Yara International Asa · OSL:YAR
Yara International Asa — Conference Presentation (October 2013)
47 slides from Yara International Asa's conference presentation, Oct 29, 2013
Slide 1: Yara International ASA
0 Yara International ASA Torgeir Kvidal, CFO 29 October 2013 IR-Date: 2013-10-29
Slide 2: Yara – the leader in nitrogen fertilizers
1 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 Yara
Slide 3: Solid global presence
2 Solid global presence IR-Date: 2013-10-29
Slide 4: 20.7 million tons of fertilizer sold on six continents in 2012
20.7 million tons of fertilizer sold on 3 six continents in 2012 2012 Fertilizer deliveries Europe 9.6 mill. tons North America 3.0 mill. tons Asia 1.9 mill. tons Africa 1.2 mill. tons Bunge 4.6 mill. tons Latin America Oceania 4.7 mill. tons 0.3 mill. tons IR-Date: 2013-10-29
Slide 5: Both value-added and commodity products important to strengthen competitive edge
Both value-added and commodity products 4 important to strengthen competitive edge Million tons capacity* 12.9 6.5 Nitrates 6.2 Announced expansions** UAN 1.2 5.7 NPK Urea 5.0 Commodity Value add * Including equity share of non-consolidated investees’ capacity ** Technical Ammonia Nitrate plant in A
Slide 6: Nitrates are more efficient than urea
5 Nitrates are more efficient than urea Urea (CON2H4) Ammonium (NH4+) Nitrate (NO3-) Urea-N needs to be Ammonium-N is fixed onto Nitrate-N is always dissolved in converted into ammonium- clay minerals in the soil and the soil water and is N before it is plant therefore immobile. The plant transporte
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 7,000 Trade 6,000 Industrial upgrade & distribution 5,000 4,000 Fertilizer upgrade & distribution 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 1Q10 2Q10 3Q1
Slide 8: Reduced exposure to oil and European gas
7 Reduced exposure to oil and European gas Yara’s geographic energy exposure Yara’s feed-stock contract structure Europe 100 % NAT GAS 90 % 15% 80 % 25% 70 % 60 % 90% 80% 50 % 70% 65% 55% 40 % 30 % 20 % -10% -20% -20% -20% 10 % -30% 0% NON 2006 2007 2008 2009 2012 2006 2009 2010 2012 2013 GAS Europe
Slide 9: Ammonia flexibility in Europe
8 Ammonia flexibility in Europe 5.2 Million tons 3.6 1.6 1.3 Urea Land-locked nitrates 0.3 European Flexible Non flexible ammonia capacity Yara can swing 2/3 of European ammonia production without affecting fertilizer production IR-Date: 2013-10-29
Slide 10: Cash Return On Gross Investment (CROGI)
9 Cash Return On Gross Investment (CROGI) 12 month rolling average 25% 20% 15% 10% 5% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H 2013 IR-Date: 2013-10-29
Slide 11: Long-term growth in NPK deliveries outside Europe; stable year-over-year development
Long-term growth in NPK deliveries outside 10 Europe; stable year-over-year development Yara-produced NPK deliveries Overseas Yara-produced NPK deliveries Kilotons Kilotons 1 400 271 1 200 237 1 000 198 800 600 95 86 400 73 68 76 72 CAGR 64 64 18% 54 200 15 18 14 0 3Q09 3Q10 3Q11 3Q12 3Q13 Asia Braz
Slide 12: Farmer yield benefits justify nitrate premium
11 Farmer yield benefits justify nitrate premium Nitrogen upgrading margins Nitrate premium, USD/t CAN USD/t 700 160 600 140 Nitrate premium above urea 120 500 Value 100 400 above ammonia 80 300 Value above gas 60 200 40 100 Yara EU gas cost *20 20 0 0 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 3Q
Slide 13: Stable NPK premiums
12 Stable NPK premiums Phosphate upgrading margins NPK blend premium USD/t USD/t 700 700 600 600 Margin above Value above blend cost 500 raw material 500 400 400 Urea, fob Black sea NH3, fob Black Sea *0.22 300 300 MOP, cfr NWE 200 200 100 Rock, fob NA *1.4 100 DAP, fob Morocco 0 0 1Q10 3Q10 1Q11 3Q
Slide 14: Solid farm economics support fertilizer demand
13 Solid farm economics support fertilizer 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 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR-Date: 2013-10-29
Slide 15: Strong global urea demand, but increased export availability from China
14 Strong global urea demand, but increased export availability from China Global urea trade Chinese urea exports Kilotons USD/t 40.3 1 800 450 36.9 33.9 +6.4 1 600 400 31.4 1 400 350 27.8 1 200 300 1 000 250 800 200 600 150 400 100 389 251 350 448 378 200 50 0 0 08/09 09/10 10/11 11/12 12/13 Jul- S
Slide 16: Chinese urea production and export balance
15 Chinese urea production and export balance Chinese urea production Domestic urea balance Million tons Million tons 7,0 14 12/13 13/14 11,8 12,2 6,0 12 11/12 -12.0% 10,7 5,0 10 1,0 9,4 2,8 4,0 8 3,0 6 2,0 4 1,0 2 0,0 0 Export Export Domestic Domestic Production Production Jul Aug Sep Oct Nov Dec J
Slide 17: Projected nitrogen capacity additions outside China in line with historical consumption growth
Projected nitrogen capacity additions outside 16 China in line with historical consumption growth Urea capacity growth relative Year Driving regions to nitrogen capacity Excluding China Excluding China Qatar 19% 2013 1.4% (2.5%) Algeria 17% Iran 23% 2014 1.8% (1.8%) India 21% Algeria 25% 2015 3.5% (
Slide 18: Basis for Yara's profitable growth ambitions
17 Basis for Yara’s profitable growth ambitions Yara Strong earnings through the cycle A scalable business model giving synergies CROGI 25 % 20 % 15 % 10 % 5% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 1H 2013 Long term target Industry-leading acquisition track-record Valuation and capital disc
Slide 19: Multiple growth options; de-bottlenecking and regional M&A currently most attractive
Multiple growth options; de-bottlenecking and 18 regional M&A currently most attractive Reconfiguration/expansion at existing sites, potential for 1 increased NPKs, nitrates and CN Pursue medium-size/regional M&A, likely highest probability 2 of success in current environment Secure longer term part
Slide 20: Bunge acquisition completed and integration underway
Bunge acquisition completed 19 and integration underway Bunge Yara Fertilizantes Brasil Sales volume 2012 (mt) 4.6 3.3 Revenues 2012 (USD billions) 2.6 1.8 Employees ~1,300 ~1,300 SSP production units 2 1 Blending units 22 11 Own sales force ~100 ~80 Sales representatives ~500 ~300 IR-Date: 2013-10-
Slide 21: Potential joint investment in world-scale ammonia plant on US Gulf coast
Potential joint investment in world-scale 20 ammonia plant on US Gulf coast Attractive long-term partnership: – BASF has strong existing presence in the United States and ammonia sourcing requirement for US downstream activities, investment would further strengthen backward integration – Yara has
Slide 22: NOT UPDATED
21 More information can be found on www.yara.com NOT UPDATED IR-Date: 2013-10-29
Slide 23: Summary third quarter
22 Summary third quarter Strong results despite weaker commodity fertilizer markets 17% increase in deliveries including Brazil acquisition Robust value-added premiums Stable NPK deliveries outside Europe Strong Industrial deliveries, especially NOX abatement IR-Date: 2013-10-29
Slide 24: Earnings per share
23 Earnings per share* 12,86 EPS excluding currency and 12,42 11,84 special items 10,54 9,82 10,02 9,25 8,04 7,73 6,68 7,67 6,68 5,42 5,65 5,27 2010 2011 2012 2013 Annual NOK 30.23 41.99 37.31 20.38 * Average number of shares for 3Q 2013: 277.6 million (3Q 2012: 281.4 million). IR-Date: 2013-10-29
Slide 25: Fertilizer market development
24 Fertilizer market development Solid farm economics support fertilizer demand, despite lower grain prices Increased exports from China led to supply-driven urea pricing Western Europe nitrogen fertilizer industry deliveries 9% lower Phosphate and potash markets impacted by reduced consumpt
Slide 26: EBITDA development
25 EBITDA development NOK millions 145 4,103 174 924 1 269 3,307 79 EBITDA Special Volume Price/margin Gas & oil Other Currency EBITDA 3Q12 items costs in 3Q13 Europe IR-Date: 2013-10-29
Slide 27: Increased fertilizer deliveries
26 Increased fertilizer deliveries Kilotons 1 336 1 380 1 305 1 094 1 111 1 032 988 706 216 258 3Q12 3Q13 3Q12 3Q13 3Q12 3Q13 3Q12 3Q13 3Q12 3Q13 Nitrate NPK compounds NPK blends Urea UAN Yara-produced deliveries Joint venture & third party sourced Total IR-Date: 2013-10-29
Slide 28: Record production
27 Record production Finished fertilizer Ammonia Kilotons Kilotons 5 000 2 000 4 500 1 900 4 000 1 800 3 500 1 700 3 000 1 600 2 500 1 500 2 000 1 400 1 500 1 300 1 000 1 200 500 1 100 0 1 000 2011 2012 2013 2011 2012 2013 * Including share of equity-accounted investees IR-Date: 2013-10-29
Slide 29: Cautious start to season in Europe and US
28 Cautious start to season in Europe and US USA* Western Europe Million tons Million tons 4,5 -17%* 2,5 4,0 3,5 2,0 -9% 3,0 1,5 2,5 2,0 1,0 1,5 1,0 0,5 0,5 0,0 0,0 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 3Q08 3Q09 3Q10 3Q11 3Q12 3Q13 Production Net imports Domestic Imports *July only, due to non-availability
Slide 30: Bunge acquisition increases purchasing scale
29 Bunge acquisition increases purchasing scale Potash purchases, China, India and Yara 2012 First half 2013 Million tons, MOP equivalents 5,3 1,1 3,9 2,8 0,6 1,9 1,8 1,0 China India Yara China India Yara Bunge Source: Yara, International Fertilizer Industry Association IR-Date: 2013-10-29
Slide 31: Prospects
30 Prospects Continued strong farm economics support fertilizer demand Marginal urea profitability in China; Chinese coal price and export tax regime are key for global urea pricing going forward Capacity outside China: limited greenfield additions next 2-3 years apart from Algeria Limited p
Slide 32: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and 31 amortization (EBITDA) NOK millions EBITDA excluding special items 6 587 5 444 4 982 4 966 4 281 4 310 4 103 4 129 3 995 3 455 3 591 3 251 3 307 2 992 2 486 Annual 2010 2011 2012 2013 NOK 15,315 18,163 16,970 11,432 millions IR-Date: 2013-10-29
Slide 33: Strong cash generation
32 Strong cash generation NOK millions 70 3,519 229 360 732 1,117 741 2,309 4,295 702 626 331 Net debt Cash Dividends Net Funding Acquisition Other Yara Share Yara FX loss Other Net debt Jun 13* earnings** from equity operating Yara of Bunge investments buy backs / Dividend Sep 13* accounted capital
Slide 34: Debt/equity ratio
33 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0,75 0,63 0,57 0,56 0,49 0,38 0,32 0,27 0,20 0,22 0,12 0,12 0,08 0,07 0,06 0,06 0,02 0,01 -0,04 2009 2010 2011 2012 2013 IR-Date: 2013-10-29
Slide 35: Yara 3Q fertilizer sales by market and product
34 Yara 3Q fertilizer sales by market and product 2013: 5.9 million tons (2012: 5.0 million tons) Kilotons 2 377 3Q12 3Q13 2 270 2 138 1 497 469 544 573 461 316 252 Europe Latin America Asia North America Africa 1 380 1 336 1 305 1 094 1 032 988 1 111 706 449 569 216 258 225 229 NPK compounds NPK bl
Slide 36: Yara stocks, including Bunge Brazil from 3Q
35 Yara stocks, including Bunge Brazil from 3Q Kilotons Finished fertilizer 6 000 5 500 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 Other NPK Nitrates Urea Bunge IR-Date: 2013-10-29
Slide 37: Gas & oil cost
36 Gas & oil cost Yearly averages 2009 – 2010, quarterly averages for 2011-13 with forward prices* for 4Q13 and 1Q14 USD per MMBtu 14 11,9 11,8 11,1 11,4 11,5 11,3 12 10,9 10,8 11,0 11,0 10,8 10,8 10,1 10 8 7,6 8,3 8,6 8,3 8,3 8,5 8,3 6,6 7,9 8,1 8,3 7,7 7,5 7,9 6 7,6 5,7 4 4,8 2 0 2009 2010 1Q11 2Q
Slide 38: Yara European gas cost closer to hub price
37 Yara European gas cost closer to hub price European energy cost Spread between Yara and Zeebrugge USD/ USD/ MMBtu MMBtu 13,0 2,1 12,0 1,7 11,0 1,4 10,0 1,1 9,0 0,9 0,9 0,8 0,9 8,0 7,0 6,0 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Zeebrugge (1-month lag) Yara
Slide 39: European producer nitrate stocks
38 European producer nitrate stocks 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 IR-Date: 2013-10-29
Slide 40: Grain consumption growth stronger than population growth
Grain consumption growth stronger 39 than population growth Million tons Billions 2 500 12 US drought resulting in 2.9% drop in production, low stocks, demand rationing and spiking prices 10 2 000 3% drop in production 3% drop in production, low stocks, demand rationing and 8 4% drop in production,
Slide 41: We work in a systematic manner to identify the crop segments with highest value potential
We work in a systematic manner to identify the 40 crop segments with highest value potential CVI CVI and hectare grown of key crops 700 Strawberry 600 500 400 300 Apples 200 Oranges 100 Coffee Potato Maize Wheat 0 0 50 100 150 200 250 million ha Crop Value Index is sales price of the crop divided by
Slide 42: Higher meat consumption requires more feed grain
41 Higher meat consumption requires more feed grain Significant potential for increasing Feed grain multipliers for meat meat consumption in emerging countries production World Poultry 2X EU North America Pork 4X Latin America Asia Beef 7X Africa 0 20 40 60 80 100 120 140 0 1 2 3 4 5 6 7 8 9 Kg/capi
Slide 43: Continued strong price incentives necessary to match consumption growth
Continued strong price incentives necessary to 42 match consumption growth 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 13E 14F 06 07 08 09 10 11 12 1
Slide 44: Chinese urea export increase
43 Chinese urea export increase Chinese urea exports, Kilotons Urea price, USD/t 1 800 550 1 600 500 450 1 400 400 1 200 350 1 000 300 800 250 200 600 150 400 100 200 50 0 0 jul.10 jan.11 jul.11 jan.12 jul.12 jan.13 jul.13 Urea, fob Yuzhny Chinese urea exports Source: BOABC IR-Date: 2013-10-29
Slide 45: Non-commercials' net long position in corn
44 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 Source: US Commodity Futures Trading Commission IR-Date: 2013-10-29
Slide 46: Key value drivers – quarterly averages
45 Key value drivers – quarterly averages Zeebrugge day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 11,1 10,3 10,3 10,1 343 351 383 385 400 314 322 9,1 294 342 308 3Q12 4Q12 1Q13 2Q13 3Q13 3Q12 4Q12 1Q13 2Q13 3Q13 3Q12 4Q12 1Q13 2Q13 3Q13 Ammonia fob Black Sea (USD/t
Slide 47: 10-year fertilizer prices – monthly averages
46 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 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Urea prilled fob Black Sea DAP fob US Gulf USD
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