Yara International Asa · OSL:YAR
Yara International Asa — Q3 2012 Earnings Presentation
41 slides from Yara International Asa's earnings presentation, October 2012
Slide 1: Yara International ASA Third Quarter results 2012
0 Yara International ASA Third Quarter results 2012 Jørgen Ole Haslestad, CEO Thor Giæver, IR 24-25 October IR - October 2012
Slide 2: Summary third quarter
1 Summary third quarter Strong results and cash flow Yara-produced NPK deliveries up 10% Strong production increase Cautious start to European nitrate season IR - October 2012
Slide 3: Earnings per share
2 Earnings per share* EPS excluding currency and special items NOK 14 12.86 12.42 11.84 12 9.86 10.58 10.02 10 9.30 7.73 8 6.68 5.42 6 4.93 5.27 3.88 4 3.06 2 1.21 0 2009 2010 2011 2012 Annual NOK 13.08 30.24 41.99 29.75 * Average number of shares for 3Q 2012: 281.4 million (3Q 2011: 287.2 million).
Slide 4: Strong production increase
3 Strong production increase Finished fertilizer Ammonia Kilotons Kilotons 4,600 1,900 1,800 4,400 1,700 4,200 1,600 4,000 1,500 3,800 1,400 3,600 1,300 3,400 1,200 3,200 1,100 3,000 1,000 2011 2012 2011 2012 * Including share of equity-accounted investees IR - October 2012
Slide 5: Yara generates value both within commodity and value-added products
Yara generates value both within commodity 4 and value-added products Nitrogen upgrading margins Phosphate upgrading margins NPK blend premium USD/t USD/t USD/t 700 700 700 600 Margin above 600 600 blend cost Nitrate premium above urea Value above 500 500 500 raw material Urea 400 Value above 400 40
Slide 6: Net debt development
5 Net debt development NOK millions 4,500 3,971 4,000 3,500 99 219 810 480 3,000 2,866 2,500 2,855 1,116 2,000 1,500 643 1,000 219 500 0 NIBD Cash Dividends NOC Investments Share Yara FX gain Other NIBD Jun 12* earnings** received change (net) buy-backs dividend Sep 12* * Included in net interest-be
Slide 7: Fertilizer incentives remain strong
6 Fertilizer incentives remain strong 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 Cereals Price Index Food Price Index Annual average Food price index Source: FAO IR - October 2012 6
Slide 8: Cautious buying in Europe, stronger in US
7 Cautious buying in Europe, stronger in US USA West Europe Million tons Million tons 2.5 4.5 0% 4.0 2.0 3.5 0% 3.0 1.5 2.5 2.0 1.0 1.5 1.0 0.5 0.5 0.0 0.0 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 3Q07 3Q08 3Q09 3Q10 3Q11 3Q12 Production Net imports Domestic Imports Source: Yara estimate for fertilizer deliver
Slide 9: Stronger pre-buying incentives
8 Stronger pre-buying incentives Crop futures higher than a year ago Urea price, fob Black Sea USD/bu USD/t 9.0 600 +16% 500 8.0 -19% 400 7.0 +4% 300 6.0 200 5.0 100 4.0 0 Corn Corn Wheat Wheat Oct 2011 Oct 2012 Dec 12 Dec 13 Dec 12 Dec 13 IR - October 2012
Slide 10: Continued strong price incentives necessary to avoid further inventory decline
Continued strong price incentives necessary to 9 avoid further inventory decline Grain production and consumption Days of consumption in stocks Million tons Days 2,350 85 2,300 80 2,250 75 2,200 2,150 70 2,100 65 2,050 60 2,000 1,950 55 06 07 08 09 10 11E 12F 13F 06 07 08 09 10 11E 12F 13F Consumpti
Slide 11: Lower Chinese urea export price in 2012
10 Lower Chinese urea export price in 2012 Chinese export tax 1 Jul – 1 Nov Domestic urea price in China Fob China RMB/t 700 2,500 2011 650 2,400 2,300 600 2,200 550 2011 2012 2,100 500 2,000 2012 450 1,900 400 1,800 350 1,700 300 1,600 1,750 1,950 2,150 2,350 2,550 Jan Apr Jul Oct Domestic price ex
Slide 12: Chinese export situation
11 Chinese export situation Accumulated urea exports Urea price and export tax Kilotons USD per ton Export tax 8,000 600 120 % 7,000 2010 500 100 % 6,000 400 80 % 5,000 2007 4,000 300 60 % 2011 2009 3,000 200 40 % 2,000 100 20 % 1,000 2012 0 0 0% * Export tax during low tariff period depends on pric
Slide 13: Continued project delays
12 Continued project delays Additional urea capacity Million tons 8 7.5 7 Fertecon assumptions: 0.4 1 new site in Egypt from Jul 13 6 5.2 1.2 Startup in UAE in Jan 13 5 4 2.5 Startups in Algeria in Jul 12, Jan 13 and Jul 13 3 2 1 2.5 0 2012 2012 2013 Oct 11 est. Oct 12 est. Oct 12 est. Source: Ferte
Slide 14: Strong NPK development
13 Strong NPK development Yara-produced compound NPK volumes Realized prices on Yara -produced NPK compounds Kilotons Index* 700 140 +3% 600 +15% 120 -9% 500 +8% 100 400 80 300 60 200 40 100 20 - Europe Overseas 0 Europe Overseas 3Q11 3Q12 3Q 2011 3Q 2012 * 100 = European price in 3Q11 IR - October
Slide 15: Value-added product growth focused on cash crops
Value-added product growth focused on cash crops NPKs have significant cash crop share, while Nitrates’ agronomic advantage has nitrates today mainly serve commodity crops higher value for cash crops than for commodity crops kt Increase in crop 4,700 Commodity crops Crop value with production value
Slide 16: Global collaboration are progressing well e.g. Nestle initiatives on three continents
Global collaboration are progressing well e.g. 15 Nestle initiatives on three continents Mexico: increased yield of Robusta Vietnam: increased coffee yield of coffee (Robusta) Africa: increased yield and Guatemala: impact sustainability of of nutrition on cup Cocoa and Coffee taste (Arabica) and CO2
Slide 17: More information can be found on www.yara.com
16 More information can be found on www.yara.com IR - October 2012
Slide 18: Integrated business model provides scale, flexibility and a strong end-to-end presence
Integrated business model provides scale, 17 flexibility and a strong end-to-end presence Downstream Upstream Industrial Supply & Trade Scale advantages + Unique flexibility + Unrivalled presence IR - October 2012
Slide 19: Yara – the leader in nitrogen fertilizers
18 Yara – the leader in nitrogen fertilizers Global no 1 in NPK Global no 1 in ammonia Global no 1 in nitrates complex fertilizer Production capacity* (mill t) Production capacity* (mill t) Production capacity* (mill t) 9 7 8 8 6 7 7 6 5 6 5 5 4 4 4 3 3 3 2 2 2 1 1 1 0 0 0 Yara CF GDF Agrium PCS Yar
Slide 20: Global downstream player with sales to 150 countries
Global downstream player with 19 sales to 150 countries 48% Europe 9.4 mill tons North America 15% 2.9 mill tons Asia 12% 2.3 mill tons Africa 6% 1.2 mill tons 19% Latin America 3.8 mill tons Yara plants Joint venture plants Sales offices Development programs R&D Units IR - October 2012
Slide 21: Yara production capacities
20 Yara production capacities Million tons product 8.0 6.0 4.0 Outside Europe Europe 2.0 0.0 Nitrate NPK Urea IR - October 2012
Slide 22: Yara 2011 fertilizer sales by market and product
21 Yara 2011 fertilizer sales by market and product Total: 19.5 million tons Kilotons 10,000 9,367 8,000 6,000 3,798 4,000 2,887 2,282 2,000 1,188 0 Europe Latin America Asia North America Africa Kilotons 7,000 6,565 6,000 5,122 5,000 4,236 4,000 3,000 2,000 1,522 1,158 919 1,000 0 NPK Nitrate Urea
Slide 23: Achieving premium requires proper marketing of nitrate benefits
Achieving premium requires proper marketing 22 of nitrate benefits Nitrate-based fertilizers are superior to urea both Nitrate premium is a function of crop agronomically and environmentally prices but can be enhanced through proper marketing The carbon footprint is CAN price Wheat price The agronom
Slide 24: Yara sensitivities
23 Yara sensitivities Operating Income EBITDA EPS* USD million USD million USD Urea sensitivity +100 USD/t 944 1,095 2.8 …of which pure Urea 304 422 1.2 …of which Nitrates 367 391 1.0 …of which NPK 198 207 0.5 Nitrate premium +50 USD/t 439 467 1.2 …of which pure Nitrates 273 294 0.8 Hub gas Europe +
Slide 25: Price and currency assumptions in scenarios
24 Price and currency assumptions in scenarios Last 4 5-year avg. to Chinese Demand- quarters 30 Sep 11 swing* driven** Ammonia fob Black Sea (USD/t) 459 366 450 550 Urea prilled fob Black Sea (USD/t) 386 342 360 510 Nitrate premium , USD/t 94 77 62 68 Phos rock fob North Africa (USD/t) 164 158 200
Slide 26: Simplified P&Ls for scenarios
25 Simplified P&Ls for scenarios Last 4 5-year avg. to Chinese Demand- NOK quarters 30 Sep 20112) swing driven EBITDA1) 14,800 15,200 13,500 23,600 Depreciation -2,600 -2,600 -2,600 -2,600 Interest expense -800 -700 -700 -700 Income before tax 11,400 11,900 10,200 20,300 Tax -2,400 -2,800 -2,100 -4,
Slide 27: Yara – the leader in nitrogen fertilizers
26 Yara – the leader in nitrogen fertilizers Global no 1 in NPK Global no 1 in ammonia Global no 1 in nitrates complex fertilizer Production capacity* (mill t) Production capacity* (mill t) Production capacity* (mill t) 9 7 8 8 6 7 7 6 5 6 5 5 4 4 4 3 3 3 2 2 2 1 1 1 0 0 0 Yara CF GDF Agrium PCS Yar
Slide 28: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and 27 amortization (EBITDA) EBITDA excluding special items NOK millions 7,000 6,587 6,000 5,444 4,968 4,982 5,000 4,281 4,312 4,105 4,000 3,455 3,251 2,992 3,000 2,486 2,036 2,000 1,259 1,394 860 1,000 0 2009 2010 2011 2012 Annual NOK 5,549 15,315 18,163
Slide 29: Share of net income in equity-accounted investees
Share of net income in 28 equity-accounted investees NOK millions 3Q 2012 3Q 2011 Qafco 412 198 Tringen 85 55 Burrup - (24) GrowHow UK Ltd. 132 141 Lifeco (78) (57) Other 20 17 Total 571 329 IR - October 2012
Slide 30: Net income after non-controlling interests
29 Net income after non-controlling interests NOK millions 4,000 3,716 3,566 3,500 3,386 3,020 3,000 2,889 2,800 2,616 2,500 2,225 1,927 2,000 1,522 1,564 1,424 1,500 1,122 1,000 887 500 349 0 2009 2010 2011 2012 Annual NOK millions 3,782 8,729 12,066 8,436 IR - October 2012
Slide 31: Debt/equity ratio
30 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.8 0.75 0.7 0.63 0.6 0.57 0.56 0.49 0.5 0.4 0.38 0.32 0.3 0.27 0.22 0.20 0.2 0.12 0.12 0.08 0.1 0.07 0.06 0.0 2009 2010 2011 2012 IR - October 2012
Slide 32: Fertilizer volumes
31 Fertilizer volumes Kilotons 7,000 6,000 5,474 5,481 5,433 5,210 5,216 5,129 5,247 5,008 4,882 4,791 4,759 2,910 4,914 2,543 4,970 4,834 2,553 2,993 5,000 2,658 2,765 2,146 2,715 2,617 4,239 2,739 2,290 2,355 2,514 2,412 4,000 2,280 3,000 2,983 2,937 2,880 2,592 2,551 2,451 2,564 2,000 2,436 2,347
Slide 33: Yara 3Q fertilizer sales by market and product
32 Yara 3Q fertilizer sales by market and product 2012: 5.0 million tons (2011: 4.8 million tons) Kilotons 3Q11 3Q12 2,500 2,214 2,270 2,000 1,492 1,500 1,207 1,000 606 527 469 461 500 284 316 0 Europe Latin America Asia North America Africa Kilotons 3,000 3Q11 3Q12 2,000 1,709 1,801 1,423 1,334 873
Slide 34: Yara – production volume
33 Yara – production volume* Finished fertilizer Kilotons Ammonia Kilotons 2,500 5,000 4,500 2,000 4,000 3,500 3,000 1,500 2,500 2,000 1,000 1,500 1,000 500 500 0 0 2009 2010 2011 2012 2009 2010 2011 2012 Urea Nitrates NPK CN UAN * Including share of equity-accounted investees IR - October 2012
Slide 35: Reduced exposure to oil and European gas
34 Reduced exposure to oil and European gas Yara’s geographic energy exposure Yara’s feed-stock contract structure Europe 100% NAT 90% GAS 15% 25% 80% 70% 60% 80% 70% 65% 50% 55% 40% 30% 20% -20% -20% -20% -30% 10% 0% NON 2006 2007 2008 2009 2012 GAS 2006 2009 2010 2012 Europe ROW Spot gas Oil-linke
Slide 36: Yara's average gas costs
35 Yara’s average gas costs Yearly averages 2006 – 2010, quarterly averages for 2011-12 with forward prices* for 3Q12 and 4Q12 USD per MMBtu 14 12.0 11.7 12 11.1 11.0 11.4 10.9 10.8 11.0 10.8 10.1 10 9.6 7.6 8 8.3 7.0 6.6 8.3 8.6 8.1 8.2 8.4 7.6 7.9 7.7 6 5.6 4 5.7 4.8 2 0 2007 2008 2009 2010 1Q11 2
Slide 37: Projected nitrogen capacity additions outside China in line with historical consumption growth
Projected nitrogen capacity additions outside 36 China in line with historical consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Pakistan 37% 2011 1.2% (1.3%) Iran 18% Qatar 34% 2012 2.2% (2.1%) Vietnam 20% Algeria 38% 2013 2.6
Slide 38: Non-commercials' net long position in corn
37 Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Source: US Commodity Futures Trading Commission IR - October 2012
Slide 39: Indian urea import requirement
38 Indian urea import requirement Sales minus production Kilotons 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 -1,000 -2,000 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2012/13 2009/10 2010/11 2011/12 Source: Indian Statistics IR - October 2012
Slide 40: Key value drivers – quarterly averages
39 Key value drivers – quarterly averages Zeebrugge day ahead(USD/MMBtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 400 376 378 9.4 600 361 9.3 331 9.3 484 471 350 314 500 446 9.3 9.2 389 300 383 9.2 400 250 9.2 9.1 9.1 9.1 300 200 9.1 9.0 150 9.0 200 100 9.0 100 8.9 50 8.9 0 0 3Q 11
Slide 41: 10-year fertilizer prices – monthly averages
40 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 20 20 20 20 20 20 20 20 20 20 20 20 0 01 02 03 04 05 06 07 08 09 10 11 12 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Urea prilled fob Black S