 0.07 0.06 0.06 0.06 0.02 0.01 -0.04 2009 2010 2011 2012 2013 IR-Date: 2014-02-12
Slide 34: Currency exposure affecting P&L
33 Currency exposure affecting P&L At the beginning of the first quarter 2014 1. The US dollar debt generating p&l exposure was USD 1,000 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Around 70% towards EUR and BRL, the rest towards NOK and emerging mark
Slide 35: Record 2013 crop add 2 days of consumption to global grain stocks
Record 2013 crop add 2 days of consumption 34 to global grain stocks Grain consumption and production Days of consumption in stocks Million tons Days 2,500 85 2,450 2,400 80 2,350 75 2,300 2,250 70 2,200 2,150 65 2,100 2,050 60 2,000 1,950 55 06 07 08 09 10 11 12 13E 14F 06 07 08 09 10 11 12 13E 14F
Slide 36: Projected nitrogen capacity additions outside China in line with historical consumption growth
Projected nitrogen capacity additions outside 35 China in line with historical consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Qatar 26% 2013 1.2% (1.4%) UAE 20% Iran 28% 2014 1.5% (1.8%) Algeria 26% Algeria 23% 2015 3.8% (3.
Slide 37: Non-commercials' net long position in corn
36 Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Source: US Commodity Futures Trading Commission IR-Date: 2014-02-12
Slide 38: Key value drivers – quarterly averages
37 Key value drivers – quarterly averages Zeebrugge day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 11.1 343 351 385 400 322 294 291 10.7 342 308 314 10.3 10.3 10.1 4Q12 1Q13 2Q13 3Q13 4Q13 4Q12 1Q13 2Q13 3Q13 4Q13 4Q12 1Q13 2Q13 3Q13 4Q13 Ammonia fob Black Sea (USD/
Slide 39: 10-year fertilizer prices – monthly averages
38 10-year fertilizer prices – monthly averages Ammonia fob Black Sea CAN cif Germany USD/t USD/t 1,000 500 800 400 600 300 400 200 200 100 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Urea prilled fob Black Sea DAP fob US Gulf USD/t USD/t 8