Yara International Asa · OSL:YAR
Yara International Asa — Q4 2015 Earnings Presentation
46 slides from Yara International Asa's earnings presentation, Feb 12, 2016
Slide 1: Yara International ASA 4Q 2015 roadshow
Yara International ASA 4Q 2015 roadshow Svein Tore Holsether, CEO Thor Giæver, IR
Slide 2: Summary fourth quarter
2 Summary fourth quarter Weaker result reflecting lower margins and deliveries Significant downtime impacts production of urea, ammonia and nitrates Global deliveries down 7%, but increase in Brazil Strong Industrial result with continued growth for environmental products Asset write-downs
Slide 3: Earnings per share
3 Earnings per share* EPS excluding currency and special items 14.56 7.41 10.54 10.80 10.51 10.59 9.82 9.25 2.65 9.58 8.32 9.00 8.52 8.26 7.97 8.17 7.67 7.62 8.04 7.03 7.74 7.21 6.69 6.74 5.66 6.40 6.18 5.62 3.97 2.65 1.58 0.23 2012 2013 2014 2015 Annual NOK 37.31 20.67 27.59 29.38 *Average number o
Slide 4: EBITDA development
4 EBITDA development NOK millions 4,625 722 3,504 102 1,296 Of which Pilbara and 1,460 Belle Plaine ~ 700 MNOK 461 EBITDA 4Q14 Volume Price/margin Other Currency Special EBITDA 4Q15 items IR – 11 February 2016
Slide 5: Lower production due to maintenance stops and unplanned outages
5 Lower production due to maintenance stops and unplanned outages Kilotons Ammonia1 Kilotons Finished fertilizer & industrial products 1 2,500 6,000 5,000 2,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Urea Nitrates NPK CN UAN SSP - based fertiliz
Slide 6: Brazil: 4Q industry deliveries 7% lower than last year, pick-up in Yara deliveries
6 Brazil: 4Q industry deliveries 7% lower than last year, pick-up in Yara deliveries Brazil 4Q fertilizer deliveries Yara Brazil value-added product deliveries Kilotons Kilotons 9,000 -7% Thousands 370 8,000 7,000 290 287 6,000 250 231 222 5,000 198 175 183 4,000 Galvani +2% ex. 170 kt 147 3,000 102
Slide 7: Stable European nitrate premium
7 Stable European nitrate premium Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 700 180 160 600 140 500 120 Nitrate 400 premium above urea 100 Value above 80 300 ammonia Value 60 200 above gas 40 100 Yara EU gas cost *20 20 0
Slide 8: Stable commodity phosphate margins and solid NPK compound premiums
8 Stable commodity phosphate margins and solid NPK compound premiums NPK premium over blend1 USD/t Phosphate upgrading margins USD/t 700 600 600 500 500 400 Weighted average global Value above premium above blend cost raw material 400 300 Nitrate premium, CIF inland Germany 300 NH3, fob Black Sea *0
Slide 9: Lower natural gas cost in Europe
9 Lower natural gas cost in Europe Yara European gas & oil cost Change in European energy cost USD/ NOK MMBtu millions 9.0 0 8.0 (200) (151) 7.0 (400) 6.0 (600) (588) (588) 5.0 (800) (726) 4.0 (1,000) (900) (1,200) (1,050) 3.0 2.0 (1,400) (1,314) 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 4Q14 1Q15 2Q15 3Q1
Slide 10: Lower urea prices due to lower supply cost from China
10 Lower urea prices due to lower supply cost from China Chinese urea balance this season Declining urea pricing Million tons USD/t 45 380 38.9 360 40 35.1 35 340 +24% 31.9 30 320 25.6 7.0 25 300 9.4 20 280 15 260 10 240 5 220 0 200 Export Domestic Domestic Export Production Production Urea price Ch
Slide 11: Proposed dividend NOK 15 per share
11 Proposed dividend NOK 15 per share Dividend and buy-backs1 NOK per share Share of net income 15.5 64% 0.5 14.1 13.8 57% 1.1 16% 53% 0.8 6% 11.9 48% 48% 6% 47% 1.9 41% 12% 6% 32% 25% 7.4 30% 15.0 0.4 7% 26% 13.0 13.0 23% 51% 5.4 5.3 5.5 21% 48% 47% 7% 19% 4.5 0.8 10.0 1% 6% 4.0 1.4 5% 34% 35% 2.8
Slide 12: Multiple growth options; de-bottlenecking and regional M&A currently most attractive
12 Multiple growth options; de-bottlenecking and regional M&A currently most attractive Reconfiguration/expansion at 1 existing sites, potential for increased NPKs, nitrates and CN Pursue medium-size/regional 2 M&A, likely highest probability of success in current environment Secure longer term part
Slide 13: Additional information
Additional information IR – 11 February 2016
Slide 14: Safe operations is our first priority
14 Safe operations is our first priority 20.0 TRI 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work ho
Slide 15: Strong growth pipeline
15 Strong growth pipeline Capex plan Production growth 2014-2017 NOK bn 14.6 14.5 0.8 Cost&capacity improvements 1.3 mt Committed growth 0.9 Maintenance 0.5 21.6 8.3 9.2 7.4 2.2 1.2 6.8 3.0 1.2 0.6 1.0 5.5 5.8 5.0 5.0 18.8 2015 2016 2017 2018 Production Committed M&A4 Sale Production Ammonia5 20142
Slide 16: Integrated business model provides scale, flexibility and end-to-end presence
16 Integrated business model provides scale, flexibility and end-to-end presence Downstream Upstream Industrial Supply & Trade Scale advantages + Unique flexibility + Unrivalled presence IR – 11 February 2016
Slide 17: Fertilizer portfolio is being driven towards greater product differentiation and profit
17 Fertilizer portfolio is being driven towards greater product differentiation and profit Product portfolio (2014/15 season volume) Differentiation improves margins and 17% reduces exposure to commodity price volatility 37% On-going efforts to further increase 24% differentiation through: – Cap
Slide 18: Yara Industrial enhances value of fertilizer operations
18 Yara Industrial enhances value of fertilizer operations Solid growth last 10 years… • Yara’s global production system enables mill. tonnes CAGR 6.7 reliable supply with close proximity to +7% 5.2 5.5 5.7 6.2 4.7 4.6 industrial customers 3.3 3.5 3.8 3.9 • Industrial adds value above commodity refe
Slide 19: 13% EBITDA growth p.a. since 2011
19 13% EBITDA growth p.a. since 2011 Gas and Industrial Environmental Base Chemicals Mining Applications applications Solutions Chemical applications CO2 in a gas, liquid and Abatement of emissions from Solutions to the Civil for food, feed, Dry ice format heavy duty vehicles, off-road explosives in
Slide 20: We serve a wide range of customers through an extensive offering
20 We serve a wide range of customers through an extensive offering End users Yara value proposition Yara competitive edge Reagent Technology Services • Global reach Trucks • AdBlue: • Dispensing bulk Automotive Off-road High-quality equipment • Strong market vehicles Cars urea solution • Telemetry
Slide 21: Price sensitivities linked to capacities
21 Price sensitivities linked to capacities Operating income EBITDA EPS Parameter (MUSD) (MUSD) (USD) Urea + USD 10/t 39 51 0.15 1 ... of which pure urea 33 44 0.13 … of which UAN 7 7 0.02 CAN price + USD 10/t 96 102 0.28 2 … of which pure nitrates 58 62 0.17 … of which NPK 38 40 0.11 3 Compound NPK
Slide 22: Yara benefits from a stronger USD
22 Yara benefits from a stronger USD Revenues and raw material costs are both 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. 2014-average2 Translation impact NOK vs. FX Fixed costs on gross profit EBITDA EB
Slide 23: Increased production and exports from China
23 Increased production and exports from China Chinese urea balance L12M Chinese exports and urea price Black Sea Kilotons USD/t Million tons 80 2,400 550 75.3 2,200 500 71.4 70 7% 2,000 450 57.7 61.6 1,800 60 400 13.6 13.8 1,600 350 50 1,400 300 40 1,200 250 1,000 30 200 800 600 150 20 400 100 10 2
Slide 24: Brazil 2015 industry deliveries 6% lower than last year, Yara Brazil -5%
24 Brazil 2015 industry deliveries 6% lower than last year, Yara Brazil -5% Brazil 2015 fertilizer deliveries Yara Brazil value-added product 2015 deliveries Kilotons Kilotons 35,000 -6% 1,200 Thousands 30,000 1,000 25,000 800 20,000 600 15,000 -5% 400 10,000 200 5,000 0 0 2011 2012 2013 2014 2015 2
Slide 25: Yara 4Q fertilizer sales by market and product
25 Yara 4Q fertilizer sales by market and product Kilotons 2,784 4Q14 4Q15 2,667 2,267 2,084 766 549 477 445 408 286 Europe Latin America North America Asia Africa 1,315 1,358 1,464 1,342 1,426 1,099 1,114 1,006 849 923 233 203 203 200 NPK compounds1 NPK blends1 Nitrate Urea Other products UAN CN 1)
Slide 26: Continued premium products growth outside Europe
26 Continued premium products growth outside Europe Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 Kilotons Kilotons 3,500 370 3,000 292 281 287 268 2,500 242 224 2,000 183 1,500 144 CAGR 119 122 108 10% 1,000 77 62 56 500 0 4Q11 4Q12 4Q13 4Q14 4Q15 Asia Brazil Latin Africa No
Slide 27: YaraMila and YaraBela deliveries
27 YaraMila and YaraBela deliveries Yara-produced YaraMila deliveries Yara-produced YaraBela deliveries Kilotons Kilotons 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 800 800 600 600 400 400 200 200 0 - 4Q11 4Q12 4Q13 4Q14 4Q15 4Q11 4Q12 4Q13 4Q14 4Q15 Outside Europe Europe Outside Europe Europe
Slide 28: Value-added and distribution make up larger part of Yara's contribution
28 Value-added and distribution make up larger part of Yaras contribution Total Yara contribution NOK millions 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
Slide 29: Earnings per segment
29 Earnings per segment 3,434 3,251 EBITDA1 (NOK millions) EBITDA excluding special items 2,176 1,998 1,234 1,435 1,211 1,253 296 308 235 308 Crop Nutrition Industrial Production 4Q14 4Q15 1) 4Q 2015 result reflects new segment structure as described in note 3 of the financial report. IR – 11 Februa
Slide 30: Industrial volume development
30 Industrial volume development Kilotons 892 866 849 852 864 859 844 829 819 816 815 792 577 540 541 511 482 456 438 432 368 358 374 364 367 382 380 364 385 343 328 339 361 346 333 328 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Industrial N-chemicals Environmental products Other IR
Slide 31: AdBlue deliveries
31 AdBlue deliveries Kilotons 450 400 350 300 250 200 150 100 50 0 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 IR – 11 February 2016
Slide 32: Earnings before interest, tax, depreciation and amortization (EBITDA)
32 Earnings before interest, tax, depreciation and amortization (EBITDA) EBITDA excluding special items NOK millions 7,884 4,614 5,742 5,196 5,179 4,625 4,794 4,310 5,055 4,966 4,186 4,184 4,103 4,227 4,002 3,830 4,528 3,935 3,591 4,103 4,149 4,039 3,318 4,185 3,964 3,508 3,591 3,541 2,363 3,504 3,2
Slide 33: Write-downs of NOK 1,150 million
33 Write-downs of NOK 1,150 million Yara Montoir (France) – nitrate and NOK millions 1,150 compound NPK plant • small scale 224 • limited export opportunities • serves home market, exposed to more commodity grains 382 544 Yara Trinidad - ammonia plant • small scale • frequent gas supply curtailm
Slide 34: Net interest-bearing debt development
34 Net interest-bearing debt development NOK millions 11,868 1,164 364 362 4,057 756 793 4,401 3,229 2,533 Net debt Cash Pilbara Galvani Net operating Investments Share FX gain Other Net debt Sep 15 earnings* buy-out payment capital net buy/backs Dec 15 change * Operating income plus depreciation an
Slide 35: Debt/equity ratio
35 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.49 0.38 0.32 0.27 0.22 0.20 0.17 0.16 0.15 0.12 0.12 0.13 0.07 0.08 0.08 0.06 0.06 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2010 2011 2012 2013 2014 2015 IR – 11 February 2016
Slide 36: Yara stocks
36 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 – 11 February 2016
Slide 37: Nutriox - calcium nitrate with integrated technology solutions
37 NutrioxTM - calcium nitrate with integrated technology solutions, for preventive waste water odor control Kilotons • Hydrogen sulphide (H2S) is a toxic gas that often 215 226 develops in waste water and sewage systems 208 • The absence of air and oxygen cause bacterial 76 84 90 production of hydr
Slide 38: Season-to-date Europe and US nitrogen fertilizer industry deliveries behind last year
38 Season-to-date Europe and US nitrogen fertilizer industry deliveries behind last year Million tons N West Europe Million tons N US -5% 4.0 10.0 -4% 3.5 9.0 8.0 3.0 7.0 2.5 6.0 2.0 5.0 1.5 4.0 3.0 1.0 2.0 0.5 1.0 0.0 0.0 2H11 2H12 2H13 2H14 2H15 2H11 2H12 2H13 2H14 2H15 Domestic production Net imp
Slide 39: European producers' nitrate stocks
39 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 IR – 11 February 2016
Slide 40: Energy cost
40 Energy cost Yearly averages 2009 – 2013, quarterly averages for 2014-15 with forward prices* for 1Q16 and 2Q16. USD per MMBtu 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 8.1 7.6 8.1 6.6 8.0 7.0 6.2 6.6 6.9 7.0 6.8 6.5 6.5 5.0 6.1 5.4 4.6 5.7 6.0 4.7 5.7 4.8 5.2 5.3 5.
Slide 41: Currency exposure affecting Profit & Loss
41 Currency exposure affecting Profit & Loss At the beginning of the first quarter 2016 1. The US dollar debt generating Profit & Loss exposure was USD 1,800 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Exposure mainly towards EUR (40 %), AUD and BRL (2
Slide 42: Global grain balance
42 Global grain balance Grain consumption and production Days of consumption in stocks Million tons Days 2,550 90 2,500 2,450 85 2,400 80 2,350 2,300 75 2,250 2,200 70 2,150 65 2,100 2,050 60 2,000 1,950 55 07 08 09 10 11 12 13 14 15E 16F 07 08 09 10 11 12 13 14 15E 16F Consumption Production Source
Slide 43: Non-commercials' net long position in corn
43 Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: US Commodity Futures Trading Commission IR – 11 February 2016
Slide 44: Projected nitrogen capacity additions outside China
44 Projected nitrogen capacity additions outside China Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Algeria 26% 2015 1.8% (2.6%) Saudi Arabia 24% USA 33% 2016 3.1% (3.0%) Algeria 14% USA 35% 2017 2.3% (1.6%) Nigeria 10% Nigeria 30% 2018 1.5%
Slide 45: Key value drivers – quarterly averages
45 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) 310 295 8.1 355 337 273 7.0 315 257 255 6.8 6.4 295 277 297 268 281 5.5 250 270 4Q14 1Q15 2Q15 3Q15 4Q15 4Q14 1Q15 2Q15 3Q15 4Q1
Slide 46: 10-year fertilizer prices – monthly averages
46 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 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 USD/t Urea prilled fob Black Sea/Urea granular fob Egypt