Yara International Asa · OSL:YAR
Yara International Asa — Investor Day (February 2018)
109 slides from Yara International Asa's investor day presentation, Feb 8, 2018
Slide 1: Capital Markets Day and 4Q 2017 results
Yara International ASA Capital Markets Day and 4Q 2017 results Thursday 8 February 2018
Slide 2: Presenters
Presenters Dag Tore Mo Svein Tore Holsether Head of Market Kajsa Ryttberg Wallgren President and CEO Intelligence VP, Innovation Kristin Kaggerud Petter Østbø Head of YPS and Tove Andersen EVP, Production TPO Productivity EVP, Supply Chain Terje Knutsen Stefan Fürnsinn Torgeir Kvidal EVP, Crop Nutri
Slide 3: Safety is our first priority
Safety is our first priority 4.5 TRI (Total recordable injuries 12-month rolling)1 4.0 3.5 3.0 2.5 2.0 1.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec '16 '17 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and med
Slide 4: Summary fourth quarter
Summary fourth quarter Earnings per share* EPS excluding currency and • Improvement program ahead of 11.23 special items schedule 10.22 6.29 9.12 • Improved results reflecting 6.19 higher margins 4.95 3.88 3.43 2.90 3.21 3.10 3.00 2.56 2.60 • Strong full-year Industrial 1.58 performance • Proposed d
Slide 5: EBITDA development: improved margins offset higher energy cost and weaker US dollar
EBITDA development: improved margins offset higher energy cost and weaker US dollar NOK millions 531 1,274 207 2,526 139 91 2,015 74 EBITDA 4Q16 Volume Price/Margin Energy costs Currency Special Other EBITDA 4Q17 translation items 5
Slide 6: Our leading global footprint and differentiated product portfolio set us apart
Our leading global footprint and differentiated product portfolio set us apart Global #1 in Nitrates1 9.4 7.4 4.5 3.2 2.7 2.3 3.1 4.7 2.1 1.0 Yara Eurochem Ostchem Uraichem Borealis Europe North 41.4% 0.2 America Asia 6.6% Global #1 in NPK2 5.3 12.1% 3.3 2.7 2.7 1.2 1.9 0.3 2.2 Africa 4.4% 0.3 Yara
Slide 7: Yara's margins are influenced by supply / demand situations
Yara’s margins are influenced by the supply / demand situations for crops, commodity fertilizer and premium fertilizer Urea is the key commodity N-product1 Both crop and fertilizer markets are key for Yara Other 10% Ammonia • The majority of Yara’s business is related to 4% nitrogen DAP/MAP Urea 7%
Slide 8: Steady growth in grain consumption, but grain prices below 5-year average
Steady growth in grain consumption, but grain prices are below the 5-year average Grain production and consumption reaching record levels Prices are however not supporting, below 5-years average (Million tons) (Index) 2.800 400 2.600 200 2.400 Consumption Cereals 2.200 Production 5 years average 0 0
Slide 9: Global grain stocks are stable, leaving weather as key driver
Global grain stocks are stable, leaving weather as a key driver of grain price development Chinese grain stocks have grown significantly since 2009 This has led to large stocks in China, stable in RoW (Grain stocks, Million tons) (Days of grain consumptions in stock) 400 220 200 180 160 140 120 100
Slide 10: Urea gaining market share in the nitrogen product mix
Urea gaining market share in the nitrogen product mix, as almost all new nitrogen capacity is in the form of urea Urea growth faster than other nitrogen products (Global consumption ex China, Million tons) • 2016 was a slow year for nitrogen consumption, with a growth of 0.7% comparing to 10-years h
Slide 11: Apparent consumption outside China increased by 2.6% in 2016
Apparent consumption outside China increased by 2.6% in 2016, Global supply grew more, compensated by lower Chinese export Change in apparent consumption 2016 Change in production 2016 (Urea, Million tons) (Urea, Million tons) 376 1.082 1.511 4.877 469 1.759 1.258 3.235 857 3.086 3.086 1.268 1.750 E
Slide 12: The surge of new capacity is past its peak
The surge of new capacity is past its peak Global capacity additions ex China (Urea, Million tons) Nigeria Iran USA Production 6.6 Russia Algeria Others 4.7 4.0 4.0 3% demand growth 3.1 2.6 2.7 1.5 1.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: CRU December 2017 12
Slide 13: ~2/3 of the world's ammonia capacity is more than 30 years old
~2/3 of the world’s ammonia capacity is more than 30 years old; older capacity may struggle to maintain utilization rates World’s ammonia capacity (ex. China) per geography and vintage (kt) Other 46.109 Americas West Europe North America 34.936 Middle East Asia CIS/East Europe 17.557 19.211 12.030 >
Slide 14: Growth in global urea production driven by new plants
Growth in global urea production driven by new plants – output from existing plants has fallen Global urea production (million tons) Comments 115 Global urea production ex. China Under the assumption that new capacity 110 runs at 100% capacity utilization, the output from the capacity already instal
Slide 15: Higher domestic price and lower exports from China offsetting oversupply
….but higher domestic price and lower exports from China are offsetting oversupply elsewhere Increasing urea pricing (USD/ton) Chinese export is falling (1000 tons) 390 2,400 370 2,200 350 2,000 330 1,800 310 1,600 290 1,400 270 1,200 250 1,000 230 800 600 210 400 190 200 170 0 Urea granular fob Egy
Slide 16: Unclear if supply is sufficient to cover Chinese urea demand this season
Unclear if supply is sufficient to cover Chinese urea demand this season Chinese urea production down vs last year (million tons) Export reduction so far kept supply stable (million tons) 5.4 30 27.6 3% 26.4 5.2 23.8 24.5 25 5.0 16/17 3.8 20 1.9 4.8 4.6 15 4.4 10 4.2 5 4.0 17/18 3.8 0 Domestic Domes
Slide 17: Premium product margins contain both commodity and premium elements
Premium product margins typically contain both commodity and premium elements Nitrogen upgrading margins1 Yara value drivers USD/t 600 500 • Premium products are key in Yara’s portfolio and business model 400 Nitrate premium above urea • Premium product margins typically contain 300 Value above both
Slide 18: Market backdrop: summary
Market backdrop: summary • Supply-driven global grain situation, but inventories outside China are not high • Urea has gained market share globally, but new-build activity has peaked • The main new development in the urea market is significantly higher urea prices in China, caused by higher coal pri
Slide 19: Improving agricultural productivity is fundamental to achieve the SDGs
Improving agricultural productivity is fundamental to achieve the SDGs: Yara is uniquely positioned to contribute • Agriculture accounts for ~25% of the world’s greenhouse gas emissions • More than half of this results from land use change • Improving productivity of land is among the most efficient
Slide 20: Sustainability represents a huge business opportunity
Sustainability represents a huge business opportunity "Business leaders need to strike out in new directions to embrace more sustainable and inclusive economic models" “Achieving the Global Goals creates at least US$12 trillion in opportunities” 20
Slide 21: Larry Fink quote on corporate purpose
“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Without a sense of purpose, no company, either public or private, can
Slide 22: Sustainability has long been integrated in Yara's way of working
Sustainability has long been integrated in Yara’s way of working Sustainability has long had strong focus in Yara is actively engaging in multi- Yara stakeholder platforms • Defining a crop nutrition strategy focused on delivering value to farmers while achieving better agricultural and environmenta
Slide 23: Yara is investing in solutions for NOx abatement in transportation
Yara is investing in solutions for NOx abatement in transportation Yara deliveries of reagent for NOx abatement Yara is investing in further growth Million tonnes +13% 2.6 2.3 2.1 1.8 2014 2015 2016 2017 • Urea and Ammonia are used as reagent for NOx abatement • Yara produces AdBlue at 5 plants and
Slide 24: Our strategy and targets are guided by our mission and vision
Our strategy and targets are guided by our mission and vision Our Mission Our Vision Responsibly feed A collaborative society; the world and a world without hunger; protect the planet. a planet respected. 24
Slide 25: Yara's solutions improve food production per hectare with lower emissions
Yara’s solutions improves food production per hectare, delivered through products with lower emissions per ton Yara crop nutrition practices enables farmers to Yara’s product mix has significant less emissions optimize application – and thus lower emissions than most of our competitors’ Yara Industr
Slide 26: Yara takes a holistic view of the climate impact of its operations
Yara takes a holistic view of the climate impact of its operations 2016 GHG emissions from fertilisers produced by Yara Fertiliser use is 60% of Million tonnes CO2 equivalents Yara’s assessed footprint 14% 19% 4% 64% 100% Emissions related to 67 volatilization of nitrogen after application. In addit
Slide 27: Yara's integrated business model is unique within the fertilizer industry
Yara’s integrated business model is unique within the fertilizer industry 27
Slide 28: Strategy execution is focused on strengthening competitive edge
Strategy execution is focused on strengthening competitive edge Knowledge Margin Global Operational Competitive Optimization Excellence edge and Scale Competitive raw material costs 28
Slide 29: Two main responses to strengthen our competitive edge
Two main responses to strengthen our competitive edge Improving returns Profitable growth 1. Organic market development 2. Step growth – M&A and new-builds Yara improvement program Sustainable business Sustainability is integrated in Yara’s strategy, and is reflected across our strategic responses 2
Slide 30: Strengthening competitive edge through improving returns
Strengthening competitive edge through improving returns Better value proposition to Improved efficiency and farmers and industrial quality in IT and support customers through Crop functions Roadmaps and Sales Knowledge Excellence Margin Yara Improvement Program Operational Global Competitive Optimi
Slide 31: Strengthening our competitive edge through profitable growth
Strengthening our competitive edge through profitable growth Yara can use our competitive edge to extract value … and growth can help to strengthen Yara’s from growth… competitive edge Tata Urea ATC Vale Sluiskil U8 Tata Urea NPK exp. Bunge Freeport 31
Slide 32: Yara has four different priority areas for growth
Yara has four different priority areas for growth 1 Expand premium fertilizer sales and supply • Demand can be created at healthy premiums • Premiums above commodities and competitors enable profitable investments in new production capacity 2 Expand commodity scale based on attractive full-cost grow
Slide 33: Building premium positions in the world's most important agriculture markets
Yara is deliberately building premium positions in the world’s most important agriculture markets Brazil and Latin America 1 2 3 4 • Brazil and Latin America represents some of the most important and growing agriculture markets in the world • The markets are export oriented, and steadily growing wit
Slide 34: Innovation is crucial to protecting Yara's current position
Innovation is crucial to protecting Yara’s current position and developing its long-term competitiveness Yara innovates to protect and disrupt – a balancing act Yara’s innovation pipeline is measured both in financial terms (Sales & EBIT contribution) and climate impact (CO2 equivalent reductions) L
Slide 35: Yara is innovating with a purpose in all parts of our value chain
Yara is innovating with a purpose in all parts of our value chain Production & Circular Economy Biocycle Digital Solutions Process Technology Green Tech development focused on From waste back to nutrients, enabling Agriculture Technology innovation carbon neutral ammonia production and organo-
Slide 36: Integrated business model and innovation approach drives premiums above commodities
Yara’s integrated business model and innovation approach drives premiums above commodities 2017 total realized premium for key premium products, USD Million Crop Nutrition Industrial 580 113 71 56 59 242 171 CN Nitrate* NPK Ammonia & NA** TAN CN Urea (over urea) (over urea) (over global blend) (over
Slide 37: Fit for the future: Yara Improvement Program
Yara Improvement Program Fit for the future 37
Slide 38: Yara Improvement Program – 2017 status
Yara Improvement Program – 2017 status Program progress Financial benefits 2017 2018 2019 2020 Production volume Variable unit cost3 Annual impact, USD million, vs. 2015 baseline, at 2015 margins Consumption factor Fixed cost Start: Today End: 2016 2020 500+ 450 350 ~35% 2017 EBITDA benefits ahead
Slide 39: Yara Improvement Program - Delivering value across the company
Yara Improvement Program - Delivering value across the company Program status 4Q 2017 Site diagnostics concluded, with IT optimization, Ongoing implementation of new Yara Productivity increase in base potential vs and support IT services contracts; New IT EBITDA target1 System original; Rollout comp
Slide 40: The Yara Productivity System is a structured way of working
The Yara Productivity System (YPS) is a structured way of working applied across operations and knowledge work The Productivity System covers all of Production Identified potential higher than expected Original estimate Confirmed after diagnostic 80% Note: Improvement potential identified at the 27
Slide 41: YPS sustainable long term improvements to reliability
A major effect of YPS is sustainable long term improvements to reliability Production volume improvements contributed Uptime has increased for (%) over 100 USD million EBITDA impact in 2015 terms 95 Comparable to a plant of capacity between Base1 production (kt) +7,9% Le Havre (~700kT) and Montoir (
Slide 42: We can see the impact of YPS across the segment
We can see the impact of YPS across the segment: Selected 2017 achievements >150 MUSD improvement Yearly production TRI rate of 2.0 delivered records 60% lower than 2 years ago at Belle Plaine, Glomfjord, Köping, Uusikaupunki, Siilinjärvi plant, Siilinjärvi All time TRI records in >50 MUSD mine, Ros
Slide 43: YPS for capital projects is in progress and showing results
Led by our project office, YPS for capital projects is in progress and showing results 19 transformation levers CAPEX reduction potential identified Lever Description Lever Description ~10-14% L1 Value optimization L11 Systems for engineering Project performance L2 L12 Hard-skill capabilities manage
Slide 44: Value optimization for smaller on-site projects
A key part of YPS for projects is to conduct value optimization for our portfolio of smaller on-site projects Yara OCOSHE1 spend Identifying and capturing value Example: Siilinjärvi Washing Bay Project 594 Learning and Project Design Minimum 517 protection requirements Alternatives Technical Value c
Slide 45: YPS makes R&D more productive
YPS makes R&D more productive, both shortening time to impact and allowing more focus on improving our plants Improvement example: Debottlenecking cooling capacity at Sluiskil with estimated 0.9 mEUR/year OPEX impact Note: Capex required to realize potential estimated at 266 kEUR (+/- 40%) 45
Slide 46: YPS is our framework for continuous improvement
YPS is our framework for continuous improvement – Developed across three dimensions Technical The way physical The formal structures, assets and resources system Management processes, and are configured and system Systems through which optimized to create the operating Systems value and minimize are
Slide 47: Improvement example: blending machine cleaning time in Rio Grande
Improvement example: Reduction in weekly cleaning time of blending machine to bring increase of 6.2 kt / year in Rio Grande 50% reduction in weekly cleaning time 47
Slide 48: Improvement example: Root Cause Problem Solving in Belle Plaine
Improvement example: Root Cause Problem Solving to improve reliability for plant start-up in Belle Plaine Identifying the root cause of failure 48
Slide 49: Yara applies several Industry 4.0 technologies
Yara applies several Industry 4.0 technologies with more to come Example Example Area initiative Area initiative Additive 3D printing use Advanced Advanced analytics Manufacturing cases Analytics for granulation GE Smart Signal for Augmented Augmented Reality Predictive heavy rotating Operator proof
Slide 50: Procurement Excellence 2018 – in a nut shell
Procurement Excellence 2018 – in a nut shell Spend Wave 1 USD 10.2 Billion 1 Improvement PX2018 Total ~100 cross-functional team members USD 6.5 Billion > 200 Overview Direct 5 categories Initiatives identified USD 3.7 Billion Indirect Wave 2 Target World-class Savings procurement ~50 permanent > US
Slide 51: New cross-functional operating model will provide sustainable impact
New cross-functional operating model will provide sustainable impact Best practice Innovative Cross functional processes Tools Teams 51
Slide 52: Variable cost improvements have contributed ~90 USD million
Variable cost improvements have contributed ~90 USD million Improvement, Target, Example categories accumulated USD million accumulated USD million 68 • Energy Direct • Phosphate rock and acid 26 categories1 • Nitrogen products • Potassium 150+ • Other 2016 2017 Wave 1: Wave 2: • MRO3 • Packaging •
Slide 53: Procurement Excellence 2018 – Packaging
Procurement Excellence 2018 – Tangible results around the globe - Packaging 1 2 3 Convertex project Consolidating demand Invite new suppliers for competition Supplier Power 17 11 53
Slide 54: Procurement Excellence 2018 – MRO
Procurement Excellence 2018 – Tangible results around the globe - MRO Old self retracting New self retracting lifeline lifeline 54
Slide 55: Procurement Excellence 2018 – Warehouses and terminals
Procurement Excellence 2018 – Tangible results around the globe – Warehouses and terminals Optimization of storage and transportation costs Evaluation of “actual cost per tonne" 55
Slide 56: Strategy recap - continuing the journey closer to the farmer
Strategy recap - continuing the journey closer to the farmer 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 •
Slide 57: Deciding where to focus and how to win
Deciding where to focus and how to win is key to profitable growth Distributor Food Industry Consumer Market segmentation Yara capabilities Crop, channel, farmer pains, gains and behaviors. Market needs Knowledge, people, assets, Focus and investment Quality, quantity, trends products, services, etc
Slide 58: Our Crop roadmaps move our strategy into action
Our Crop roadmaps move our strategy into action 58
Slide 59: Growth of 5% in Premium Products
Yara has delivered a growth of 5% in Premium Products and aim for continued growth despite challenging markets Premium Product development (million tons) • CAGR of 4.8% between 2015 and 2017 5.5% 15.2 4.8% 14.5 13.9 13.1 12.6 • Annual market growth of 1.8%* for the +3.5 same period • Growth rate sus
Slide 60: Creating value above commodities in best-matched market segments
We create value above commodities by focusing on the market segments that best match our offering 300% Realized premium (%) Total absolute premiums (12mth rolling USD million) 250% 1,400 1,200 200% 1,000 150% 800 100% 600 400 50% 200 0% - 2015 2016 2017 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-1
Slide 61: Crop-focused Yara growth in India
Crop-focused Yara growth in India 2011 - 18 Himachal Pradesh 2015 - 54 2017 - 140 North India 2018 - 600 Central India South India Maharashtra 61
Slide 62: Acquisition of Tata Chemicals' fertilizer business
Acquisition of Tata Chemicals’ fertilizer business expands our footprint, enabling accelerated premium product growth 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 a
Slide 63: Yara's knowledge grows yields, profitability and living standards in India
Yara’s knowledge grows yields, profitability and living standards in India Balanced crop nutrition programs Best practice demonstrations Regular farmer training programs On-farm training Special crop seminars Mobile campaigns Participation in agri-fairs Tools and Services 63
Slide 64: Leading the digitalization is key to Farmer Centric strategy
Leading the digitalization is key to deliver on our Farmer Centric strategy 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 serv
Slide 65: Digitization, big data, and precision sensors are disrupting agriculture
Digitization, big data, and precision sensors are disrupting agriculture Real-time Automation of precision application sensors and and farm insights operations Data science, Tailored digital modelling, two-way machine communication learning The farm of the future is getting more interconnected, soph
Slide 66: The digital disruption can unlock multiple benefits for the farmer
The digital disruption can unlock multiple benefits for the farmer More insights Higher yield millions of datapoints to feed the world Unmatched precision Higher quality < 1 m2 for better food Smarter choices Less waste "computational agronomy" to protect the planet Unseen connectivity More value re
Slide 67: Yara has a long and successful history in innovation
Yara has a long and successful history in innovation to build on 2005 1956 Commercialization Launch of Crop of broad range of Nutrition R&D digital tools 1905 1997 NOW The invention First prototype N-sensor Stepping up of fertilizer Digital 67
Slide 68: Our Digital Aspiration
Our Digital Aspiration Building the Global Digital Leader in Crop Nutrition 68
Slide 69: Cornerstones of our Crop Nutrition Digital Strategy
Cornerstones of our Crop Nutrition Digital Strategy Our offer Our customers Our benefits Our focus • We innovate • We have a • We build on the • We are building a industry-leading unique global world leading new way of digital nutrition reach into 160 fertilizer business working around solutions tha
Slide 70: Our ability to holistically create value will set us apart
Our ability to holistically create value will set us apart Core product promotion Digital value creation Digital business Improved commercial and revenues processes 70
Slide 71: Where we stand
Where we stand Rapid expansion of our activities in Digital Farming > 100 employees implementing our digital strategy + 60 employees in the past 6 months in Digital Farming 71
Slide 72: We have launched 4 Digital Hubs
We have launched 4 Digital Hubs as centers of gravity for our efforts 72
Slide 73: We are building new capabilities in Yara
We are building new capabilities in Yara Digital Entrepreneurs UX Design Digital commercial models Agile innovation 73
Slide 74: We are working in an agile way
We are working in an agile way Agile innovation Weekly sprints, first farmer testing in week 1 Farmer centricity Tested digital solution with >50 farmers in 6 weeks Fail fast (to succeed) Fundamentally changed hypothesis on digital product Our Digital teams work as value proposition after 4 weeks “s
Slide 75: Ramp-up of digital solutions
Ramp-up of digital solutions • We are quickly building a strong pipeline of digital solutions • Every 3 months launch of 1-2 digital solution teams • Commercial pilots in coming season • Examples − Sensor-aided N-application − Nutrient optimization tailored to specific fields − Crop advisory platfor
Slide 76: Adapt-N – expanding our position in digital farming
Adapt-N – expanding our position in digital farming • Leading Nitrogen recommendation platform • >15 years of scientific validation • Proven benefits for farmers – well beyond competing digital tools • Reducing N-loss by 35-40% • Winner of Tulane 1 million N-Challenge 76
Slide 77: Benefits for Yara
Benefits for Yara • Unmatched customer engagement Significantly higher reach to farmers, two-way exchange, deeper relationships • Knowledge leadership Invaluable insights into farmer needs to catalyze as a differentiator • New sources of value Build-up of digital service businesses and integrated fe
Slide 78: Roadmap – Digital Farming
Roadmap – Digital Farming 2018 2019 2020+ • Capability • Launch in • Global building core markets expansion • Innovating • Prepare for • Financial global viability • Piloting scale-up 78
Slide 79: Our Digital Aspiration
Our Digital Aspiration Building the Global Digital Leader in Crop Nutrition 79
Slide 80: High on-going Yara growth investment activity
High on-going Yara growth investment activity Capex plan1 Production growth 2015 - 20203 Finished products4 Ammonia NOK bn 17.9 Mill.tons 25.5 9.2 Cost&capacity improvements 2) 1.2 M&A 2.3 Committed growth 1.4 5.2 Maintenance 2.8 0.3 11.1 0.4 7.0 0.9 0.2 0.2 0.2 0.7 5.2 19.2 8.2 0.7 0.3 1.1 4.8 1.2
Slide 81: Growth pipeline focused on premium & industrial products
Yara has expected commodity nitrogen oversupply, and has focused its growth pipeline on premium & industrial products Growth focused on premium & industrial Expected start up Pipeline EBITDA (2015 prices, USDm)1 Uusikaupunki NPK 3Q 2016 190 170 180 Expand premium products Porsgrunn/Glomfjord CN/NPK
Slide 82: NPK and Calcium Nitrate expansion in Porsgrunn and Glomfjord
350 kt NPK and Calcium Nitrate expansion in Porsgrunn and Glomfjord, Norway Business case highlights EBITDA (2015 prices, USDm) Investment highlights 80 80 80 Project adds 200 kt calcium nitrate and 50 kt compound NPK 20 annual capacity in Porsgrunn. Enables further 70 kt NPK and 35 kt calcium n
Slide 83: Joint investment with BASF in ammonia plant in Freeport
Joint investment with BASF in world-scale ammonia plant in Freeport, USA Business case highlights Investment highlights EBITDA (2015 prices, USDm, 68%) 75 100 100 100 Attractive long-term partnership: - BASF has strong existing presence in the United States and ammonia sourcing requirement for US
Slide 84: Technical ammonium nitrate plant in Pilbara, Australia
330 kt technical ammonium nitrate (TAN) plant in Pilbara, Australia Business case highlights Investment highlights EBITDA (2015 prices, USDm, 50%) 25 25 JV with Orica (50%/50%) 10 0 Plant ideally located in the world’s biggest iron ore 2018 2019 2020 2021 mining region Volume phasing (kt, 50%) 1
Slide 85: Phosphate project in Salitre, Brazil
Phosphate project in Salitre, Brazil Business case highlights Investment highlights EBITDA (2015 prices, USDm, 100%) The Salitre project, located in the state of Minas Gerais, a traditional mining region, will include a chemical plant in addition 170 170 to the mining operation. 0 30 Start up mi
Slide 86: Yara to acquire Vale Cubatão Fertilizantes complex in Brazil
Yara to acquire Vale Cubatão Fertilizantes complex in Brazil – and establish Yara as a nitrogen producer in Brazil Vale Cubatão Fertilizantes: • Strong competitive position as only nitrate assets in Brazil • Annual production capacity of 200 kt ammonia, 600 kt nitrates and 980 kt of phosphate fertil
Slide 87: Yara Improvement Program effects
Yara Improvement Program effects Production volume Variable unit cost USD million Consumption factor Fixed cost 242 102 180 66 145 55 -35 110 35 73 73 ~600 NOK million 10 95 89 56 10 ~80 NOK million -10 -10 6 56 ~460 NOK million -29 ~240 NOK million Sustained EBITDA Sustained EBITDA 2017 YIP impact
Slide 88: Significant positive impact of the Improvement Program in 2017
Significant positive impact of the Improvement Program in 2017 NOK millions 540 240 15,563 600 246 491 2,182 174 1,776 474 11,120 2016 YiP Turnaround/ YiP YiP Net Market Energy Currency Special Other 2017 EBITDA volume inventory margin cost price/margin costs translation items EBITDA impact build-up
Slide 89: 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 387 272 372 270 267 271 230 254 300 220 267 218 5Y avg 2015 avg 2017 avg Run rate 5Y avg 2015 avg 2017 avg Run rate 5Y avg 2015 avg 2017 avg Run rate NPK compound premium, USD/t1 DAP
Slide 90: 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 7.1 3.2 3.0 7.7 6.5 6.6 2.9 7.1 7.1 5.7 2.6 6.1 5Y avg 2015 avg 2017 avg Run rate 5Y avg 2015 avg 2017 avg Run rate 5Y avg 2015 avg 2017 avg Run rate NOK per USD NOK per EU
Slide 91: Price sensitivities linked to capacities
Price sensitivities linked to capacities Operating income EBITDA EPS Parameter (MUSD) (MUSD) (USD) Urea + USD 10/t 45 54 0.16 1 ... of which pure urea 38 47 0.14 … of which UAN 7 7 0.02 CAN price + USD 10/t 101 101 0.28 2 … of which pure nitrates 61 61 0.17 … of which NPK 40 40 0.11 3 Compound NPK p
Slide 92: Yara will change to USD as reporting currency as of 1Q 2018
Yara will change to USD as reporting currency as of 1Q 2018 Why? What does the change imply? • The fertilizer business is fundamentally a USD • Yara’s financial statement will be consolidated and business presented in USD from 1Q 2018 reporting • USD as reporting currency would better reflect the •
Slide 93: Higher prices offset higher energy cost
Scenario based on current market prices: Higher prices offset higher energy cost 2.7 Primarily higher value add prices Value add +1.3 USD Commodity +0.6 USD 1.8 1.8 0.2 0.1 0.6 Higher EU gas price +0.6 USD 2017 EPS (USD)2 Tax Currency Gas price Price Run rate EPS1 1) Based on market prices as of 1 F
Slide 94: 2015 prices, committed growth and YIP add 3.2 USD to run rate EPS
2015 prices, committed growth and Yara Improvement Program add 3.2 USD to run rate EPS 5.8 0.7 4.4 0.8 1.4 2.7 0.3 Value add +0.5 USD Commodity +0.9 USD Run rate EPS (USD)2 Currency Price EPS at 2015 prices Committed growth 2020 Remaining YIP EPS at 2015 prices and committed growth 1) Based on marke
Slide 95: Strong growth and profitability through the cycle
Strong growth and profitability through the cycle Average cash return on gross investment (CROGI) Average annual shareholder return of 20%1 well above the Yara CROGI target of 10% NOK/share 0 160 400 22.8% 20.9% 140 350 0 17.4% 17.3% 120 300 16.1% 14.4% 0 14.1% 100 250 14.1% 13.3%14.0% 12.6% 80 200
Slide 96: Major improvement and growth investments in 2018
Major improvement and growth investments in 2018; main earnings improvement from 2019 onwards1 Improvement and growth capex2 (BNOK) Improvement program EBITDA improvement3 (MUSD) Committed expansions + M&A 12.1 1,100 850 1.7 500 550 450 Improvement program: 282 350 600 + 350 MUSD cost improvement 10
Slide 97: Additional information
Additional information 97
Slide 98: Sensitivity tables reflecting 2018 production capacities
Sensitivity tables reflecting 2018 production capacities Operating income EBITDA EPS USD million USD million USD Urea sensitivity +10 USD/t 45 54 0.16 …of which pure Urea 38 47 0.14 …of which UAN 7 7 0.02 Nitrate sensitivity CAN +10 USD/t 101 101 0.28 …of which pure Nitrates 61 61 0.17 …of which NPK
Slide 99: Price sensitivities including committed growth projects
Price sensitivities including committed growth projects Updated As Is EBITDA EBITDA impact Porsgrunn Sluiskil Freeport Salitre sensitivity Urea sensitivity +10 USD/t 54 1.0 55 …of which pure Urea 47 2.6 50 …of which UAN 7 -1.6 6 Nitrate sensitivity CAN +10 USD/t 101 1.4 1.3 104 …of which pure Nitrat
Slide 100: NPK expansion in Uusikaupunki, Finland
250 kt NPK expansion in Uusikaupunki, Finland Business case highlights Investment highlights EBITDA (2015 prices, USDm) 20 20 20 Strong NPK demand growth outside Europe presents solid 20 business case Project to install new granulator adds ~250 kt annual capacity 2018 2019 2020 2021 Completed
Slide 101: Value-add expansion in Sluiskil, Netherlands
Value-add expansion in Sluiskil, Netherlands Business case highlights Investment highlights EBITDA (2015 prices, USDm) 40 New urea granulator with capacity of 660 kt per year, replacing old 30 30 prilling unit with capacity of 400 kt per year 0 Granulator will produce urea with sulphur, a produc
Slide 102: Nitric acid expansion in Köping, Sweden
Nitric acid expansion in Køping, Sweden Business case highlights Investment highlights EBITDA (2015 prices, USDm) 50 Nitric acid upgrade and expansion in Køping 50 50 10 The investment includes the construction of a new nitric acid plant replacing an existing plant which is approaching the end o
Slide 103: Acquisition of Tata Chemicals' urea business in India
Acquisition of Tata Chemicals’ urea business in India Business case highlights Investment highlights EBITDA (2015 prices, USDm)1 45 Integrated world scale urea plant in Babrala, Uttar Pradesh: 43 38 40 - Commissioned in 1994 - World-class operations and energy efficiency Significant distribution
Slide 104: Rio Grande expansion and operational improvement
Rio Grande expansion and operational improvement Business case highlights Investment highlights EBITDA (2015 prices, USDm) Consolidation of 3 sites reduces fixed cost and maintenance 54 30 45 49 investments Increased fertilizer production and blending capacity 2018 2019 2020 2021 Improved safe
Slide 105: Improvements 90m USD over target for 2017
Improvements 90m USD over target for 2017 - target increased by 50m USD for 2018 Sustained EBITDA improvement Original target • 2017 impact over Annual impact, USD million, vs. 2015 baseline, at 2015 margins set 4Q ‘16 target driven to 500+ energy and variable cost 450 • Volume ~35% Production volum
Slide 106: Production volume improvements contributed over USD 100 million
Yara Productivity System – Production volume Production volume improvements have contributed over USD 100 million in 2015 terms 5 Margins (value of EBITDA impact , Annual production volumes, kt each extra ton) USDm 7,504 7,459 2015 margins2 18 Ammonia 7,035 5,926 +103 Total 5,858 2017 margins3 26 Ba
Slide 107: YPS drives significant energy improvements
Yara Productivity System – Consumption factor Yara Productivity System drives significant energy improvements Consumption factor, Financial Benefit, GJ (LHV) /ton, based on 12 month rolling average Accumulated USD million1 39 -1.6% Ammonia 23 Q1 ’15 Q2 Q3 Q4 Q1 ’16 Q2 Q3 Q4 Q1 ’17 Q2 Q3 Q4 2016 2017
Slide 108: Procurement benefits calculation methodology
Procurement Excellence – Variable unit cost Procurement benefits calculation methodology Calculation methodology • Improvements measured against the most Direct relevant industry benchmarks categories • Benchmark publications and product details Improvements are specified to ensure relevant comparis
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