Yara International Asa · OSL:YAR
Yara International Asa — Q4 2017 Earnings Presentation
39 slides from Yara International Asa's earnings presentation, Feb 8, 2018
Slide 1: Yara International ASA 2017 fourth quarter results
Yara International ASA 2017 fourth quarter results 8 February 2018
Slide 2: Safe operations is our first priority
Safe operations 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 wor
Slide 3: Summary fourth quarter
Summary fourth quarter • Improvement program ahead of schedule • Improved results reflecting higher margins • Strong full-year Industrial performance • Proposed dividend NOK 6.50 per share, 45% of net income IR – 8 February 2018 3
Slide 4: Earnings per share
Earnings per share* EPS excluding currency and special items 14.56 7.41 11.23 10.51 10.59 10.22 6.29 2.65 9.58 8.26 9.12 8.17 7.62 7.03 7.74 6.74 6.19 6.18 6.40 4.95 3.97 3.43 3.21 3.88 1.58 2.90 3.00 2.60 3.10 2.56 1.58 -1.22 2014 2015 2016 2017 Annual NOK 27.59 29.38 23.25 14.45 *Average number of
Slide 5: 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 6: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and amortization (EBITDA) EBITDA excluding special items NOK millions 7,884 4,614 5,742 5,179 5,489 4,794 5,055 5,055 3,958 4,625 5,050 4,227 3,830 4,002 4,528 4,185 3,508 3,591 3,964 3,335 2,992 2,845 3,504 3,004 2,728 3,216 2,873 2,526 2,968 2,474 2,386
Slide 7: EBITDA: Stronger margins offsets higher energy cost and weaker US dollar
EBITDA: Stronger margins offsets 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 IR – 8 February 2018 7
Slide 8: Higher margins in Production segment
Higher margins in Production segment EBITDA excluding special items 1,915 EBITDA (NOK millions) 1,829 1,221 823 829 860 707 483 398 129 Crop Nutrition Industrial Production 4Q16 4Q17 IR – 8 February 2018 8
Slide 9: Higher natural gas cost expected for the next two quarters
Higher natural gas cost expected for the next two quarters Yara European natural gas cost Change in global natural gas cost USD/ NOK MMBtu millions 8.0 800 7.0 187 600 169 6.0 400 98 543 161 5.0 200 382 340 290 212 230 4.0 0 (251) 3.0 (200) 2.0 (400) 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 4Q16 1Q17 2Q17
Slide 10: Lower realized European nitrate premiums
Lower realized European nitrate premiums Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 600 90 80 500 70 400 Nitrate 60 premium above urea 50 300 Value above 40 ammonia 200 30 Value above gas 20 100 Yara EU gas cost *20 10 0 0
Slide 11: Solid commodity phosphate margins and compound NPK premiums
Solid commodity phosphate margins and compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 Weighted average global 400 premium above blend cost 300 Value above Nitrate premium, CIF inland Germany raw material 300 200 NH3, fob Black Sea *0.22 U
Slide 12: Higher net interest-bearing debt as investments and net operating capital change more than offset cash earnings
Higher net interest-bearing debt as investments and net operating capital change more than offset cash earnings NOK millions 19,383 877 257 2,908 16,476 1,736 1,116 Net debt Cash earnings* Net operating Investments (net) Foreign currency Other Net debt Sep 17 capital change translation loss Dec 17 *
Slide 13: 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 IR – 8 February 2018 13
Slide 14: ….but higher domestic price and lower exports from China are offsetting oversupply elsewhere
….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 1,400 290 1,200 270 1,000 250 800 230 600 210 400 190 200 170 0 Urea fob Black Sea Ur
Slide 15: Additional information
Additional information
Slide 16: 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 17: Yara has expected commodity nitrogen oversupply, and has focused its growth pipeline 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 18: Improvement and growth investments; earnings and sensitivities
Improvement and growth investments; earnings and sensitivities1 EBITDA improvement2 (MUSD) Improvement program: Impact3 of +100 USD/t price change (NOK/share) 1,100 850 500 0.7 550 450 0.4 282 350 600 124 400 242 200 40 40 Ammonia Urea 2016 2017 2018 2019 2020 Growth: Impact3 of +100 USD/t price cha
Slide 19: Higher finished fertilizer and ammonia production
Higher finished fertilizer and ammonia production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 +1% +5% 2,000 5,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2014 2015 2016 2017 2014 2015 2016 2017 Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including sha
Slide 20: 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 2010 2011 2012 2013 2014 2015 2016 2017 Europe Outside Europe IR – 8 February 2018 20
Slide 21: Yara 4Q fertilizer deliveries by market and product
Yara 4Q fertilizer deliveries by market and product Kilotons 4Q16 4Q17 2,293 2,448 2,297 2,243 801 662 533 587 520 550 268 303 Europe Brazil Latin America North America Asia Africa 1,467 1,514 1,330 1,477 1,513 1,165 1,264 1,150 806 822 291 233 227 245 Compound NPK1 Blend NPK Nitrate Urea Other prod
Slide 22: Fertilizer deliveries by product and source
Fertilizer deliveries by product and source Kilotons 1,477 1,513 1,467 1,514 1,330 1,264 1,165 1,150 1,033 1,067 291 233 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – 8 Feb
Slide 23: Strong premium product deliveries
Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 4,000 591 3,500 547 3,000 2,500 372 338 352 2,000 286 289 CAGR 224 242 1,500 13% 1,000 101 106 108 94 104 500 56 0 4Q13 4Q14 4Q15 4Q16 4Q17 Asia Brazil Latin Africa North America excl. America Out
Slide 24: Brazil: focus on premium products and solutions drives growth
Brazil: focus on premium products and solutions drives growth Brazil 2017 fertilizer deliveries Brazil 2017 premium product deliveries Kilotons Kilotons 40,000 +1% 2,500 Thousands 30,000 +17% 20,000 2,000 10,000 0 1,500 Kilotons 2013 2014 2015 2016 2017 10,000 -2% 1,000 8,000 6,000 500 4,000 2,000 0
Slide 25: AdBlue deliveries
AdBlue deliveries Kilotons 600 500 400 300 200 100 0 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 IR – 8 February 2018 25
Slide 26: Industrial volume development
Industrial volume development Kilotons 967 939 938 926 892 900 912 849 852 864 859 847 866 816 815 829 699 663 637 640 618 577 571 572 540 541 538 511 482 456 438 382 380 385 361 346 364 339 333 328 310 299 177 171 172 184 152 135 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Slide 27: Energy cost
Energy cost Yearly averages 2009 – 2015, quarterly averages for 2016-18 with forward prices* for 1Q18 and 2Q18. 11.0 11.4 10.7 10.5 9.1 9.2 9.4 7.6 7.2 8.1 7.1 6.5 6.6 6.6 6.6 8.2 8.0 8.0 5.7 6.6 6.4 6.6 6.4 5.6 6.9 5.3 6.5 6.0 5.0 4.6 4.9 5.8 5.0 5.5 5.9 5.7 5.4 4.7 5.5 5.3 5.2 4.8 4.2 4.4 4.2 4.7
Slide 28: Yara stocks
Yara stocks Kilotons Finished fertilizer Bunge Fertilizer included from 3Q 2013 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR – 8 February 2018 28
Slide 29: Steady growth in grain consumption, while production growth is more volatile due to weather variations
Steady growth in grain consumption, while production growth is more volatile due to weather variations Grain consumption and production Days of consumption in stocks Million tons Days 2,650 100 2,600 95 2,550 2,500 90 2,450 2,400 85 2,350 80 2,300 2,250 75 2,200 70 2,150 2,100 65 2,050 60 2,000 1,95
Slide 30: Relatively weak grain economics
Relatively weak grain economics Index FAO price index 300 250 200 150 100 50 0 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 1/2017 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – 8 February 2018 30
Slide 31: Non-commercials' net long position in corn
Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Source: US Commodity Futures Trading Commission IR – 8 February 2018 31
Slide 32: 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 33: Increased coal prices drove nitrogen prices higher
Increased coal prices drove nitrogen prices higher Coal price in China (fob Qinhuangdao 5500, RMB/mt) China anthracite and urea prices (RMB/mt) 800 700 2017 600 2016 500 400 300 2015 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IHS, CFMW IR – 8 February 2018 33
Slide 34: Import catch-up need in India
Import catch-up need in India Calendar year Season-to-date (Apr – Dec) +2.7% + 4% +1.5% 32.5 31.5 23.3 29.4 29.6 29.7 30.2 22.4 - 3% Million Million tonnes 26.9 27.3 tonnes 26.4 25.5 24.4 18.3 17.8 23.5 23.7 22.6 22.3 23.0 22.7 21.5 22.0 20.8 20.7 19.7 20.1 20.0 2005 2016 2016 2017 Production Sales
Slide 35: Strong deliveries in Europe, slow in USA
Strong deliveries in Europe, slow in USA Million tons N USA Million tons N West Europe 9.0 4.0 +0% -8% 8.0 3.5 7.0 3.0 6.0 2.5 5.0 2.0 4.0 1.5 3.0 2.0 1.0 1.0 0.5 0.0 0.0 2H13 2H14 2H15 2H16 2H17 2H13 2H14 2H15 2H16 2H17 Production Net imports Domestic Imports Source: Yara estimate for fertilizer de
Slide 36: 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 17/18 12/13 13/14 14/15 15/16 16/17 Source: Fertilizers Europe IR – 8 February 2018 36
Slide 37: 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) 6.6 granular fob Egypt (dotted line, USD/t) 5.8 5.5 5.4 5.0 272 265 244 239 233 242 234 231 206 190 201 207 198 205 184 4Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 4
Slide 38: 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 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 USD/t Urea prilled fob Black Sea/Urea granular fob Egypt US
Slide 39: Debt/equity ratio
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.25 0.22 0.22 0.18 0.17 0.17 0.15 0.16 0.13 0.13 0.14 0.11 0.07 0.08 0.08 0.06 0.06 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2012 2013 2014 2015 2016 2017 IR – 8 February 2018 39