Yara International ASA · OSL:YAR
Yara International ASA — Q1 2008 Earnings Presentation
58 slides from Yara International ASA's earnings presentation, Apr 18, 2008
Slide 1: Yara International ASA First quarter 2008 results
Yara International ASA First quarter 2008 results 18 April 2008
Slide 2: Summary first quarter 2008
1 Summary first quarter 2008 Strong results Continued strength in nitrate prices Substantial NPK margin expansion Value of European market position confirmed, enhanced by Kemira GrowHow acquisition IR - Date: 2008-04-18
Slide 3: Net income after minority interest
2 Net income after minority interest* NOK millions 3,000 2,808 2,500 2,044 2,000 1,403 1,422 1,487 1,500 1,041 1,085 1,000 853 891 500 0 2006 2007 2008 Accumulated NOK mill 4,188 6,037 2,808 USD mill 657 1,045 529 * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-04-18
Slide 4: Earnings per share
3 Earnings per share* NOK 12.00 9.63 10.00 8.00 7.01 6.00 4.85 5.10 4.68 3.42 3.67 4.00 3.01 2.77 2.00 0.00 2006 2007 2008 Accumulated NOK 13.86 20.60 9.63 * Average number of shares for 1Q 2008: 291.6 million (1Q 2007: 295.7 million) * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-04-18
Slide 5: Earnings per share adjusted for foreign exchange gain / loss and special items
4 Earnings per share adjusted for foreign exchange gain / loss and special items* NOK 12.00 10.00 8.98 8.00 6.00 4.56 3.59 3.90 3.86 4.00 3.00 2.69 2.35 1.79 2.00 0.00 2006 2007 2008* Accumulated NOK 9.80 15.91 8.98 * After tax, Kemira GrowHow included from 4Q 2007 * Average number of shares for 1Q
Slide 6: Overall fertilizer market development during quarter
5 Overall fertilizer market development during quarter Further increase in grain prices, especially rice Continued strong Chinese urea export Strong demand more than offset increased export supply Phosphate availability far from matching increase in demand Rebound in European nitrogen fertilizer con
Slide 7: Fertilizer price development during quarter
6 Fertilizer price development during quarter Average urea price unchanged from previous quarter, despite huge Chinese exports. Increasing towards the end of the quarter Sharp increase in ammonia prices Increased nitrate prices in Western Europe, rebound in demand Rapid increase in phosphate prices,
Slide 8: Indian urea imports continue to grow
7 Indian urea imports continue to grow Kt 7,000 Sales - Production 2007/08 6,000 5,000 2006/07 4,000 3,000 2,000 2005/06 1,000 2004/05 0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar -1,000 -2,000 Kharif (July planting) – imports Apr-Sep -3,000 Rabi (November planting) – imports Oct-Jan Source: In
Slide 9: Higher urea prices attract Chinese exports
8 Higher urea prices attract Chinese exports Net urea exports Kt 6,000 2007 5,000 4,000 2004 3,000 2,000 2008 2005 1,000 2006 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: BOABC IR - Date: 2008-04-18
Slide 10: Strong increase in value of phosphate production
9 Strong increase in value of phosphate production* Value of phos.acid production Value of DAP production USD/ton USD/ton Latest: 1,800 $ 2,065 1,200 DAP price 1,600 Phos.acid price 1,000 1,400 Value above raw materials 1,200 800 1,000 600 800 600 400 400 Ammonia Value above raw materials Sulphur 20
Slide 11: Agricultural commodity prices strong…
10 Agricultural commodity prices strong… Corn Wheat Soybeans Rice Source: Chicago Board of Trade, 17 April 2008; November/December 2008 contracts IR - Date: 2008-04-18
Slide 12: Fertilizer is a catalyst for solar energy
11 Fertilizer is a catalyst for solar energy Optimal use of fertilizer gives: 1) More biomass and and absorption of solar energy 2) Better use of agricultural areas 3) Lower CO2 emissions (when biomass replaces fossil fuel) Food and feed Solar energy 10-15 times more energy in biomass Bio energy 1 u
Slide 13: Higher grain prices more than offset increase in fertilizer costs
12 Higher grain prices more than offset increase in fertilizer costs EUR/ha Change March’07 – March’08 700 Assumptions Wheat yield: 6.2 tons/ha 600 Fertilizer application: 500 K N: 132 kg/ha P P2O5: 25 kg/ha 400 N K2O: 20 kg/ha Wheat 300 Price increase March 07 - March 08: 200 Wheat: 100 EUR/ton CAN
Slide 14: Increased food production required, with less land per capita
13 Increased food production required, with less land per capita m2 per capita billions 3,000 World 8.5 World population will exceed population 8 billion by 2030 Arable land 2,750 Global arable land can be 7.5 increased by maximum 7% 2,500 Significant reduction in arable land per capita 6.5 2,250 Wi
Slide 15: Ghana & Ivory Coast: 2 million tons of cocoa beans produced today
14 Ghana & Ivory Coast: 2 million tons of cocoa beans are produced today on 5 million hectares Other uses Other crops Cocoa: 2 mill. Tons / 5 mill. Ha = 400 kg/ha IR - Date: 2008-04-18
Slide 16: 2 million tons of cocoa beans can be produced on 20% of the land
15 2 million tons of cocoa beans can be produced on 20% of the land that is used today Other uses Other crops crops Land for biodiversity Forest carbon sequestration Cocoa: 2 mill. Tons/1 mill. Ha = 2,000 kg/ha IR - Date: 2008-04-18
Slide 17: Considerable potential for optimal fertilizer application
16 Considerable potential for optimal fertilizer application kg/ha 300 250 200 150 100 50 0 France FSU + EE South Asia East Asia Sub-Saharan Latin America Africa Source: FAO IR - Date: 2008-04-18
Slide 18: Earnings before interest, tax, depreciation and amortization (EBITDA)
17 Earnings before interest, tax, depreciation and amortization (EBITDA)* NOK millions 4,500 3,988 4,000 3,500 3,000 2,531 2,500 2,222 1,947 1,901 2,000 1,787 1,682 1,492 1,500 1,351 1,000 500 0 2006 2007 2008 Accumulated NOK mill 6,472 8,441 3,988 USD mill 1,014 1,450 751 * Kemira GrowHow included
Slide 19: EBITDA and operating income by segment
18 EBITDA and operating income by segment EBITDA (NOK millions) 1Q 2008 1Q 2007* Downstream 2,049 724 Industrial 139 174 Upstream 1,994 911 Other and eliminations (194) (23) Yara total 3,988 1,787 Operating income (NOK millions) 1Q 2008 1Q 2007* Downstream 1,773 527 Industrial 88 125 Upstream 1,209
Slide 20: Variance analysis Yara group
19 Variance analysis Yara group First quarter NOK millions USD millions* EBITDA 2008 3,988 751 EBITDA 2007 1,787 287 Variance EBITDA in NOK 2,201 Conversion (NOK vs. USD) 261 Variance EBITDA 2,462 463 Kemira GrowHow 2007 (pro forma)** 265 50 Volume & mix 47 9 Price/Margin 3,328 627 Energy arbitrage
Slide 21: Special items
20 Special items EBITDA effect (NOK millions)* 1Q 2008 1Q 2007 Restructuring Kemira GrowHow (40) Brazil restructuring (24) Downstream (40) (24) Restructuring Kemira GrowHow (14) Contract derivatives (17) (7) Industrial (31) (7) Restructuring Kemira GrowHow (56) Loss on resale of gas (52) Contract de
Slide 22: Net interest-bearing debt
21 Net interest-bearing debt NOK millions 10,000 8,924 3,027 323 486 9,000 2,955 600 7,879 8,000 7,000 210 6,000 5,000 Net interest- Cash Dividends Net operating Other Foreign Other Net interest- bearing debt earnings* received** capital investments exchange bearing debt Dec07 change (net) gain/(los
Slide 23: Downstream segment
22 Downstream segment Strong results driven by improved margins NPK prices increased by 70% Deliveries outside Europe up 6% IR - Date: 2008-04-18
Slide 24: Downstream – EBITDA
23 Downstream – EBITDA* NOK millions 2,500 2,049 2,000 1,500 1,000 804 847 724 661 518 490 511 441 500 0 2006 2007 2008 Accumulated NOK mill 1,960 3,035 2,049 USD mill 305 521 386 * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-04-18
Slide 25: Downstream – fertilizer sales volume
24 Downstream – fertilizer sales volume* Europe Outside Europe Kt 6,104 6,284 6,000 2,835 2,575 5,256 5,179 4,883 4,763 5,000 4,786 4,685 2,388 2,827 4,437 2,697 2,275 2,507 2,629 1,848 4,000 3,710 3,000 3,269 2,868 2,589 2,511 2,000 2,352 2,178 2,186 2,135 1,000 0 2006 2007 2008 Accumulated Fin. fe
Slide 26: NPK prices more than recover raw material cost increases
25 NPK prices more than recover raw material cost increases 15-15-15 France Blend cost proxy* USD/t 850 750 650 Average differential has increased by 550 ~$120/ton 450 350 250 150 May May Mar Mar Mar July Nov Nov Jun Aug Jun Aug Jan 2006 Jan 2007 Jul Jan 2008 Apr Apr Feb Feb Feb Sep Sep Oct Oct Dec
Slide 27: Industrial segment
26 Industrial segment Strong underlying EBITDA growth Environmental products with strong growth Volume growth for liquid CO2 sales to end users IR - Date: 2008-04-18
Slide 28: Industrial – EBITDA
27 Industrial – EBITDA* NOK millions 1,200 1,007 1,000 800 600 400 252 258 205 166 165 153 174 200 139 0 2006 2007 2008 Accumulated NOK mill 736 1,645 139 USD mill 115 290 26 * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-04-18
Slide 29: Continued strong Industrial growth
28 Continued strong Industrial growth Kt Kt Process Chemicals Stationary NOX abatement 1,800 400 1,600 Ammonia Nitric acid Urea 350 1,400 300 1,200 250 1,000 200 800 600 150 400 100 200 50 0 0 2003 2004 2005 2006 2007 Q107 Q108 2003 2004 2005 2006 2007 Q107 Q108 Kt Technical Ammonium Nitrate Kt AdBl
Slide 30: Upstream segment
29 Upstream segment Strong results driven by higher prices Energy cost in line with expectations Good production performance IR - Date: 2008-04-18
Slide 31: Upstream – EBITDA
30 Upstream – EBITDA* NOK millions 2,500 1,994 2,000 1,500 1,168 1,202 926 911 956 1,000 797 673 728 500 0 2006 2007 2008 Accumulated NOK mill 3,563 3,797 1,994 USD mill 560 646 376 * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-04-18
Slide 32: Upstream – production volume
31 Upstream – production volume* Kt Ammonia Finished fertilizer 5,000 4,589 4,500 2,895 4,027 4,000 3,437 3,443 2,615 3,312 3,357 3,500 3,247 3,175 3,256 1,999 2,053 2,051 3,000 2,010 1,983 1,994 1,914 2,500 2,000 1,500 1,694 1,329 1,358 1,384 1,392 1,412 1,000 1,237 1,262 1,262 500 0 2006 2007 2008
Slide 33: Estimated European energy cost
32 Estimated European energy cost Actual for quarter April 2008 estimate NOK millions 1,300 1,200 1,200 1,001 1,000 Cost change on previous year 800 600 400 266 200 0 (200) (104) (258) (400) 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 IR - Date: 2008-04-18
Slide 34: Cost savings by new gas turbine in Sluiskil
33 Cost savings by new gas turbine in Sluiskil Replacement of old turbine increases energy efficiency and reliability Commissioned November 2007 Energy efficiency improved 25% Annual cost savings EUR 10 million at 2007 electricity prices NOX emmissions reduced by 66% Investment cost EUR 26 million I
Slide 35: Share of net income in non-consolidated investees
34 Share of net income in non-consolidated investees NOK millions 1Q 2008 1Q 2007 Qafco 268 177 Tringen 48 58 Rossosh 82 35 Burrup 45 9 Other 123 42 Total 566 321 IR - Date: 2008-04-18
Slide 36: Production JVs and minority holdings
35 Production JVs and minority holdings Rossosh (30%) Investment: USD 49 mill. Site capacity* (mill. tons) Ammonia 1.0 Nitrates 0.5 China BlueChemical (1.7%) NPK 1.1 Fair value 31 March 2008 USD 43 million* Cost: USD 20 million* Tringen (49%) Site capacity* (mill. tons) Ammonia 1.0 Burrup (30%) Qafc
Slide 37: Prospects second quarter 2008
36 Prospects second quarter 2008 Following strong European season to date, deliveries for final quarter expected to be more in line with last year Time lag from price setting to delivery to head back towards normal one-month average Low inventories support prices in the final phase of European seaso
Slide 38: Prospects next twelve months
37 Prospects next twelve months Increased Chinese export tax tightens global nitrogen balance Grain prices at historical high levels incentivize increased fertilizer application, even at higher fertilizer prices Urea capacity growth running at lower rate than demand growth Continued energy cost incr
Slide 39: Additional information
cg YARA Additional intormation
Slide 40: Three segments mitigate cyclicality and create value for Yara
39 Three segments mitigate cyclicality and create value for Yara EBITDA*, pro forma until 2005 . USD millions Knowledge Margin Local market knowledge 2,000 Strong customer relations 1,800 288 Agronomic and application 1,600 competence Differentiation and branding . 1,400 290 1,200 790 Sourcing & log
Slide 41: Global optimization creates value
40 Global optimization creates value 2007 fertilizer and nitrogen chemicals volumes in million tonnes* Global Marketing and Sales Product source** optimization Fertilizer Europe Yara production 17.9 13.5 Europe Latin America 4.7 Yara production 2.9 outside Europe Sourcing Business Asia 28.2 2.5 Allo
Slide 42: Downstream – variance analysis
41 Downstream – variance analysis First quarter NOK millions USD millions* USD/ton** EBITDA 2008 2,049 386 61 EBITDA 2007 724 116 19 Variance EBITDA in NOK 1,325 Conversion (NOK vs. USD) 106 Variance EBITDA 1,431 269 43 Kemira GrowHow 2007 (pro forma)*** 84 16 3 Volume & mix 64 12 2 Margin 1,300 245
Slide 43: Industrial – variance analysis
42 Industrial – variance analysis First quarter NOK millions USD millions* EBITDA 2008 139 26 EBITDA 2007 174 28 Variance EBITDA in NOK (35) Conversion (NOK vs. USD) 24 Variance EBITDA (11) (2) Kemira GrowHow 2007 (pro forma)** 16 3 Volume & mix 60 11 Margin 2 - Special items (25) (5) Yara Praxair (
Slide 44: Upstream – variance analysis
43 Upstream – variance analysis First quarter NOK millions USD millions* USD/ton** EBITDA 2008 1,994 376 88 EBITDA 2007 911 147 34 Variance EBITDA in NOK 1,082 Conversion (NOK vs. USD) 134 Variance EBITDA 1,216 229 53 Kemira GrowHow 2007 (pro forma)*** 214 40 9 Volume & mix 103 19 5 Price/Margin 2,0
Slide 45: Strong balance sheet after Kemira GrowHow completion
44 Strong balance sheet after Kemira GrowHow completion Net interest-bearing debt / equity ratio (end of period) 0.45 0.42 0.41 0.39 0.40 0.37 0.36 0.35 0.35 0.34 0.33 0.34 0.34 0.35 0.31 0.30 0.27 0.25 0.20 0.15 0.10 0.05 0.00 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2005 2005 2005 2005 2006 2006 200
Slide 46: Downstream net operating capital turnover
45 Downstream net operating capital turnover* Downstream external operating revenues / external net operating capital 5.1 5.0 4.9 4.8 4.8 4.6 4.5 4.4 4.3 4.3 4.3 4.0 3.5 3.0 2006 2007 2008 * 12-month rolling average IR - Date: 2008-04-18
Slide 47: Grain stocks to drop further through June 2008
46 Grain stocks to drop further through June 2008 Million tons 2,200 35% 2,150 2001-2008: 1.7% growth/year 115 days inventory 30% 2,100 2,050 25% 2,000 20% 1,950 Consumption 1,900 15% 1,850 10% 55 days inventory 1,800 Production 5% 1,750 1995-2001: 0.8% growth/year 1,700 0% 1995 1997 1999 2001 2003
Slide 48: Agricultural commodity strength extends beyond current harvest
47 Agricultural commodity strength extends beyond current harvest Forward prices USD/bu USD/bu 7.0 24 6.5 Corn (150 kg N/ha) 22 Rice (150 kg N/ha) 20 6.0 18 16 5.5 14 Soybeans (30 kg N/ha) 5.0 12 10 4.5 8 Wheat (75 kg N/ha) 4.0 6 May-08 May-08 Jul-08 Nov-08 Nov-09 Nov-10 Sep-08 Dec-08 Dec-09 Dec-10
Slide 49: Chinese export necessary to cover 19% increase in urea import demand
48 Chinese export necessary to cover 19% increase in urea import demand 2007 compared with 2006 7.0 1.0 0.6 6.0 1.4 0.3 Gas 0.7 curtailment /domestic demand 0.7 5.0 Million tons urea Demand suppressed 4.2 2.0 4.0 3.0 2.1 2.0 1.0 0.0 Latin India US Rest of Rest of Egypt Saudi Indonesia China America
Slide 50: Further delays to new urea capacity
49 Further delays to new urea capacity Global urea capacity Year Driving regions growth estimate* World Excluding China World Ex. China 2007 4.3% (4.4%) 2.5% (2.7%) China 63% Egypt 50% Egypt 18% Iran 25% 2008 4.4% (4.6%) 3.8% (4.2%) China 45% Iran 45% Iran 25% Oman 27% 2009 4.7% (4.3%) 2.5% (1.9%) C
Slide 51: US natural gas versus Yara average
50 US natural gas versus Yara average* Yearly averages 2000 – 2006, quarterly averages for 2007 and 2008 with forward prices for 2008** USD/MMBtu European spot 16 gas price (Zeebrugge Hub) Yara European 14 oil & gas cost 12.8 (weighted average) 12.3 12 11.2 US spot gas price 10 (Henry Hub) 8.9 9.6 9
Slide 52: Key value drivers – quarterly averages
51 Key value drivers – quarterly averages Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 600 400 364 359 450 404 507 350 400 500 295 293 300 281 350 291 400 250 300 291 250 227 233 228 281 200 300 249 254 200 150 200 150 100 100 100 50 50 0 0 0 1Q 07 2Q 07 3
Slide 53: Key value drivers – 10-year history
52 Key value drivers – 10-year history Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 350 264 308 300 229 240 245 300 245 250 250 212 185 250 220 223 186 200 200 200 175 165 138 146 150 121 139 150 119 111 110 100 150 110 103 100 84 101 96 94 86 100 84 1
Slide 54: 10-year fertilizer prices – monthly averages
53 10-year fertilizer prices – monthly averages Ammonia fob Black Sea USD/t 600 500 400 300 CAN cif Germany 200 USD/t 100 500 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 400 300 200 Urea prilled fob Black Sea USD/t 100 450 0 400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 350
Slide 55: 10-year grain/oilseed prices – yearly averages
54 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/t USD/t 500 500 400 400 300 300 200 200 100 100 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 TD08 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 TD08 Corn (US Gulf) USD/t Soybeans (cif Rotterdam) US
Slide 56: Income statement
55 Income statement NOK millions 1Q 2008 1Q 2007 Revenue and other income 20,781 13,494 Operating income 2,860 1,063 Share of net income in non-consolidated investees 566 321 Interest income and other financial income 146 76 Interest expense and other financial items (275) (121) Foreign exchange gai
Slide 57: Consolidated balance sheet
56 Consolidated balance sheet NOK millions 31 Mar 2008 31 Mar 2007 Deferred tax assets 1,255 1,164 Property, plant and equipment 10,350 7,451 Other non-current assets 13,824 7,413 Inventories 10,511 6,395 Receivables 10,528 8,213 Other current assets 2,148 1,785 Cash and cash equivalents 1,422 624 T
Slide 58: Definition of EBITDA and CROGI
57 Definition of EBITDA and CROGI Operating income before financial items Total assets + Share of net income in non-consolidated investees - Cash and other liquid assets + Interest income - Deferred tax assets + Net gain/loss on securities - Other current liabilities + Dividends received from 0-20 c