Yara International Asa · OSL:YAR
Yara International Asa — Q4 2014 Earnings Presentation
38 slides from Yara International Asa's earnings presentation, Feb 12, 2015
Slide 1: Yara International ASA Fourth quarter results 2014
1 Yara International ASA Fourth quarter results 2014 Roadshow 12-13 February 2015 IR - Feb 2015
Slide 2: Summary fourth quarter
2 Summary fourth quarter Strong result driven by higher margins Margins benefit from lower European gas prices and stronger US dollar Continued volume and margin growth in Brazil Further growth in Latin America with OFD and Galvani acquisitions Proposed dividend NOK 13 per share, 47% of ne
Slide 3: EBITDA development
3 EBITDA development NOK millions 4,625 600 491 339 726 1 347 1,858 246 EBITDA Volume & mix Price/margin Gas & oil Special Other Currency EBITDA 4Q13 costs in items 4Q14 Europe IR - Feb 2015
Slide 4: Strong returns through the cycle
4 Strong returns through the cycle CROGI1 (12 months rolling average) 22.8 % 20.9 % 17.4 % 17.3 % 16.1 % 14.1 % 14.4 % 14.1 % 13.3 % 12.6 % 8.5 % 2004 05 06 07 08 09 10 11 12 13 14 Ex special items Long-term target 1) Cash Return on Gross Investment= (EBITDA-tax)/Gross accumulated investments IR - F
Slide 5: Proposed dividend NOK 13 per share
5 Proposed dividend NOK 13 per share Share of net income 64% 16% 53% 48% 48% 47% 6% 41% 12% 6% 32% 25% 30% 7% 26% 21% 23% 48% 7% 19% 47% 5% 1% 6% 34% 35% 25% 23% 18% 19% 16% 18% 17% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Share buy backs Dividends Target range 40-45% IR - Feb 2015
Slide 6: Brazil performing well; significant Bunge synergies realized
Brazil performing well; significant Bunge 6 synergies realized Realized synergies Yara Brazil performance USD million 55 NOK million mill. tonnes 7.9 1,100 8 44 1,000 50% 7 900 800 6 45% 5.2 700 5 600 3.3 1,076 4 10% 20% 500 400 3 300 2 45% 200 30% 334 52 1 100 0 0 Business case Realized 2014 2012 2
Slide 7: Growth in Latin-America strengthens Yara's competitive edge
Growth in Latin-America strengthens Yara’s 7 competitive edge • Scale in logistics • Scale in raw material sourcing • Cash crop market - untapped potential for Yara’s differentiated products and crop nutrition programs • Operational excellence Further potential Potential Brazil also complements Yara
Slide 8: Galvani expansions further improve scale and cost position
Galvani expansions further improve scale 8 and cost position AS-IS Future operations (~2018) Santa Quiteria1 Angico Angico (Irecé) L.E.M. L.E.M. Lagamar Salitre Fertilizer plants Paulínia Paulínia Phosphate mines Self-sufficiency Phosphate rock on phosphate surplus rock mt mt 2.0 2.2 Santa Q. 1.0 S
Slide 9: Yara value chain presence in Brazil
9 Yara value chain presence in Brazil Domestic raw Raw material/end-product Rock upgrade, Blending and Sales & Rio Grande port material production outside Brazil SSP production bagging marketing production Share of contribution p-rock, sulphur ~0.8mt SSP ~5 mt blends ~50% N, P, K for blends ~3mt ~1
Slide 10: Yara serves rest of Latin America with an extensive product range and geographical reach
Yara serves rest of Latin America with an 10 extensive product range and geographical reach Volume per geography Volume per product group 2014, mill. tonnes 2014, mill. tonnes 0.3 2.4 1.4 2.4 0.1 0.2 0.7 0.3 1.0 1.4 0.5 0.2 0.1 0.4 0.4 1.0 1.0 0.3 0.4 0.2 1.0 0.3 0.7 0.3 Colombia Mexico Peru Argenti
Slide 11: Price and currency assumptions for run-rate earnings scenario
Price and currency assumptions for run- 11 rate earnings scenario Current market Parameter 2014 average (3 Feb 2015) Ammonia fob Black Sea (USD/t) 496 410 Urea prilled fob Black Sea (USD/t) 318 315 CAN CIF Germany, USD/t 329 311 Phos rock fob North Africa (USD/t) 118 120 DAP fob USG (USD/t) 473 483
Slide 12: Increase in run-rate earnings driven by currency and energy
Increase in run-rate earnings driven by 12 currency and energy NOK per share Primarily lower EU gas price (USD1.5/mmbtu) 1 7 Primarily lower 8 ammonia price 2 (USD86/t) 5 Primarily lower CAN 1 price (USD18/t) 45 13 31 2014 EPS Currency Energy cost OFD & Price Other Annual run-rate (NOK) excl. Galvan
Slide 13: CAPEX guidance
CAPEX guidance 13 Capex plan Production growth 2014-2017 NOK bn mt 12.6 20.7 0.3 1.3 10.2 10.4 1.5 0.2 1.3 1.0 1.9 2.2 7.6 4.2 1.5 0.7 1.3 1.3 0.9 6.2 5.2 5.3 5.3 18.8 2014 2015 2016 2017 Production Committed M&A4 Production 2017 Committed growth (NOKbn)1 20142 growth3 Uusikapunki 0.4 - - TAN Pilbar
Slide 14: Price incentives needed to keep up with consumption growth
Price incentives needed to keep up with 14 consumption growth Grain consumption and production FAO price index (2002-2004=100) mill. tonnes 3,000 280 2,700 260 240 2,400 +5.9% 220 2,100 200 +2.1% 180 1,800 160 1,500 140 1,200 120 100 900 80 600 60 300 40 1960 1970 1980 1990 2000 2010 ‘14 1990 1995 2
Slide 15: Production curtailments in Ukraine and Egypt impact Black sea urea price
Production curtailments in Ukraine and Egypt 15 impact Black sea urea price Jan–Sep urea exports, kt Price Urea price Premium (USD/t) (USD/t) 350 160 3,663 140 300 -49% 120 250 1,469 100 200 80 1,871 150 60 910 40 100 2,194 20 50 961 0 0 -20 2013 2014 Jul- Oct- Jan- Apr- Jul- Oct- Jan- 13 13 14 14 1
Slide 16: Prospects
16 Prospects Incentives for fertilizer application remain supportive. Continued grain production growth required to keep up with consumption growth Strong US dollar improves competitiveness of European farmers and nitrogen producers Strong European order book at start of first quarter China
Slide 17: Additional information
17 Additional information IR - Feb 2015
Slide 18: Price sensitivities linked to capacities
Price sensitivities linked to capacities 18 Operating income EBITDA EPS Parameter (MUSD) (MUSD) (USD) Urea + USD 10/t 39 51 0.15 1 ... of which pure urea 0.13 33 44 … of which UAN 7 7 0.02 CAN price + USD 10/t 96 102 0.28 2 58 62 0.17 … of which pure nitrates 38 40 0.11 … of which NPK 3 Compound NPK
Slide 19: Yara benefits from a stronger USD
19 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 20: Increased end-user interaction in Brazil
20 Increased end-user interaction in Brazil 45% 25% Cooperatives 20% Agroindustry GROWERS 10% Retailer Knowledge Crop focus Product portfolio Application competence IR - Feb 2015
Slide 21: Improved European margins; stable nitrate premium
Improved European margins; 21 stable nitrate premium Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) (quarterly Yara realized) 700 180 160 600 Nitrate premium 140 above urea 500 120 Value above ammonia 400 100 Value 300 above gas 80 60 200 40 100 Yara EU gas
Slide 22: Higher commodity phosphate margins and solid NPK premiums
Higher commodity phosphate margins and 22 solid NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 700 700 600 600 500 500 Value above raw material Weighted average global 400 400 premium above blend cost 300 NH3, fob Black Sea *0.22 300 Nitrate premium Urea, fob Black sea
Slide 23: Earnings per share
23 Earnings per share* 12.42 11.84 EPS excluding currency and 10.54 special items 10.02 9.82 9.25 8.04 8.26 7.73 7.67 6.40 6.69 6.74 5.66 6.18 0.23 2011 2012 2013 2014 Annual NOK 41.99 37.31 20.67 27.59 *Average number of shares for 4Q 2014: 275.8 million (4Q 2013: 277.2 million). IR - Feb 2015
Slide 24: Yara 4Q fertilizer sales by market and product
24 Yara 4Q fertilizer sales by market and product Kilotons 4Q13 4Q14 2,667 2,398 2,267 2,152 773 766 607 477 408 215 Europe Latin America Asia North America Africa 1,389 1,464 1,429 1,426 1,133 1,224 1,210 1,184 851 554 247 233 183 203 NPK compounds NPK blends Nitrate Urea Other products UAN CN IR -
Slide 25: Air1 deliveries
25 Air1 deliveries Kilotons 400 25% 350 20% 300 250 15% 200 10% 150 100 5% 50 0 0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Europe North America ROW % of total Industrial deliveries IR - Feb 2015
Slide 26: Yara production volume
26 Yara production volume* Finished fertilizer and industrial products Ammonia Kilotons Kilotons 5,000 2,500 4,500 4,000 2,000 3,500 3,000 1,500 2,500 2,000 1,000 1,500 1,000 500 500 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Urea Nitrates NPK CN UAN SSP - based fertilizer * Including sha
Slide 27: Net interest-bearing debt development
27 Net interest-bearing debt development NOK millions 11,808 1,561 351 193 2,584 1,595 4,963 2,909 3,957 1,907 297 Ned debt Cash Dividends Net OFD Galvani Investments Share buy FX loss Other Net debt Sep 14 earnings* from equity- operating net backs & Dec 14 accounted capital redemption investees ch
Slide 28: Debt/equity ratio
28 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.75 0.63 0.570.56 0.49 0.38 0.32 0.27 0.20 0.22 0.17 0.12 0.12 0.08 0.08 0.07 0.06 0.06 0.06 0.05 0.06 0.02 0.01 -0.04 2009 2010 2011 2012 2013 2014 IR - Feb 2015
Slide 29: Yara stocks
29 Yara stocks Kilotons Bunge Fertilizer Finished 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 - Feb 2015
Slide 30: Energy cost
30 Energy cost Yearly averages 2009 – 2010, quarterly averages for 2011-15 with forward prices* for 4Q14 and 1Q15 USD per MMBtu 12 11.0 11.4 11.3 10.7 10.6 10 9.7 9.4 9.2 8.5 9.2 7.6 7.7 8 7.6 7.5 8.0 8.1 8.2 6.6 6.6 8.2 8.0 7.1 7.0 6.9 6.8 6.7 6 6.5 5.7 6.1 5.9 4.7 5.6 5.2 4 4.8 4.4 4.6 4.0 4.0 3.9
Slide 31: Net income from equity-accounted investees
31 Net income from equity-accounted investees NOK millions 210 4Q13 4Q14 137 85 32 16 -47 -67 -143 Qafco GrowHow UK Lifeco Other Tringen is from 2014 classified as “Joint operations” in line with IFRS 11, and is not any longer included as equity-accounted investee. 2013 has been restated accordingly
Slide 32: Currency exposure affecting P&L
32 Currency exposure affecting P&L At the beginning of the first quarter 2015 1. The US dollar debt generating p&l exposure was USD 1,500 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Around 50% towards BRL with the rest mainly towards other emerging mar
Slide 33: Brazil - the fastest growing fertilizer market
33 Brazil - the fastest growing fertilizer market Brazil fertilizer industry deliveries Yield evolution ( tons / hectare) 90’s 00’s 10’s Best practice mill. tonnes 35 32.2 CAGR (1990-2014) 3.0 3.0 2.2 2.5 30 Soybean 5,9% 24.5 25 10.0 20.2 20 5.0 16.4 2.5 3.5 15 Corn 1st 10.8 10 8.2 7.2 5 2.8 3.6 2.4
Slide 34: Stable nitrogen deliveries so far this season
34 Stable nitrogen deliveries so far this season USA Western Europe Million tons N Million tons N 4.5 10.0 9.0 +7% 4.0 +2% 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 2H10 2H11 2H12 2H13 2H14 2H10 2H11 2H12 2H13 2H14 Production Net imports Production Net imports Source: Yara
Slide 35: European producers nitrate stocks
35 European producers nitrate stocks Index June 2007=1 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 14/15 10/11 11/12 12/13 13/14 Source: Fertilizers Europe IR - Feb 2015
Slide 36: Projected nitrogen capacity additions outside China
Projected nitrogen capacity additions outside 36 China Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Indonesia 20% 2014 1.1% (1.5%) Egypt 14% Algeria 18% 2015 2.6% (2.1%) Saudi Arabia 16% USA 30% 2016 3.1% (2.3%) Algeria 14% Nigeria 32% 2017
Slide 37: Production stable, increased exports
37 Production stable, increased exports Chinese urea production Domestic urea balance Million tons Million tons 7.0 40 12/13 36.1 36.1 6.0 35 14/15 13/14 -8% 30 29.1 5.0 26.7 7.0 25 9.4 4.0 20 3.0 15 2.0 10 1.0 5 0.0 0 Production Production Domestic Domestic Export Export Jul Aug Sep Oct Nov Dec Jan
Slide 38: 10-year fertilizer prices – monthly averages
38 10-year fertilizer prices – monthly averages Ammonia fob Black Sea CAN cif Germany USD/t USD/t 1,000 500 800 400 600 300 400 200 200 100 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Urea prilled fob Black Sea/Urea granular fob Egypt DAP f