Yara International Asa · OSL:YAR
Yara International Asa — Q2 2016 Earnings Presentation
39 slides from Yara International Asa's earnings presentation, Jul 21, 2016
Slide 1: Yara International ASA 2016 second quarter results
Yara International ASA 2016 second quarter results 21 July 2016
Slide 2: Safe operations is our first priority
Safe operations is our first priority 14.0 TRI1 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours 2) OFD and Galvani included in statistics from January 2016 IR – 21 July 2016 2
Slide 3: Summary second quarter
Summary second quarter Results impacted by lower fertilizer prices Positive impact from lower energy prices and stronger US dollar Deliveries of Yara-produced fertilizer up 8% Continued strong production performance, especially ammonia Gain of NOK 1.6 billion from sale of CO2 business Im
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 6.37 9.58 8.52 2.65 9.14 8.26 8.04 7.97 8.17 7.62 7.03 7.74 6.74 6.69 6.18 5.66 6.40 5.62 3.97 2.65 1.58 0.23 2013 2014 2015 2016 Annual NOK 20.67 27.59 29.38 21.45 *Average number of shares for 2Q 2016:
Slide 5: 2Q catch-up in European fertilizer industry deliveries; full season in line with a year earlier
2Q catch-up in European fertilizer industry deliveries; full season in line with a year earlier Full-season deliveries (12m ending 30 Jun) Quarterly deliveries Million tons N Million tons N -1% 8.0 2,353 2,303 7.0 +6% 1,881 1,832 6.0 1,749 1,703 1,653 1,613 5.0 4.0 3.0 2.0 1.0 0.0 11/12 12/13 13/14
Slide 6: Brazil: 1H industry deliveries up 13%, Yara up 19%
Brazil: 1H industry deliveries up 13%, Yara up 19% Season-to-date (1H) fertilizer deliveries Season-to-date premium product deliveries Kilotons Kilotons 15,000 +13% 700 Thousands 10,000 600 +47% 5,000 500 0 400 Kilotons 1H12 1H13 1H14 1H15 1H16 4,000 300 Thousands 3,000 200 +19% 2,000 100 1,000 0 0
Slide 7: Yara 2Q fertilizer sales by market and product
Yara 2Q fertilizer sales by market and product Kilotons 2,204 2,293 2Q15 2Q16 1,986 1,820 1,031 1,143 640 631 683 569 515 298 Europe Brazil Latin America North America Asia Africa 1,353 1,473 1,326 1,292 1,141 1,132 1,124 1,240 1,160 986 438 483 327 343 Compound NPK1 Blend NPK Nitrate Urea Other pro
Slide 8: Reduced exports from China amid lower prices…
Reduced exports from China amid lower prices… Declining urea pricing Chinese exports and urea price Black Sea USD/t Kilotons USD/t 460 2,400 550 440 2,200 500 420 2,000 450 400 1,800 400 380 360 1,600 350 340 1,400 300 320 1,200 300 250 1,000 280 200 800 260 150 600 240 400 100 220 200 200 50 180 0
Slide 9: …and increased production elsewhere
…and increased production elsewhere Gross capacity additions, excl. China (mill. tonnes urea1) 7.8 7.6 Nigeria 0.7 Nigeria 0.7 Russia 0.3 Russia 0.3 Iran 0.5 Iran 0.5 Algeria 1.2 Algeria 1.2 USA 1.7 USA 2.5 3.5 3.0 Nigeria 1.3 Russia 0.3 ~3 Mt Iran 0.5 consumption Indonesia 0.7 India 0.7 2.0 growth
Slide 10: Yara Improvement Program will deliver cost and revenue improvements throughout the organization
Yara Improvement Program will deliver cost and revenue improvements throughout the organization Overview of main initiatives Production Commercial Supply Chain/Other Crop roadmap Sales Supply Chain IT implementation excellence transformation optimization Plant productivity improvement and portfolio
Slide 11: 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 5,489 4,794 5,179 4,625 5,055 3,958 4,227 5,055 4,103 5,050 4,184 3,830 4,002 4,528 4,185 4,149 4,039 3,318 3,964 3,508 3,591 3,504 3,223 2,363 1,858 2013 2014 2015 201
Slide 12: EBITDA development
EBITDA development NOK millions 5,489 5,179 81 181 1,407 2,730 367 1,165 EBITDA 2Q15 Volume Price/Margin Energy costs Currency Special Other EBITDA 2Q16 translation items IR – 21 July 2016 12
Slide 13: Lower prices mainly impact Production segment
Lower prices mainly impact Production segment 3,133 EBITDA (NOK millions) 2,976 EBITDA excluding special items 2,120 1,693 1,923 1,605 1,572 1,330 360 1,330 335 335 Crop Nutrition Industrial Production 2Q15 2Q16 IR – 21 July 2016 13
Slide 14: Lower natural gas cost in Europe
Lower natural gas cost in Europe Yara European gas & oil cost Change in spot energy cost USD/ NOK MMBtu millions 8.0 0 7.0 (200) (151) (250) 6.0 (400) 5.0 (600) (588) (588) (650) 4.0 (800) 3.0 (1,000) (923) (1,042) 2.0 (1,200) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 TTF
Slide 15: Lower European nitrate premiums at end of season
Lower European nitrate premiums at end of season Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 700 100 90 600 80 500 70 Nitrate 60 400 premium above urea 50 300 40 Value above ammonia 200 30 Value above gas 20 100 Yara EU gas
Slide 16: Lower commodity phosphate margins, solid compound NPK premiums
Lower commodity phosphate margins, solid compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 400 Weighted average global Value above premium above blend cost 300 raw material Nitrate premium, CIF inland Germany 300 NH3, fob Black Sea *0.22 20
Slide 17: Net interest-bearing debt development
Net interest-bearing debt development NOK millions 1,894 4,150 2,830 3,817 2,758 9,698 8,465 869 122 Net debt Investments Yara dividend Cash Net operating Sale of CO2 Foreign Other Net debt Mar 16 (net) and share earnings* capital change business currency Jun 16 buy-backs translation gain * Operatin
Slide 18: Prospects
Prospects Supportive farm margin outlook overall, with lower input prices On-going production increases elsewhere displacing Chinese exports Improved pre-buying incentives in Europe; strong Yara order book Continued demand growth in Brazil, but P&K demand in other regions impacted by lower c
Slide 19: Additional information
Additional information IR – 21 July 2016
Slide 20: Strong growth pipeline
Strong growth pipeline 16.1 Capex plan1 Production growth 2015 - end 20185 NOK bn 14.4 2.1 Cost&capacity improvements 0.9 0.4 M&A Finished fertilizer Ammonia 12.6 Committed growth 3.3 1.3 Maintenance Mill.tons 22.1 8.3 7.4 8.8 0.5 7.2 0.7 4.2 5.6 1.3 2.3 1.9 6.0 6.2 5.6 5.6 18.9 0.8 2015 2016 2017 2
Slide 21: Increasing coal prices
Increasing coal prices CIF ARA1 November 2016 ($/mt) CFMW Anthracite prices July 2016 (RMB/mt) 1) Amsterdam, Rotterdam, Antwerp IR – 21 July 2016 21
Slide 22: Continued strong production performance
Continued strong production performance Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 2,000 5,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accou
Slide 23: 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 2009 2010 2011 2012 2013 2014 2015 2016 Europe Outside Europe IR – 21 July 2016 23
Slide 24: Fertilizer deliveries by product and source
Fertilizer deliveries by product and source Kilotons 1,619 1,473 1,503 1,353 1,326 1,240 1,141 1,132 1,124 986 438 483 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – 21 July
Slide 25: YaraMila and YaraBela deliveries
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 - 2Q12 2Q13 2Q14 2Q15 2Q16 2Q12 2Q13 2Q14 2Q15 2Q16 Outside Europe Europe Outside Europe Europe IR
Slide 26: Strong premium product deliveries in Brazil
Strong premium product deliveries in Brazil Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 3,500 406 378 3,000 2,500 294 296 279 248 2,000 235 204 201 188 1,500 CAGR 147 6% 116 1,000 62 500 48 52 0 2Q12 2Q13 2Q14 2Q15 2Q16 Asia Brazil Latin Africa North America excl. America O
Slide 27: Value-added and distribution make up larger part of Yara's contribution
Value-added and distribution make up larger part of Yara’s contribution Total Yara contribution 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 4Q15 2Q16 IR –
Slide 28: AdBlue deliveries
AdBlue deliveries Kilotons 500 450 400 350 300 250 200 150 100 50 0 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 IR – 21 July 2016 28
Slide 29: Industrial volume development
Industrial volume development Kilotons 892 889 844 866 849 852 864 859 847 819 816 815 829 577 571 540 541 538 511 482 432 456 438 374 364 382 380 385 368 358 367 361 346 364 339 333 328 308 242 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Industrial N-chemicals Environmental pro
Slide 30: Debt/equity ratio
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.22 0.20 0.17 0.16 0.15 0.13 0.13 0.12 0.12 0.11 0.08 0.08 0.07 0.06 0.06 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2011 2012 2013 2014 2015 2016 IR – 21 July 2016 30
Slide 31: Yara stocks
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 – 21 July 2016 31
Slide 32: Increased production and lower export have boosted domestic supply strongly so far this season
Increased production and lower export have boosted domestic supply strongly so far this season Million tons Chinese urea production Domestic urea balance Million tons 7.0 80 6.8 70.8 70 65.5 6.6 19% 59.5 15/16 60 6.4 49.9 11.3 6.2 50 14/15 15.5 6.0 40 5.8 30 5.6 13/14 20 5.4 5.2 10 5.0 0 Production
Slide 33: 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 15/16 10/11 11/12 12/13 13/14 14/15 Source: Fertilizers Europe, Yara estimate for June IR – 21 July 2016 33
Slide 34: Energy cost
Energy cost Yearly averages 2009 – 2013, quarterly averages for 2014-16 with forward prices* for 3Q16 and 4Q16. 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 8.0 8.1 7.6 8.1 6.6 7.0 6.2 6.6 7.0 6.8 5.5 6.9 6.5 5.0 5.1 6.5 5.4 4.6 5.4 6.1 5.9 4.7 5.7 5.7 4.7 5.2 5.3 5.2 4.2
Slide 35: Global grain balance
Global grain balance Grain consumption and production Days of consumption in stocks Million tons Days 2,600 95 2,550 90 2,500 2,450 85 2,400 2,350 80 2,300 75 2,250 2,200 70 2,150 2,100 65 2,050 60 2,000 1,950 55 07 08 09 10 11 12 13 14 15 16E 17F 07 08 09 10 11 12 13 14 15 16E 17F Consumption Produ
Slide 36: 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 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 Jul-16 Source: US Commodity Futures Trading Commission IR – 21 July 2016 36
Slide 37: Weaker farm economics in USD, affecting particularly P and K demand
Weaker farm economics in USD, affecting particularly P and K demand FAO price index Index 300 250 200 150 100 50 0 1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – 21
Slide 38: 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) granular fob Egypt (dotted line, USD/t) 6.8 6.4 5.5 277 297 268 281 273 250 270 233 257 255 249 4.1 4.3 207 198 208 197 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 2
Slide 39: 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 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 USD/t Urea prilled fob Black Sea/Urea granular fo