Yara International Asa · OSL:YAR
Yara International Asa — Bank of America Merrill Lynch conference 2016
55 slides from Yara International Asa's conference presentation, Mar 3, 2016
Slide 1: Yara International ASA
Yara International ASA Svein Tore Holsether, CEO Bank of America Merrill Lynch conference 2-3 March 2016
Slide 2: 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 1
Slide 3: 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 4: 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 5: 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 6: 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 7: Brazil: significant growth in Premium products, both volumes and margins
Brazil: 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 6
Slide 8: Industrial: four business lines with focused strategy and operations
Industrial: 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 i
Slide 9: We work to secure the competitiveness of our production assets
We work to secure the short and long term competitiveness of our production assets by focusing on four areas Safety Reliability Productivity Project delivery IR – 01 March 2016 8
Slide 10: 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 11: 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 10
Slide 12: ~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) 11
Slide 13: 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 12
Slide 14: 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 15: 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 16: 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 17: 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 18: 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 19: 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 20: 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 21: 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 22: Additional information
Additional information 21
Slide 23: 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 Root cause analysis Toolbox Me
Slide 24: 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 25: 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 26: 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 25
Slide 27: Volume growth per crop
Volume growth per crop IR – 01 March 2016 26
Slide 28: 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 29: 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 30: 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 31: 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 32: 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 33: 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 34: 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 35: 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 36: 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 37: Improving safety and diversifying portfolio
Contractors Improving safety and diversifying portfolio Combined 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 38: 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 37
Slide 39: 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 40: 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 41: 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 40
Slide 42: 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 41
Slide 43: 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 44: 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 45: 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 46: 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 47: 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 48: 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 49: 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 50: Status committed growth projects
Status committed growth projects Projects IRR CN/NPK expansion Porsgrunn Value add NPK expansion Uusikapuunki Urea 8 Sluiskil Freeport ammonia BASF JV Commodity scale New ammonia vessels Pilbara – TAN Industrial Köping – TAN Structurally secure phosphate and potash Galvani Salitre su
Slide 51: 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 market 6% 32% 25% outlook and expected pipeline
Slide 52: 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 53: 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 54: Creating value through growth
3 Profitable step growth Creating value through growth OFD Greenbelt Fertilizers Expand premium products sales and CN/NPK expansion Porsgrunn West Sacramento import supply NPK expansion Uusikapuunki terminal Bunge (Downstream) Expand commodity scale based on Freeport ammonia JV (newbui
Slide 55: Knowiledge geaws (
4 Knowiledge geaws (
Yara International — Bank of America Merrill Lynch conference 2016 on 6ix