Yara International Asa · OSL:YAR
Yara International Asa — Q2 2016 Earnings Presentation
37 slides from Yara International Asa's earnings presentation, Sep 8, 2016
Slide 1: Yara International ASA 2Q 2016 roadshow
Yara International ASA 2Q 2016 roadshow Torgeir Kvidal, CFO Kjetil Storås, IR
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 – September 2016 2
Slide 3: Summary second quarter
Summary second quarter Results impacted by lower fertilizer prices Positive impact from lower energy prices and stronger US dollar Deliveries of Yara-produced fertilizer up 8% Continued strong production performance, especially ammonia Gain of NOK 1.6 billion from sale of CO2 business Im
Slide 4: Strong earnings despite supply driven market
Strong earnings despite supply driven market EPS excluding currency and special items NOK 41.99 36.28 34.94 37.31 28.27 35.34 31.48 30.24 30.66 29.38 20.69 27.59 24.95 21.45 20.60 20.67 15.51 15.91 13.86 13.08 11.54 9.8 8.82 10.20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1H 2016 IR – S
Slide 5: EBITDA development
EBITDA development NOK millions 5,489 5,179 81 181 1,407 2,730 367 1,165 EBITDA 2Q15 Volume Price/Margin Energy costs Currency Special Other EBITDA 2Q16 translation items IR – September 2016 5
Slide 6: Lower natural gas cost in Europe
Lower natural gas cost in Europe Yara European gas & oil cost Change in spot energy cost USD/ NOK MMBtu millions 8.0 0 7.0 (200) (151) (250) 6.0 (400) 5.0 (600) (588) (588) (650) 4.0 (800) 3.0 (1,000) (923) (1,042) 2.0 (1,200) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 TTF
Slide 7: Lower European nitrate premiums at end of season
Lower European nitrate premiums at end of season 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 40 Value above ammonia 200 30 Value above gas 20 100 Yara EU gas
Slide 8: Lower commodity phosphate margins, solid compound NPK premiums
Lower commodity phosphate margins, solid compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 400 Weighted average global Value above premium above blend cost 300 raw material Nitrate premium, CIF inland Germany 300 NH3, fob Black Sea *0.22 20
Slide 9: Brazil: 1H industry deliveries up 13%, Yara up 19%
Brazil: 1H industry deliveries up 13%, Yara up 19% Season-to-date (1H) fertilizer deliveries Season-to-date premium product deliveries Kilotons Kilotons 15,000 +13% 700 Thousands 10,000 600 +47% 5,000 500 0 400 Kilotons 1H12 1H13 1H14 1H15 1H16 4,000 300 Thousands 3,000 200 +19% 2,000 100 1,000 0 0
Slide 10: Reduced exports from China amid lower prices…
Reduced exports from China amid lower prices… Declining urea pricing Chinese exports and urea price Black Sea USD/t Kilotons USD/t 460 2,400 550 440 2,200 500 420 2,000 450 400 1,800 400 380 360 1,600 350 340 1,400 300 320 1,200 300 250 1,000 280 200 800 260 150 600 240 400 100 220 200 200 50 180 0
Slide 11: …and increased production elsewhere
…and increased production elsewhere Gross capacity additions, excl. China (mill. tonnes urea1) 7.8 7.6 Nigeria 0.7 Nigeria 0.7 Russia 0.3 Russia 0.3 Iran 0.5 Iran 0.5 Algeria 1.2 Algeria 1.2 USA 1.7 USA 2.5 3.5 3.0 Nigeria 1.3 Russia 0.3 ~3 Mt Iran 0.5 consumption Indonesia 0.7 India 0.7 2.0 growth
Slide 12: Yara Improvement Program will deliver cost and revenue improvements throughout the organization
Yara Improvement Program will deliver cost and revenue improvements throughout the organization Overview of main initiatives Production Commercial Supply Chain/Other Crop roadmap Sales Supply Chain IT implementation excellence transformation optimization Plant productivity improvement and portfolio
Slide 13: Yara acquires Tata Chemicals' urea business in India for USD 400 million
Yara acquires Tata Chemicals’ urea business in India for USD 400 million Integrated world scale urea plant in Babrala, Uttar Pradesh • ~0.7 million tons ammonia production • ~1.2 million tons urea production • Commissioned in 1994 World-class operations and energy efficiency • Workforce is committed
Slide 14: Strategic growth with financial discipline
Strategic growth with financial discipline: Profitable growth through brownfield expansion and M&A, while maintaining credit rating Net debt / EBITDA evolution OFD (Latin America) 2.5 Net debt/EBITDA CN/NPK expansion Porsgrunn (Europe) Expand premium products BBB NPK expansion Uusikapuunki (Eu
Slide 15: IR – September 2016
IR – September 2016
Slide 16: Safe operations is our first priority
Safe operations is our first priority 14.0 TRI (Total recordable injuries 12-month rolling)1 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1) Lost time (absence from work), restricted work and medical treatment cases per one million work hours 2) OFD and Galvani included in statistics from January 2016 IR – Septemb
Slide 17: Strong growth pipeline
Strong growth pipeline Capex plan1 Production growth 2015 - end 20185 16.1 15.9 NOK bn Cost&capacity improvements 14.4 2.1 1.3 M&A Finished fertilizer Ammonia 0.9 0.4 Committed growth 3.3 Maintenance Mill.tons 23.3 3.3 9.0 7.4 0.7 8.8 2.3 7.2 0.5 4.2 5.6 1.3 0.7 1.9 1.2 6.0 6.2 5.6 5.6 18.9 0.8 2015
Slide 18: Fertilizer portfolio is being driven towards greater product differentiation and profit
Fertilizer portfolio is being driven towards greater product differentiation and profit Product portfolio (2015/16 season volume) • Differentiation improves margins and reduces exposure to commodity 19% price volatility 36% • On-going efforts to further increase differentiation through: • Capacity e
Slide 19: Value-added and distribution make up larger part of Yara's contribution
Value-added and distribution make up larger part of Yara’s contribution Total Yara contribution 11,000 10,000 9,000 8,000 Trade 7,000 6,000 Upgrade & distribution 5,000 4,000 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 IR –
Slide 20: Net interest-bearing debt development
Net interest-bearing debt development NOK millions 1,894 4,150 2,830 3,817 2,758 9,698 8,465 869 122 Net debt Investments Yara dividend Cash Net operating Sale of CO2 Foreign Other Net debt Mar 16 (net) and share earnings* capital change business currency Jun 16 buy-backs translation gain * Operatin
Slide 21: Crop Nutrition creates resilience in earnings…
Crop Nutrition creates resilience in earnings… Key financials 2015 Highlights Offers the industry’s most comprehensive product portfolio and (NOKm) 1H 2016 1H 2015 Change YE 2015 has a strong position in value-adding crop solutions. Revenue and other income1 37,760 41,950 (4,190) 80,189 Increase
Slide 22: … by adding distribution and agronomic competence
… by adding distribution and agronomic competence Farmer Evolved focus and aspiration Crop Product Asset Market depth Farmer centric solutions and tools Build crop • Our next strategic step to solutions build Yara’s knowledge Build product margin • Crop knowledge reputation • Product portfolio Sell
Slide 23: Industrial segment reduces cyclicality and seasonality…
Industrial segment reduces cyclicality and seasonality… Key financials 2015 Highlights (NOKm) 1H 2016 1H 2015 Change YE 2015 Significantly expansion of terminal and logistics network in North Revenue and other income1 9,085 8,520 565 17,233 America and Brazil to better and more efficiently serve t
Slide 24: …by securing stable off-take from production plants and the unseasonal nature of its businesses
…by securing stable off-take from production plants and the unseasonal nature of its businesses Four business lines with focused strategy and operations Base Chemicals Gas and Industrial Environmental Solutions Mining Applications applications Chemical applications for Abatement of emissions from So
Slide 25: Production segment has plants and mines across the globe which provide scale and flexibility…
Production segment has plants and mines across the globe which provide scale and flexibility… Key financials 2015 Highlights In the US, Yara and BASF started construction of a world-scale (NOKm) 1H 2016 1H 2015 Change YE 2015 ammonia plant in Freeport. In Australia, Yara secured full ownership of
Slide 26: Increasing coal prices
Increasing coal prices CIF ARA1 November 2016 ($/mt) CFMW Anthracite prices August 2016 (RMB/mt) 1) Amsterdam, Rotterdam, Antwerp IR – September 2016 26
Slide 27: Continued strong production performance
Continued strong production performance Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 2,000 5,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accou
Slide 28: 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 2009 2010 2011 2012 2013 2014 2015 2016 Europe Outside Europe IR – September 2016 28
Slide 29: AdBlue deliveries
AdBlue deliveries Kilotons 500 450 400 350 300 250 200 150 100 50 0 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 IR – September 2016 29
Slide 30: Industrial volume development
Industrial volume development Kilotons 892 889 844 866 849 852 864 859 847 819 816 815 829 577 571 540 541 538 511 482 432 456 438 374 364 382 380 385 368 358 367 361 346 364 339 333 328 308 242 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Industrial N-chemicals Environmental pro
Slide 31: Yara stocks
Yara stocks Kilotons Finished fertilizer Bunge Fertilizer included from 3Q 2013 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR – September 2016 31
Slide 32: 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 15/16 10/11 11/12 12/13 13/14 14/15 Source: Fertilizers Europe, Yara estimate for June IR – September 2016 32
Slide 33: Energy cost
Energy cost Yearly averages 2009 – 2013, quarterly averages for 2014-16 with forward prices* for 3Q16 and 4Q16. 11.0 11.4 11.3 10.7 10.5 9.2 9.8 8.5 9.2 9.4 7.6 7.5 7.6 7.5 7.0 8.2 8.0 8.0 8.1 7.6 8.1 6.6 7.0 6.2 6.6 7.0 6.8 5.5 6.9 6.5 5.0 5.1 6.5 5.4 4.6 5.4 6.1 5.9 4.7 5.7 5.7 4.7 5.2 5.3 5.2 4.2
Slide 34: Global grain balance
Global grain balance Grain consumption and production Days of consumption in stocks Million tons Days 2,600 95 2,550 90 2,500 2,450 85 2,400 2,350 80 2,300 75 2,250 2,200 70 2,150 2,100 65 2,050 60 2,000 1,950 55 07 08 09 10 11 12 13 14 15 16E 17F 07 08 09 10 11 12 13 14 15 16E 17F Consumption Produ
Slide 35: Weaker farm economics in USD, affecting particularly P and K demand
Weaker farm economics in USD, affecting particularly P and K 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 1/2014 1/2015 1/2016 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – Sep
Slide 36: 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) 6.8 6.4 5.5 277 297 268 281 273 250 270 233 257 255 249 4.1 4.3 207 198 208 197 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 2
Slide 37: 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 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 USD/t Urea prilled fob Black Sea/Urea granular fo