Yara International Asa · OSL:YAR
Yara International Asa — Investor Day (2023)
71 slides from Yara International Asa's investor day presentation, 2023
Slide 1: Capital Markets Day 2023
CMD 2023 Capital Markets Day 2023
Slide 2: Cautionary note
Cautionary note This presentation contains forward-looking information and statements relating to the business, financial performance and results of Yara and/or industry and markets in which it operates. Forwardlooking statements are statements that are not historical facts and may be identified by
Slide 3: Agenda
Agenda Section Main content Speaker Performance review Part I Managing a volatile environment Holsether Strategic progress and way forward Building a strong base for the future Strategy update: new opportunities Climate Neutrality Ankarstrand Regenerative Agriculture Souza Part II Monthean Prosperit
Slide 4: Key messages for today
Key messages for today Strong shareholder returns and strategic progress delivered, resilience of business model demonstrated • Resilience of global ammonia position, flexible production assets and leading market presence demonstrated in a challenging market • Accumulated FCF generation1 from -0.5 b
Slide 5: Strategic progress and way forward
Strategic progress and way forward
Slide 6: Safety is our license to operate
Safety is our license to operate A safe workplace environment for employees and partners TRI1, 2022 8.7 4.2 1.1 Yara Fertilizer industry2 Norwegian industry We have come a long way since 2016, but our ambition remains zero injuries TRI1, 12 month rolling 4.1 1.1 Q1 Q1 16 23 1) Total Recordable Injur
Slide 7: Strong value case development since 2020 ESG seminar
Strong value case development since 2020 ESG seminar Value creation levers - developments 2021-2023: Current Market Farming Industrial Yara YIP Hydrogen baseline conditions Solutions Solutions 2025 - Strong markets amplified by - Behind targets, - New revenue - Resilient earnings - Opportunities Mid
Slide 8: Yara prioritized resilience and cash flow over continuous improvement
In challenging market conditions, Yara prioritized resilience and cash flow over continuous improvement 91% 85% 82% 78% 77% 70% 57% 59% 1Q 21 2Q 21 3Q 21 4Q 21 1Q 22 2Q 22 3Q 22 4Q 22 European plants Ammonia production EBITDA for segments operating TTF Price Development (usd/mmbtu) (% of capacity) i
Slide 9: New revenue streams more likely to monetize through product premiums
New revenue streams more likely to monetize through product premiums than as separate value streams Premium generated L12M Transformational KPIs Long-term target Million USD Active Hectares, million Ha 150 New revenue streams less apparent, offerings rather 2,145 strengthens ability to extract value
Slide 10: Agoro Carbon program sees solid growth
Agoro Carbon program sees solid growth How the Agoro Carbon program works Progress and next steps Strong US footprint > 5 million tons of CO2e to be sequestered over 10 years from signed contracts with American farmers and ranchers 6 practice offerings Farms: Reduced tillage, cover crops and nitroge
Slide 11: Industrial Solutions segment adds resilience to Yara's integrated business model
Industrial Solutions segment adds resilience to Yara’s integrated business model and core products Record revenue generation in all BUs Stable sales volumes Strong profits Yearly revenues per BU1 (billion USD) Yearly volumes sold (million tonnes) Yearly EBITDA generation (million USD) 7.6 7.3 4.2 6.
Slide 12: Our scorecard status
Our scorecard status Our most recent scorecard - from 1Q 2023: Progress towards 2025 targets: People: ✓ Continuing strong and leading performance in safety, engagement and DEI Planet: ✓ Progress on GHG project portfolio, emission targets negatively impacted by lower production in 2022 Active hecta
Slide 13: Long track record of strong Yara performance, resilience and shareholder returns
Long track record of strong Yara performance, resilience and shareholder returns Solid shareholder returns (Share price with dividends reinvested – NOK1) FCF generation – accumulated since 2015 (MUSD) 5,118 5,353 832 2,704 3,236 528 936 1,345 787 354 406 92 517 177 175 450 49 -457 310 15 16 17 18 19
Slide 14: Our strategic direction aligns with stakeholder expectations
Our strategic direction aligns with stakeholder expectations Sustainability ratings Awards/ Credentials Listed on the A 2021 Fortune Change the World list Winner in category of Medium «Communicating integrated thinking» 61% of Yara investments and Platinum 38% of revenues rated as light, medium or d
Slide 15: Geopolitical situation strengthens business case for operational flexibility and resilience
Geopolitical situation strengthens business case for operational flexibility and resilience Key geopolitical risk drivers Europe: Energy crisis and Ukraine war, EU regulations Russia and Belarus: food, gas, raw materials US: Inflation reduction act China: trade policies Africa: Food system resilienc
Slide 16: Attractive growth prospects with clear link to value creation
Attractive growth prospects with clear link to value creation Premium Current Market Clean growth, new Industrial YIP baseline conditions Ammonia products Solutions and services Creating Volumes value through Margins growing Premiums 16
Slide 17: Ammonia market: US 45Q full cost below European cash cost
Ammonia market: US 45Q full cost significantly below European cash cost in most gas price scenarios Gas price sensitivity: + 1 USD/MMBtu = 34 USD/t ammonia Blue production costs in the US significantly below European cash cost Scenario for ammonia cost, 2023 real terms, USD/ton Even at full cost US
Slide 18: Agriculture is undergoing significant shifts
Agriculture is undergoing significant shifts Digital revolution Agri and food Dietary shifts: in farming, Responsibly feed industry Focus on healthy, safe production and the world integration and sustainable diets supply chain Protect the planet Climate Zero waste and Water safety Improving soil Eff
Slide 19: Ag fundamentals are supportive
Ag fundamentals are supportive High food prices are supporting farmer World food demand is growing Global grain stocks are reducing incentives Kcal/capita/day Days of consumption in stock Cereal-to-urea price index, 2014-2016=100 6.1 World population 115 days 1.10 (billion people) 1.00 0.67 3.1 ~2,1
Slide 20: Growing a Nature Positive Food Future
Growing a Nature Positive Food Future 20
Slide 21: 'Nature-positive' definition
'Nature-positive' definition Growing a Nature-positive food future Restore & regenerate A high-level goal and concept describing a future E.g., restoring freshwater sources, improving soil health, … state of nature (e.g. biodiversity, nature’s contributions to people) which is greater than the Drive
Slide 22: Growing a Nature-Positive food future is a journey
Growing a Nature-Positive food future is a journey – Yara has already started Growing a 'nature- positive’ food future Iterative process Reach targets Track progress Act Measure, set targets Interpret & & disclose Assess prioritize Set 'nature-positive' nature ambition impacts 22
Slide 23: Four focus areas prioritized for the next 1-2 years
Four focus areas prioritized for the next 1-2 years of Yara's nature-positive journey1 Focus areas next 1-2 years1 Relevant nature issue areas Prioritization: Reduce climate footprint on all scopes GHG emissions Step 1: Most significant nature impacts along Yara's Evaluate nature impact at all plant
Slide 24: Transforming Yara to grow a nature-positive food future
Transforming Yara to grow a nature-positive food future Yara's target state Climate neutrality Regenerative farming Prosperity Accelerated the nature-positive journey, on Commercialized regenerative farming offering Continued to improve the in selected markets and positioned Yara to be prosperity fo
Slide 25: Yara is actively assessing its portfolio to ensure a fit-for-future footprint
Yara is actively assessing its portfolio to ensure a fit-for- future footprint Illustration: Yara’s ammonia position in Europe1,2 Mt ammonia Mt CO2 • Yara has a future optionality to consider closing some EU 5.8 10 ammonia production capacity, with our terminal structure in Europe representing a str
Slide 26: Our ambition is to be carbon neutral by 2050
Our ambition is to be carbon neutral by 2050 Historic reductions1, MtCO2 per year Planned reductions 2025 2030 2050 Our climate roadmap -42% 2025 Intensity target: 10% reduction in 13 Scope 1 & 2 CO2e per ton N ~30% 1 2030 Reduce scope 1+2 2.5 32 Equivalent to -100% absolute emissions emissions of 3
Slide 27: 80% of our GHG 2025 project portfolio is mature
2025 target 80% of our GHG 2025 project portfolio is mature Forecasted Scope 1+2 CO2 savings per phase in ktCO2eq/year Major projects finalized last year Key areas for emission reductions: - N2O abatement ~ 1.3 MtCO2 • Four high-impact projects in - Energy efficiency ~ 0.4 MtCO2 GHG portfolio comple
Slide 28: Pipeline of projects and clean ammonia imports can meet 2030 target
2030 target Pipeline of projects and clean ammonia imports can enable Yara to meet its 2030 emission reduction target Realization of GHG portfolio and most Potential for emission reductions in different profitable conversions are not sufficient to scenarios of clean ammonia imports meet 2030 targets
Slide 29: We are working towards a 2050 roadmap
2050 ambition We are working towards a 2050 roadmap Yara total emissions Potential actions ~70 Million tCO2e Scope 1 – Green ammonia, bio/renewable gas, CCS, minimal emission 23% Scope 2 – Power sourced only from carbon free sources 1% 16% Scope 3up – Decarbonized mining, minimum natural gas, clean
Slide 30: Moving towards science-based targets and a decarbonization blueprint
2050 ambition Moving towards science-based targets and a decarbonization blueprint for the industry Status update: Science Based Targets Submitted Developing a 1.5°C-aligned Enabler: working on R&D to reduce for validation ‘well below 2 degrees’ pathway for the industry N2O emissions By 2030: Sector
Slide 31: Yara will prioritize science over protocols
2050 ambition Yara will prioritize science over protocols Scope 3 reductions: Nutrient Use Efficiency is a major mitigation lever GHG emissions from mineral nitrogen fertilizer use (Mt CO2e/year in 2050)1 • Improving the efficiency in use of nitrogen is a 2050 2050 key decarbonization lever for the
Slide 32: Climate neutrality
Climate neutrality Building on our leading ammonia position to serve new market segments and decarbonize own production 32
Slide 33: Climate neutrality
Climate neutrality
Slide 34: Our leading ammonia position presents significant opportunities
Our leading ammonia position presents significant opportunities Global #1 in traded ammonia with >20% market share1 YCA competitive advantages YCA global terminal and storage infrastructure Integration across the value chain Reliable, asset-backed supply and attractive offtaker Deep industry know-ho
Slide 35: Our ambition
Our ambition • Yara aims to be the leading midstream player across green, blue and grey ammonia production, both for decarbonized fertilizers and for Yara Clean Ammonia customer segments such as shipping and energy • Yara will decarbonize its existing ammonia production where technically and commerc
Slide 36: Creating demand pull for clean ammonia from new segments
We are creating demand pull for clean ammonia from new segments through partnerships and collaborations Decarbonize fertilizers Shipping fuel Hydrogen carrier Power generation 2050 ammonia demand potential1 in 232 210 59 21 million tons ▪ Yara Clean Ammonia and • Signed first commercial ▪ Lloyd’s Re
Slide 37: Yara Clean Ammonia uniquely positioned for growth
Yara Clean Ammonia uniquely positioned for growth Ammonia represents a significant growth opportunity YCA uniquely positioned with distinct competitive edges Global demand for ammonia per year1, million tons Integrated 2.8x midstream 522 Upstream Downstream Profitable upstream #1 global Create pull
Slide 38: Strong US clean ammonia project economics
Strong US clean ammonia project economics Strong federal incentives in the US for sequestering CO2 The accumulated 45Q credits benefit is substantial Ammonia cash cost1, USD/ton, illustrative USD billion, illustrative example2 190 2.6 – 2.9 140 1.5 – 1.8 80 30 Cash cost 45Q CCS Cash cost CapEx Accum
Slide 39: Prioritizing strategic and value-creating investments in US clean ammonia
Yara will prioritize strategic and value-creating investments in US clean ammonia Type Project CO2 Capture Yara volume1 Type Yara capex3 Start of production Project YaREN2 50% stake North America, Texas, Ingleside ~95% 1.2 – 1.4 mt and full 1.3 – 1.45 bn 2027 – 2028 Partnership with Enbridge offtake
Slide 40: US ammonia investments are complementary to Yara's European footprint
US ammonia investments are complimentary to Yara’s European footprint Yara current ammonia footprint is flexible Creating opportunities for Yara to: Europe • Norway • Netherlands 1) Fuel parts of the EU production with import of • Finland • Germany low-carbon ammonia at competitive cost • France • I
Slide 41: Nitrates and compound NPKs can be produced without CO2
Nitrates and compound NPKs are the only nitrogen fertilizers that can be produced without CO2 Fossil fuel Ammonia Urea (contains CO2) Urea CO2 CO2 is released upon spreading Fossil fuel Ammonia Nitric acid Nitrates Nitrates No CO2 needed CO2 In blue ammonia, CO2 is captured and permanently CCS store
Slide 42: Strong value creation in European nitrate upgrade position
Strong value creation in European nitrate upgrade position Historical (past 10 years): nitrate premium above urea1 Future scenario: profitable decarbonization through US ammonia USD/t, Urea equivalents ~500 ~100 ~400 illustrative n- margin above ammonia cost3 With CBAM, importers have to pay carbon
Slide 43: Regenerative Agriculture
R a ai bi td y ee “Sh NY ulture . ne St al
Slide 44: Regenerative Agriculture
Regenerative Agriculture Leveraging on our more than 100 years of agronomic knowledge and solutions to transform agriculture 44
Slide 45: Yara's definition of Regenerative agriculture
At Yara we define Regenerative agriculture as a systematic, outcome-based approach to adopt the best sustainable farming practices that positively affect nature and climate, across five recurrent themes: CLIMATE - SOIL HEALTH - RESOURCE USE - BIODIVERSITY - PROSPERITY 45
Slide 46: Extensive portfolio of products and solutions for regenerative agriculture
Yara has an extensive portfolio of products and solutions for regenerative agriculture Green & low-carbon Specialty products Digital solutions Higher crop yields and Support farmers in nitrates1: (biostimulants, foliars, improved nutrient use maximizing economic • Low-carbon fertilizers fertigation
Slide 47: R&D and innovation supported by worldwide research centres
Our R&D and innovation efforts are supported by a worldwide network of research centres and universities 3 R&D centres and 32 demo centres in Europe Research on all sustainability dimension (soil, water, biodiversity, and climate with a focus on in field greenhouse gas emissions, innovate recommenda
Slide 48: Future growth opportunities within regenerative agriculture
Future growth opportunities within regenerative agriculture Positioning within regenerative agriculture is a platform for value creating business opportunities in the future e.g. within the following areas: Outcome Water & Digital Biologicals Carbon Soil health based Fertigation solutions models Str
Slide 49: Outcome-based business models benefit all involved parties
The outcome-based business models (OBM) benefit all involved parties In-field presence, expertise and digital tools and services Yara Agronomic Increased results from Risk and knowledge and a financial, agronomic additional value product offering and environmental sharing approach standpoint Potenti
Slide 50: Positive results under OBM in key crops in Americas
We have already seen positive results under OBM in key crops in Americas during 22-23 season Wheat and Barley Argentina, Season 2022-23, 26 farms Value created for all parties in the value chain: Yara Farmers Society & environment Distributors/ food value chain partners Increased margins +19USD/ha Y
Slide 51: Yara is geared for success within Regenerative Agriculture
Yara is geared for success within Regenerative Agriculture Identified Balanced crop Capabilities growth nutrition for scale-up opportunities 51
Slide 52: Prosperity
Prosperity
Slide 53: Prosperity
Prosperity We have been bringing prosperity to farming communities, businesses, employees, shareholders and the wider ecosystem for a very long time. Building on solid foundations for the future. 53
Slide 54: Embedding impact as part of the business transformation
Embedding impact as part of the business transformation Impacts Improve farmer income and Contribute to zero hunger and Positively impact farmer diversity sustainability healthy nutrition Examples: actions and proofpoints Digital Inclusion – Inclusive Local Economic Partnerships for Access and Enabl
Slide 55: Yara will play a larger role in Africa
Yara will play a larger role in Africa by engaging in a holistic food systems transformation Expand smallholder farmer Defend and grow premium penetration for broader food segments through commercial systems transformation via excellence to maximise returns partnerships Farmer segment | Commercially
Slide 56: Food Systems transformation requires new metrics
Food Systems transformation requires setting and tracking a new set of metrics Growing a Nature Positive Food Future Prosperity Climate Neutrality Regen Farming dimensions Success Climate Economy Livelihoods, Nutrition, diet adaption and Nature and and production poverty and equity and health mitiga
Slide 57: Integrated strategy will lead to significant long term value creation
Pursuing this integrated strategy will lead to significant long term value creation Commercial Goals Food System Transformation Goals (In Yara’s chosen markets) (Illustrative example – maize in Kenya) 2030 Food System Transformation integrated strategy Ideal state metric Target From To Volumes1 (MMT
Slide 58: Capital allocation
Capital allocation
Slide 59: Capital allocation
Capital allocation Delivering growth with capital discipline and competitive shareholder returns 59
Slide 60: Capital allocation - key messages
Capital allocation - key messages • Capital allocation policy maintained, based on BBB / Baa2 credit rating target • Annual average capex at 1.2 BUSD max in real 2022 terms, on a net basis including portfolio optimization and equity funding • Fixed cost target to beat inflation in core business (exc
Slide 61: Operating environment: energy volatility and strong urea supply
Operating environment: energy volatility and strong urea supply currently impacts margins, but healthy farmer incentives and declining supply longer term Upgrading margin1 Declining growth in global urea capacity Strong farmer incentives4 Average May northwest Europe price Million tonnes urea Cereal
Slide 62: Financial policy based on BBB/Baa2 rating target
The basis for our financial policy is our BBB/ Baa2 rating target Targeted capital structure Net Debt/EBITDA ex Special Items 2.49 • BBB/Baa2 rating and FFO/Net debt at 0.4-0.5 1.66 1.72 2.0 • Mid- to long-term Net debt/EBITDA of 1.5-2.0 1.36 1.36 1.5 0.86 • Maintain a net debt/equity ratio below 0.
Slide 63: Average net annual Capex maintained at max. 1.2 BUSD
Average net annual Capex maintained at max. 1.2 BUSD Annual Capex Capex, MUSD Incl 500 USD phasing from Target (in real 1,700 2022): 2022 Growth 800 1,200 1,057 987 902 769 Maintenance 2020 2021 2022 L12M 2023 target Annual net average 63
Slide 64: Growth investments focused on key strategic priorities
Growth investments focused on key strategic priorities Yara`s strategic framework guides capital allocation in the next 2-3 years Investment focus: Climate Neutrality Regenerative ag. Prosperity Invest in prioritized core operations - Selective investment in Accelerate operational improvement Operat
Slide 65: Structural moves continuously considered to reallocate capital
Structural moves continuously considered to reallocate capital Asset portfolio YCA IPO evaluation • Increased focus on divesting non-core assets where • Viability of minority divestment of YCA confirmed Yara sees accretive conversion into prioritized growth segments • Timing postponed due to highly
Slide 66: Strong shareholder returns
Strong shareholder returns Dividend and buy-back per share1 Dividend policy NOK/share Subject to target capital structure: Ordinary dividend 65 Additional dividend 58 52 • Ordinary dividend; 50% of net income Buy-back and redemption • Further cash distributions continuously considered in 20 30 line
Slide 67: Updated KPI scorecard
We will monitor and report progress through an updated KPI scorecard People Planet Profit Key Performance Indicators 2025 2025 2025 Yara KPI 2021 Measure Yara KPI 2021 Measure Yara KPI 2021 Measure Target Target Target Strive towards zero 1.0 <1.0 TRI GHG emissions, intensity 2.99 2.7 t COշe / tN Am
Slide 68: Closing remarks
Closing remarks
Slide 69: Key messages for today
Key messages for today Strong shareholder returns and strategic progress delivered, resilience of business model demonstrated • Resilience of global ammonia position, flexible production assets and leading market presence demonstrated in a challenging market • Accumulated FCF generation1 from -0.5 b
Slide 70: Yara is playing a leading role in tackling the food crisis and climate change
Yara is playing a leading role in tackling the food crisis and climate change while enabling the energy transition Focused strategy Profitable growth Strong shareholder returns Resilient and flexible business model Building on Yara’s leading ammonia Strong capital discipline maintained – position to
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