Yara International Asa · OSL:YAR
Yara International Asa — Non-Deal Roadshow (August 2014)
54 slides from Yara International Asa's roadshow presentation, Aug 22, 2014
Slide 1: Yara International ASA Roadshow presentation August 2014
0 Yara International ASA Roadshow presentation August 2014 Jørgen Ole Haslestad, CEO Thor Giæver, IR IR date: Aug 2014
Slide 2: Integrated business model provides scale, flexibility and end-to-end presence
Integrated business model provides scale, 1 flexibility and end-to-end presence Downstream Upstream Industrial Supply & Trade Scale advantages + Unique flexibility + Unrivalled presence IR date: Aug 2014
Slide 3: Yara – the leader in ammonia and value-added nitrogen fertilizers
Yara – the leader in ammonia and value-added 2 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 Yar
Slide 4: 24 million tons of fertilizer sold in 2013, and further growth in Latin America
24 million tons of fertilizer sold in 2013, and 3 further growth in Latin America in 2014 Bunge (Brazil): – Blending & distribution 43% business, closed 3Q13 – USD 50 million annual synergies effective 2014 Europe 10.2 mill. tons OFD (Colombia): North-America 14% 3.3 mill. tons – Distribution &
Slide 5: Strong NPK quarter and season, with continued growth outside Europe
Strong NPK quarter and season, with continued 4 growth outside Europe Yara-produced compound NPK deliveries Yara-produced compound NPK deliveries (by season) (by quarter) Kilotons Kilotons 5,000 1,400 4,500 1,300 4,000 1,200 3,500 1,100 3,000 1,000 2,500 900 2,000 CAGR 800 1,500 7% 1,000 700 500 600
Slide 6: Brazil: Yara benefiting both from Bunge acquisition and increase in industry deliveries
Brazil: Yara benefiting both from Bunge 5 acquisition and increase in industry deliveries Brazil 1H fertilizer industry deliveries Yara Brazil 1H fertilizer deliveries1 Kilotons Kilotons 14,000 +7% 3,500 12,000 3,000 10,000 2,500 8,000 2,000 6,000 1,500 4,000 1,000 2,000 500 0 0 2011 2012 2013 2014
Slide 7: Value-added upgrading and distribution make up larger part of Yara’s contribution
6 Value-added upgrading and distribution make up larger part of Yara’s contribution Total Yara contribution NOK millions 9,000 8,000 Trade 7,000 6,000 Upgrade & distribution 5,000 4,000 3,000 Commodity overseas 2,000 1,000 Commodity Europe 0 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 IR date: Aug
Slide 8: Strong nitrate premium at season close
7 Strong nitrate premium at season close Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) (quarterly Yara realized) 800 180.0 700 160.0 Nitrate premium 140.0 600 above urea 120.0 500 Value above 100.0 ammonia 400 80.0 300 Value above gas 60.0 200 40.0 Yara EU
Slide 9: Improved NPK premiums
8 Improved 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 Nitrate premium NH3, fob Black Sea *0.22 300 300 Urea, fob Black sea 200 200 Rock, fob NA *1.4 MOP, cfr NW
Slide 10: Fertilizer portfolio is being driven towards greater product differentiation and profit
Fertilizer portfolio is being driven towards 9 greater product differentiation and profit Product portfolio (2013/14 season volume) Differentiation improves margins and reduces exposure to 20% commodity price volatility 34% On-going efforts to further increase differentiation through: 25% – Addi
Slide 11: Lower natural gas cost in Europe
10 Lower natural gas cost in Europe Yara European gas & oil cost Change in European energy cost USD/ NOK MMBtu millions 13.0 200 Actual for quarter July 2014 estimate** 12.0 1 0 11.0 (51) (36) 10.0 (200) 9.0 (400) 8.0 7.0 (600) 6.0 (660) (700) (800) 5.0 (950) 4.0 (1,000) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q1
Slide 12: Farm economics strong overall, despite grain price decline
Farm economics strong overall, despite grain 11 price decline Source: FAO IR date: Aug 2014
Slide 13: Chinese urea: strong export volume increase, limited production increase
Chinese urea: strong export volume increase, 12 limited production increase Chinese production Chinese exports Black Sea (kilotons) (kilotons) USD/t 2013/14 season 11.1 mt 7.0 1,800 (7.9 mt season-to-date last year) 550 12/13 13/14 Year-to-date 5.3 mt 500 1,600 (2.6 mt year-to-date last year) 6.0 11
Slide 14: Debt/equity ratio
13 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 0.12 0.12 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 date: Aug 2014
Slide 15: Increased dividend payout ratio improves capital efficiency
Increased dividend payout ratio improves 14 capital efficiency 37% 28% 48% Overall target 40-45% 10% 3% Minimum 30% dividend 34% 34% 10% 7% 9% 11% 25% 23% 19% 3% 18% 18% 16% 17% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Numbers reflect cash returns executed in a calendar year relative to net
Slide 16: Continued brownfield expansion potential: 250 kt NPK expansion in Uusikaupunki, Finland
Continued brownfield expansion potential: 15 250 kt NPK expansion in Uusikaupunki, Finland Annual NPK production capacity (kt) 1,250 Strong NPK demand growth 250 1,000 outside Europe presents solid business case Project to install new granulator adds ~250 kt Current Expansion End 2015 annual cap
Slide 17: Additional information
16 Additional information IR date: Aug 2014
Slide 18: Yara sensitivities
17 Yara sensitivities Operating Income EBITDA EPS* USD million USD million USD Urea sensitivity +100 USD/t 937 1,103 3.1 …of which pure Urea 285 416 1.2 …of which Nitrates 367 393 1.1 …of which NPK 211 220 0.6 Nitrate premium +50 USD/t 468 498 1.4 …of which pure Nitrates 289 311 0.9 Hub gas Europe +
Slide 19: Yara financial scenarios (December 2013)
18 Yara financial scenarios (December 2013) 5-year avg. Chinese swing Last 4 Demand- NOK millions to quarters driven 30 Sep 132) Low High EBITDA1) 14,800 14,800 11,300 14,700 23,500 Depreciation -3,400 -3,600 -3,600 -3,600 -3,600 Interest expense -900 -800 -800 -800 -800 Income before tax 10,500 10,
Slide 20: Price and currency assumptions in scenarios
19 Price and currency assumptions in scenarios 5-year Chinese swing* Last 4 Demand- avg. to quarters driven** 30 Sep 13 Low High Ammonia fob Black Sea (USD/t) 546 424 400 400 475 Urea prilled fob Black Sea (USD/t) 365 340 300 350 475 Nitrate premium, USD/t 84 85 85 85 85 Phos rock fob North Africa (
Slide 21: Earnings scenario price assumptions
20 Earnings scenario price assumptions USD/t Urea price fob China 440 420 USD/RMB 6.23 USD/RMB 6.23 USD/RMB 6.10 USD/RMB 6.10 400 380 360 360 340 335 320 56 320 22 310 7 7 300 24 24 33 33 280 260 289 289 270 270 0 CMD 12 CMD 12 CMD 13 Assumed cost CMD 13 High tax Assumed cost Realized export tax Tax
Slide 22: 85 USD/t nitrate premium in scenarios, in line with 5-year average
85 USD/t nitrate premium in scenarios, 21 in line with 5-year average CAN USD/t 160 Lower urea prices increase farm 140 margins and make room for stronger nitrate premiums 120 100 A situation with continued strong 80 food prices and supply-driven urea 60 pricing allows for higher nitrate premium
Slide 23: Earnings per share
22 Earnings per share* 12.42 11.84 EPS excluding currency and special items 10.54 10.02 9.82 9.25 8.04 8.26 7.73 7.67 6.69 6.40 5.66 0.23 2011 2012 2013 2014 Annual NOK 41.99 37.31 20.67 14.66 • Average number of shares for 2Q 2014: 276.5 million (2Q 2013: 279.3 million). IR date: Aug 2014
Slide 24: Strong growth in Air1 deliveries
23 Strong growth in Air1 deliveries Kilotons 350 20% > 1 million tons of product sold L12M 18% 300 16% 250 14% 12% 200 10% 150 8% 100 6% 4% 50 2% 0 0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Europe North America ROW % of total Industrial deliveries I
Slide 25: Fertilizer deliveries
24 Fertilizer deliveries Kilotons 7,000 6,491 6,342 6,405 6,284 6,104 6,146 6,017 5,884 6,000 5,474 5,296 5,437 5,2565,179 5,253 5,297 5,2105,216 5,129 4,970 5,0135,044 4,882 4,914 5,000 4,763 4,742 4,791 4,759 4,834 4,239 4,000 3,496 3,000 2,000 1,000 0 2007 2008 2009 2010 2011 2012 2013 2014 Europ
Slide 26: Yara 2Q fertilizer sales by market and product
25 Yara 2Q fertilizer sales by market and product Kilotons 2Q13 2Q14 2,771 2,487 2,183 1,448 1,118 954 644 537 361 329 Europe Latin America Asia North America Africa 1,551 1,672 1,360 1,331 1,211 1,114 1,119 865 607 518 469 407 314 295 NPK compounds NPK blends Nitrate Urea Other products UAN CN IR d
Slide 27: Fertilizer deliveries by product and source
26 Fertilizer deliveries by product and source Kilotons 1,672 1,551 1,360 1,331 1,211 1,119 1,114 865 607 469 518 407 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced Total IR date
Slide 28: NPK and nitrate deliveries
27 NPK and nitrate deliveries Yara-produced compound NPK deliveries Yara-produced nitrate deliveries Kilotons Kilotons 1,400 1,700 1,300 1,500 1,200 1,100 1,300 1,000 1,100 900 800 900 700 700 600 500 500 2Q10 2Q11 2Q12 2Q13 2Q14 2Q10 2Q11 2Q12 2Q13 2Q14 IR date: Aug 2014
Slide 29: Industrial deliveries
28 Industrial deliveries Kilotons 896 860 867 837 843 816 455 432 368 374 382 343 342 346 337 342 304 313 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Industrial N-chemicals Environmental products Other IR date: Aug 2014
Slide 30: Yara production volume
29 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 31: Net interest-bearing debt development
30 Net interest-bearing debt development NOK millions 3,347 860 2,591 124 2,606 2,758 26 1,382 1,580 Net debt Cash Dividends Net operating Investments net Yara Dividend FX gain/(loss) Other Net debt Mar 14* earnings** received capital change Jun 14* from equity- accounted investees * Included in net
Slide 32: Increased investments in 2014 drive continued value-added product growth outside Europe
Increased investments in 2014 drive continued 31 value-added product growth outside Europe Total • Smaller growth initiatives: Hurdle rate for all NOK 13 billion - Largest category is plant expansions; e.g. investments is 7% Norway & Finland approx. 500kt NPK & CN real after tax - Also Downstream
Slide 33: Currency exposure affecting P&L
32 Currency exposure affecting P&L At the beginning of the third quarter 2014 1. The US dollar debt generating p&l exposure was USD 950 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Around 80% towards EUR and BRL, the rest towards NOK and emerging market
Slide 34: Yara stocks: normal level, adjusted for Bunge
33 Yara stocks: normal level, adjusted for Bunge Kilotons Bunge Fertilizer Finished fertilizer included from 3Q 2013 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR date: Aug 2014
Slide 35: Delivering growth in Latin America: with Bunge acquisition – and OFD Group
Delivering growth in Latin America: 34 with Bunge acquisition – and OFD Group Value-added N production in Colombia (Abocol) Distribution companies across Latin America FTEs 2012: 959 USD million 2010 2011 2012 Net Revenues 540 820 796 EBITDA 47 64 35 K tons 2010 2011 2012 Total net volumes 1,0
Slide 36: Integration and synergy harvest on track
35 Integration and synergy harvest on track Total USD 50 • Operations: million - Plant & overhead optimization - Storage cost reduction - Equipment leasing contracts 35% • Local logistics & procurement : - Gains in scale - Optimization of product flows 20% • Supply: - Maritime freight: larger vessel
Slide 37: Value-added products drive commercial synergies through increased footprint
Value-added products drive commercial 36 synergies through increased footprint Brazil value-added product deliveries (kilotons) 900 Significant growth track record 800 for Yara value-added fertilizer 700 products exported from our European production facilities 600 to Brazil 500 400 The enlarged
Slide 38: Bunge: increased scale drives maritime logistics savings
37 Bunge: increased scale drives maritime logistics savings 1 USD/t improvement on shipping = 6 MUSD Other Nitrates 6 million tons NPK Urea Phosphate MOP Pre Post Bunge Bunge IR date: Aug 2014
Slide 39: Yara’s product portfolio is continuously improved to meet changing customer needs
Yara’s product portfolio is continuously 38 improved to meet changing customer needs Yara has over many years developed a wide, differentiated product offering Continuous development of both new and improved differentiated products key to maintaining earnings in competitive global market We wi
Slide 40: YaraVita: a specialty product success story
39 YaraVita: a specialty product success story YaraVita revenues, USD millions 110 CAGR +17% 78 81 68 58 2009/2010 2010/2011 2011/2012 2012/2013 BP 2014 IR date: Aug 2014
Slide 41: YaraVita Procote: Cost effective vehicle for differentiation and better agronomic efficiency
YaraVita Procote: Cost effective vehicle for 40 differentiation and better agronomic efficiency Uses YaraVita micronutrient expertise Fertilizer in innovative new fertilizer coating products Allows wider differentiation within Downstream with minimal complexity Very strong agronomic and materi
Slide 42: Supply & Trade – global optimization
41 Supply & Trade – global optimization Biggest industrial buyer of Third single biggest buyer of Significant market natural gas in Europe P&K globally share on trade Gas consumption, MMBtu 2012 raw material purchases (mt) 2012 annual trade volumes (mt) 185 5.3 21.3 43 115 3.0 2.8 19 11 25 3.3 23% 9
Slide 43: Leading global position in ammonia trade
42 Leading global position in ammonia trade Europe 6.1 4.9 5.1 • Yara-operated ammonia fleet unrivalled giving scale and Available Demand flexibility Americas Middle East / Africa 2.3 2.5 Asia • Operate 18 ships 1.5 1.1 0.7 Available Demand Available Demand • Total shipping capacity of ~260 Availabl
Slide 44: Yara’s flexible cost structure gives downside protection
Yara’s flexible cost structure gives 43 downside protection Total cost base L4Q, NOK Bn European ammonia balance (million tons) Upgrade / consumption 72 Available Fixed 7 Non flexible 1.6 Flexible 0.3 4.9 Variable 65 2.1 1.5 L4Q 1.1 0.5 1. Excluding depreciation, amortization and NH3 Urea/UAN Tertre
Slide 45: Gas & oil cost
44 Gas & oil cost Yearly averages 2009 – 2010, quarterly averages for 2011-14 with forward prices* for 3Q14 and 4Q14 USD per MMBtu 14 11.9 11.1 11.4 11.5 12 10.9 10.8 10.8 11.0 11.0 10.8 11.2 11.3 10.1 10.3 10 9.5 11.1 10.3 10.1 10.7 9.7 9.2 9.0 9.3 9.1 9.1 9.2 8.5 7.6 9.0 8 8.1 7.8 7.3 8.6 8.5 7.8
Slide 46: For 2014/15, global grain production and consumption close to balanced
For 2014/15, global grain production and 45 consumption close to balanced Grain consumption and production Days of consumption in stocks Million tons Days 2,500 85 2,450 2,400 80 2,350 75 2,300 2,250 70 2,200 2,150 65 2,100 2,050 60 2,000 1,950 55 06 07 08 09 10 11 12 13 14E 15F 06 07 08 09 10 11 12
Slide 47: Large variations in yields across regions
46 Large variations in yields across regions Maize yields Wheat yields Tons/Ha Tons/Ha 12 8 10 7 6 8 5 6 4 4 3 2 2 1 0 0 US Argentina China Brazil Mexico France China US India Russia Rice yields Soybean yields Tons/Ha Tons/Ha 8 4 7 3 6 3 5 2 4 3 2 2 1 1 1 0 0 China Viet Nam Indonesia Bangladesh Indi
Slide 48: Projected nitrogen capacity additions outside China
Projected nitrogen capacity additions outside 47 China Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Qatar 23% 2013 1.6% Algeria 16% Algeria 16% 2014 1.5% UAE 15% Saudi Arabia 22% 2015 1.9% USA 20% USA 48% 2016 2.0% Malaysia 12% Nigeria 34% 2
Slide 49: India nitrogen consumption outpaces capacity
India nitrogen consumption outpaces capacity 48 Urea supply & demand 2005-2012 1,4% 4,6% 30,5 31,0 28,0 26,8 26,5 26,5 25,2 22,6 22,6 22,7 23,0 21,8 22,0 22,0 22,2 20,8 2005 2006 2007 2008 2009 2010 2011 2012 Production Consumption New subsidy policy aimed at increasing production – but limited gas
Slide 50: European producer nitrate stocks ending the season close to average
European producer nitrate stocks ending the 49 season close to average Index June 2007=1 1.8 1.6 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 13/14 08/09 09/10 10/11 11/12 12/13 Source: Fertilizers Europe, Yara estimate for June IR date: Aug 2014
Slide 51: Non-commercials’ net long position in corn
50 Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Source: US Commodity Futures Trading Commission IR date: Aug 2014
Slide 52: Key value drivers – quarterly averages
51 Key value drivers – quarterly averages Zeebrugge day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea CAN cif Germany (USD/t) granular fob Egypt (USD/t) 10.3 10.7 345 354 10.1 9.7 414 322 379 358 294 291 342 336 354 338 7.6 308 314 299 2Q13 3Q13 4Q13 1Q14 2Q14 2Q13 3Q13 4Q13 1Q14 2Q14 2Q
Slide 53: 10-year fertilizer prices – monthly averages
52 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 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Urea prilled fob Black Sea/Urea granular fob E
Slide 54: Lower US nitrogen deliveries, stable in Europe
53 Lower US nitrogen deliveries, stable in Europe USA West Europe Million tons N Million tons N 9.0 20.0 -8% +2% 18.0 8.0 16.0 7.0 14.0 6.0 12.0 5.0 10.0 4.0 8.0 3.0 6.0 4.0 2.0 2.0 1.0 0.0 0.0 09/10 10/11 11/12 12/13 13/14 09/10 10/11 11/12 12/13 13/14 Production Net imports Domestic Imports Source