Yara International Asa · OSL:YAR
Yara International Asa — Q4 2019 Earnings Presentation
38 slides from Yara International Asa's earnings presentation, Feb 7, 2020
Slide 1: Yara International ASA 2019 fourth quarter results
Yara International ASA 2019 fourth quarter results 7 February 2020
Slide 2: Safety is our first priority
Safety is our first priority Ensuring a safe workplace for employees and partners TRI1 (12-month rolling) 5 4 3 2 1.4 1 0 1Q16 4Q19 1 Total Recordable Injuries per 1 million working hours 2 OFD and Galvani included in statistics from January 2016 2
Slide 3: Continued profit growth
Continued profit growth Earnings improvement continuing Increased 4Q profitability L12M EBITDA ex. special items (MUSD) • Strategy execution drives improved commercial margins 2,500 and bottom line − NPK premium up 62 USD/t 2,000 • Plant portfolio benefiting from lower gas cost, but unsatisfactory p
Slide 4: Lower urea prices and input costs, improved commercial margins
Lower urea prices and input costs, improved commercial margins Lower European natural gas Lower urea prices outside China Lower nitrate and NPK prices prices Urea price development1 (USD/t) Spot gas prices1 (USD/Mmbtu) Yara realized CAN2 and NPK price3 (USD/t) -22% -1% -17% -55% 321 451 445 302 8.2
Slide 5: Sales & Marketing revenues resilient to commodity price fluctuations
Sales & Marketing revenues resilient to commodity price fluctuations Revenue per premium product tonne, USD/t Revenue per commodity tonne, USD/t Price above commodity value Price above commodity value Commodity value Commodity value 403 407 363 393 342 368 370 374 374 371 335 328 337 321 318 300 110
Slide 6: Strong New Business operations and earnings improvement
Strong New Business operations and earnings improvement New Business EBITDA excl. special items1 Comments +21% +59% • Strong 4Q performance, especially for Maritime 48 187 • 2019 EBITDA up 59%, mainly driven by Maritime 39 and Cubatão acquisition 117 • Process for NewCo CEO replacement initiated; In
Slide 7: Delivering on capital allocation policy: ~USD 500 million cash return
Delivering on capital allocation policy: ~ USD 500 million cash return Dividends and buy-backs per share (NOK) Comments ~18 • Improving Yara cash flow from strategy execution Buy-back and redemption ~3 and a robust outlook allows Yara to keep net Dividend debt/EBITDA in upper end of the targeted ran
Slide 8: Improving crop nutrition efficiency and sustainability is core to Yara
Improving crop nutrition efficiency and sustainability from factory to field is core to Yara and crucial for the planet Ag sector represents 25% of global GHG emissions Significant improvement potential Tonnes output per hectare Fertilizer production (2%) 11.0 Enteric Fermentation (4%) Corn: 3.7 Man
Slide 9: Yara and IBM launch collaborative approach to sustainable food production
Yara and IBM launch a collaborative approach to enable sustainable food production – towards an open farm and field data exchange • Today, many challenges prohibit farm and field data sharing at scale • A collaborative approach for data management is needed • Yara and IBM invite institutions across
Slide 10: Performance overview
Performance overview EBITDA ex. Special items EPS ex. currency and special items Cash from operations (USD millions) (USD per share) (USD millions) 525 0.80 688 424 0.60 4Q18 4Q19 4Q18 4Q19 -89 4Q18 4Q19 Investments (net) Change in net operating capital ROIC (USD millions) (USD millions) (12-month r
Slide 11: Performance focus and capital discipline drives cash flow improvements
Performance focus and capital discipline drives cash flow improvements Free cash flow before financing activities1 Comments USD millions, rolling 4 quarters Operations ▪ Strategy execution driving Investments improved free cash flow1 in 2019 Free cash flow1 863 • strong operational cash flow, lower
Slide 12: Strong commercial performance and lower input costs drive EBITDA increase
Strong commercial performance and lower input costs drive EBITDA increase EBITDA ex. special items (MUSD) 525 41 16 424 34 161 170 IFRS 16 +37 MUSD Fixed cost +31 MUSD Other -26 MUSD 4Q18 Volume/Mix Price/Margin Energy costs Currency Other 4Q19 12
Slide 13: Stronger value creation in commercial segments, lower Production margins
Stronger value creation in commercial segments, somewhat lower commodity margins in Production segment 4Q18 EBITDA ex. special items (MUSD) 4Q19 295 256 160 128 39 48 Production Sales & Marketing New Business • Nitrogen and phosphate price decline • Improved commercial margins • Improved financial p
Slide 14: Improvement Program status: production volume KPIs
Improvement Program status: production volume KPIs1 Ammonia production volumes, kt annualized Comments Qtr, annualized 2023 target 12 month rolling 8,900 ▪ Unsatisfactory production performance overall in 4Q, 2019 reflecting unplanned outages in 7,772 several plants 2018 7,850 • Ammonia -130 kt Main
Slide 15: Growth project status
Growth project status Sluiskil Köping Freeport Rio Grande Salitre Pilbara TAN Dallol (Netherlands) (Sweden) (US) (Brazil) (Brazil) (Australia) (Ethiopia) production Status In testing, Stable operations On line since Delayed Delayed Progressing to On hold completion 1H20 since late 2019 mid-2018 (end
Slide 16: Improvement program: non-volume KPIs
Improvement program: non-volume KPIs Ammonia energy efficiency Fixed costs Operating capital GJ/ton MUSD Days 33.7 33.9 33.7 32.7 2,315 2,291 2,315 115 2,217 108 102 90 2017 2018 2019 2023 2017 2018 2019 2023 2017 2018 2019 2023 target target target • Fewer turnarounds compared to • Fixed costs in l
Slide 17: EBITDA variance including YIP
EBITDA variance including YIP EBITDA ex. special items (MUSD) 120 MUSD YIP impact - 95 MUSD EBITDA bottom line • Actual production = ~40 MUSD (~10 MUSD in YIP terms) • NH3 efficiency = ~10 MUSD • Nominal Fixed costs = ~25 MUSD (~80 MUSD inflation adjustment) • Variable costs = ~20 MUSD 75 2,165 96 4
Slide 18: Full year 2019 Condensed Profit and Loss statement
Full year 2019 Condensed Profit and Loss statement USD millions, except share information 2019 2018 Variance Main comments Revenue and other income 12,936 13,054 -118 Raw materials, energy costs and freight expenses -9,334 -9,952 618 • Lower revenues due to lower fertilizer prices, but Payroll and r
Slide 19: Condensed balance sheet
Condensed balance sheet Main comments USD millions 31-Dec-19 31-Dec-18 Assets • Implementation of IFRS 16 on 1 January 2019 increased non-current assets by USD 447 million Total non-current assets 11,940 11,337 • Disposal group held-for-sale of USD 175 million Total current assets 4,785 5,319 classi
Slide 20: Capital discipline reduced 2019 capex, 2020/21 unchanged
Capital discipline reduced 2019 capex, 2020/21 unchanged - maintenance capex in line with peers Capex plan1 USD Billions Growth - acquisitions Cost&capacity improvements 0.6 Growth - expansions Maintenance 0.1 Sales & Marketing Other 2 2.2 0.2 Turnarounds Reduced from 1.3 bn Ordinary maintenance in
Slide 21: Net interest-bearing debt reduced in 4Q
Net interest-bearing debt reduced in 4Q 4Q development Comments USD millions • Strong operating cash flow, more 3,968 than covering investments and 3,725 share buy-backs 369 300 232 • Lower operating capital driven by 69 65 62 lower inventories in Brazil and lower receivables in India • Mainly maint
Slide 22: Significant reduction in forward gas prices
Significant reduction in forward gas prices European gas prices1 Comments TTF, USD/MMBtu • European forward prices 7 Oct 2019 significantly lower than last 29 Jan 2020 quarter • Forward market sees prices staying lower for longer 5.7 5.6 5.8 5.7 5.3 5.2 4.7 • Yara energy cost guiding based 3.9 on fo
Slide 23: Strong commercial performance in slow market
Strong commercial performance in slow market Weaker premium & commodity Lower revenues, increasing Increased EBITDA with stable gross product deliveries premium share margin, but significant cost savings Volumes (Mt) Revenues (BUSD) EBITDA ex. SI (MUSD) -5% -14% +25% 7.5 2.8 7.2 160 2.4 128 4.2 1.5
Slide 24: Positive mix effect with volume decline mainly in commodities
Positive mix effect with volume decline mainly in commodities Total deliveries 4Q18 Mill. tonnes 4Q19 -8% 3.2 -6% 2.9 2.8 2.7 Commodity +4% +8% 1.3 1.3 1.1 1.2 -16% +27% Premium* 0.6 0.5 0.5 0.4 OPP 2.3 2.1 0.8 0.8 0.6 0.7 0.5 0.5 0.3 0.3 0.1 0.2 Europe Brazil Asia North Latin Africa America America
Slide 25: Our long term targets; increased premium product deliveries and higher margins
Our long term targets; increased premium product deliveries and higher margins Increase premium product Increase YaraVita deliveries to Increase EBITDA margin1 deliveries by > 3.5 mill tonnes > 100 million units Premium products in mill. tonnes YaraVita in mill. units EBITDA margin in USD/tonne 13.3
Slide 26: Digital: Growing reach and scale in professional and smallholder segments
Digital: Growing reach and scale in both professional and smallholder segments Growing our reach in the professional segment Strong user adoption in smallholder segment Farmland under management1 Farmweather users Million Hectares Thousand Users 10.4 750 5.6 2.2 0 32 May 2018 May 2019 Dec 2019 May 2
Slide 27: Attractive Yara prospects
Attractive Yara prospects Attractive industry Operating cash flow Focused long-term strategy fundamentals improvement • Growing population and dietary • Operating cash flow improving with • Crop nutrition focus; #1 market improvement drives demand cycle and Yara actions presence and #1 premium ferti
Slide 28: Appendix
Appendix 2/10/2020 28
Slide 29: Delivering on our Strategy, our KPIs and our Ambition
Delivering on our Strategy, our KPIs and our Ambition Advance operational excellence Create scalable solutions Drive innovative growth Improving margins and nitrogen use Building closeness to farmers through Delivering improved operations and efficiency through premium product scaling up digital far
Slide 30: Higher nitrogen upgrading margin, global NPK premium above last year
Higher nitrogen upgrading margin, global NPK premium above last year Nitrogen upgrading margins1 NPK premium over blend2 USD/t (monthly publication prices) USD/t 500 450 Yara’s NPK price 251 149 86 CAN Urea Egypt 269 Weighted average global CFR proxy premium above blend cost Nitrate premium, CIF inl
Slide 31: Energy cost
Energy cost Quarterly averages for 2018-2020 with forward prices* for 1Q20 and 2Q20 9.4 8.4 7.7 8.1 7.8 8.2 8.2 7.7 7.4 6.1 6.3 6.6 6.1 6.0 5.5 5.9 4.8 4.3 4.3 4.0 3.8 4.3 4.3 4.0 3.9 4.1 3.8 4.0 3.3 3.3 3.4 3.1 2.9 2.9 2.9 2.5 2.3 2.3 1.9 2.0 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 US gas
Slide 32: Declining grain stocks excluding China
Declining grain stocks excluding China Grain stocks ex. China (right axis) and grain prices (left axis) Mill. tonnes Index 360 260 350 240 340 220 330 200 320 180 310 Grain stocks 160 FAO grain price index 300 140 290 120 280 100 10 11 12 13 14 15 16 17 18 19E 20F Sources: FAO, USDA 32
Slide 33: Yara stocks
Yara stocks Finished fertilizer Mill. tonnes 8 Other Compound NPK Nitrates Urea 0 Q4-15 Q4-16 Q4-17 Q4-18 Q4-19 33
Slide 34: European producers' nitrate stocks
European producers’ nitrate stocks Index June 2007 = 1 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 19/20 14/15 15/16 16/17 17/18 18/19 Source: Fertilizers Europe 34
Slide 35: Nitrogen supply growth is forecast to reduce significantly
Nitrogen supply growth is forecast to reduce significantly Global urea capacity additions ex. China (mill. tonnes) India Algeria Others Russia USA Production 6.7 Iran Nigeria 4.9 4.2 4.3 3.5 3.4 3.7 2.8% consumption growth 2.4 2.3 1.2 0.4 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source
Slide 36: Tighter global urea market, Chinese exports required
Tighter global urea market, Chinese exports required, but lower prices in China negatively affect global pricing Urea price development1 (USD/t) 350 Urea inland proxy China Urea granular fob Egypt 170 Jul-16 Dec-19 1 Source: BOABC, CFMW 36
Slide 37: Alternative performance measures
Alternative performance measures Alternative performance measures are defined, explained and reconciled to the Financial statements in the APM section of the Quarterly report on pages 33-38 37
Slide 38: wt iN
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