Yara International Asa · OSL:YAR
Yara International Asa — Q3 2007 Earnings Presentation
53 slides from Yara International Asa's earnings presentation, Oct 19, 2007
Slide 1: Yara International ASA Third quarter results
Yara International ASA Third quarter results 19 October 2007
Slide 2: Summary third quarter 2007
1 Summary third quarter 2007 Strong financial results Fertilizer margin increase reflecting strong demand High growth in industrial applications Strong production performance Early EU approval of Kemira GrowHow acquisition, integration started IR - Date: 2007-10-19
Slide 3: Net income after minority interest
2 Net income after minority interest NOK millions 1,600 1,487 1,403 1,422 1,400 1,200 1,085 1,041 1,000 917 891 846 846 853 800 588 600 400 200 0 2005 2006 2007 Accumulated NOK mill 3,198 4,188 3,993 USD mill 500 657 670 IR - Date: 2007-10-19
Slide 4: Earnings per share
3 Earnings per share* NOK 6.00 5.10 4.85 5.00 4.68 4.00 3.67 3.42 2.90 3.01 3.00 2.68 2.70 2.77 1.90 2.00 1.00 0.00 2005 2006 2007 Accumulated NOK 10.20 13.86 13.60 * Average number of shares for 3Q 2007: 291.6 million (3Q 2006: 299.6 million) IR - Date: 2007-10-19
Slide 5: Earnings per share adjusted for foreign exchange gain / loss
4 Earnings per share adjusted for foreign exchange gain / loss* NOK 4.75 4.51 4.50 3.94 4.00 3.52 3.50 3.31 3.18 2.98 3.00 2.57 2.61 2.65 2.50 2.18 2.00 1.50 1.00 0.50 0.00 2005 2006 2007 ** Accumulated NOK 11.36 12.90 11.97 * After tax ** Average number of shares for 3Q 2007: 291.6 million (3Q 2006
Slide 6: Overall fertilizer market development during quarter
5 Overall fertilizer market development during quarter Higher grain prices provided further boost for fertilizer demand Strong development in Latin America Continued increase in Indian urea imports West European fertilizer deliveries stable, imports down 5% Higher Chinese urea exports IR - Date: 200
Slide 7: Fertilizer price development during quarter
6 Fertilizer price development during quarter Strong urea price recovery driven by increased import demand Increasing ammonia prices through the quarter, although still low compared to urea Nitrate prices in Western Europe stable through the quarter, strong increase in October IR - Date: 2007-10-19
Slide 8: Grain stocks forecast to drop further through June 2008
7 Grain stocks forecast to drop further through June 2008 Million tonnes 2,200 35% 115 days inventory 30% 2,100 25% Consumption 2,000 20% 1,900 15% 55 days inventory 10% 1,800 Production 5% 1,700 0% 1995 1997 1999 2001 2003 2005 2007E 1995 1997 1999 2001 2003 2005 2007E Source: USDA, update October
Slide 9: Strong season in Brazil
8 Strong season in Brazil Accumulated urea import Kt 2,000 2004 1,800 1,600 1,400 2007 1,200 2005 1,000 800 600 400 2006 200 0 May Mar Jan Jun Nov Jul Aug Oct Apr Feb Sep Dec Source: GTIS IR - Date: 2007-10-19
Slide 10: Indian imports continue to grow
9 Indian imports continue to grow Kt 5,000 Sales - Production 2006/07 4,000 3,000 2,000 2007/08 2005/06 1,000 0 2004/05 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar -1,000 -2,000 Kharif (July planting) – imports Apr-Sep -3,000 Rabi (November planting) – imports Oct-Jan Source: Indian Statistics,
Slide 11: Higher urea prices attract Chinese exports
10 Higher urea prices attract Chinese exports Net urea exports Kt 4,500 4,000 2004 3,500 3,000 2,500 2007 2,000 2005 1,500 2006 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: BOABC IR - Date: 2007-10-19
Slide 12: Chinese export necessary to cover 10% increase in urea import demand
11 Chinese export necessary to cover 10% increase in urea import demand 1H 2007 compared to 1H 2006 3.0 DEMAND INCREASE SOURCING 0.6 1.1 Million tonnes urea Demand 2.0 0.8 destruction /delay Africa & Asia 0.1 0.6 0.9 1.0 0.7 0.0 Latin America India US Rest of world Rest of world Egypt China IMPORTS
Slide 13: NPK prices recover raw material cost increases
12 NPK prices recover raw material cost increases 15-15-15 France Blend cost proxy* USD/t 400 350 ~$90 300 ~$35 250 200 150 July Nov Jun Jun Jul May May Jan 2006 Aug Jan 2007 Aug Oct Mar Apr Mar Apr Dec Feb Sep Feb Sep * AN delivered France + DAP fob Morocco + MOP fob W. Eur. (no freights or other c
Slide 14: Agricultural commodity prices strong…
13 Agricultural commodity prices strong… Corn Wheat Soybeans Rice Source: Chicago Board of Trade, 18 October 2007; November/December contracts IR - Date: 2007-10-19
Slide 15: …and strength extends beyond current harvest
14 …and strength extends beyond current harvest Forward prices USD/bu USD/bu 10 13 Rice (150 kg N/ha) 9 12 8 11 Soybeans (30 kg N/ha) Wheat (75 kg N/ha) 7 10 6 9 5 8 Corn (150 kg N/ha) 4 7 3 6 May-08 Mar-08 May-08 Jul-08 Nov-07 Jan-08 Mar-08 Nov-08 Dec-07 Sep-08 Dec-08 Jul-08 Sep-08 Source: Chicago
Slide 16: Estimated European energy cost
15 Estimated European energy cost NOK millions Actual for quarter October 2007 estimate 600 550 500 Cost change on previous year 400 300 250 200 100 0 (23) (100) (104) (200) (300) (258) 1Q07 2Q07 3Q07 4Q07 1Q08 IR - Date: 2007-10-19
Slide 17: Further delays to new urea capacity
16 Further delays to new urea capacity Global urea capacity Year Driving regions growth estimate* World Excluding China World Ex. China 2006 4.9% (4.5%) 2.6% (3.0%) China 65% Oman 27% Oman 10% S. Arabia 21% 2007 5.0% (4.7%) 3.0% (3.8%) China 62% Egypt 42% Egypt 16% Iran 32% 2008 4.6% (4.9%) 3.6% (4.
Slide 18: Yara upgrades urea capacity in Sluiskil
17 Yara upgrades urea capacity in Sluiskil Description: Increase urea capacity from 2,400 to 3,500 tonnes/day Investment approx. EUR 300 million Operational by 2011 Rationale: Export surplus of ammonia today Competitiveness of efficient European ammonia capacity improved due to increased gas cost in
Slide 19: Kemira GrowHow update
18 Kemira GrowHow update European Commission phase 1 approval 21 September, committed remedies equivalent to <3% of Kemira GrowHow revenues Tender offer completed – Yara owns 97.5% of Kemira GrowHow De-listing of Kemira GrowHow expected by February 2008 Earnings to be consolidated from start of 4Q 2
Slide 20: Earnings before interest, tax, depreciation and amortization (EBITDA)
19 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 2,222 1,947 1,901 2,000 1,866 1,868 1,787 1,800 1,682 1,600 1,505 1,492 1,379 1,351 1,400 1,200 1,000 800 600 400 200 0 2005 2006 2007 Accumulated NOK mill 6,618 6,472 5,910 USD mill 1,033 1,014 986 IR - Date: 2007
Slide 21: EBITDA and operating income by segment
20 EBITDA and operating income by segment EBITDA (NOK millions) 3Q 2007 3Q 2006 Downstream 661 490 Industrial 258 252 Upstream 956 1,168 Other and eliminations 26 38 Yara total 1,901 1,947 Operating income (NOK millions) 3Q 2007 3Q 2006 Downstream 448 295 Industrial 205 203 Upstream 442 628 Other an
Slide 22: Net interest-bearing debt / equity ratio
21 Net interest-bearing debt / equity ratio End of quarter 0.50 0.46 0.45 0.41 0.38 0.39 0.40 0.37 0.36 0.35 0.35 0.34 0.33 0.34 0.35 0.31 0.30 0.27 0.25 0.20 0.15 0.10 0.05 0.00 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 IR - Date: 2007-1
Slide 23: Net interest-bearing debt
22 Net interest-bearing debt NOK millions 7,000 1,141 697 138 5,965 6,000 5,350 3,572 838 5,000 2,232 4,000 3,000 1,305 2,000 770 1,000 0 Net Interest- Cash Dividends Net operating Grow th Other Yara dividend Foreign Other Net Interest- Bearing Debt earnings* received** capital change investments in
Slide 24: Variance analysis Yara group
23 Variance analysis Yara group Third quarter NOK millions USD millions* EBITDA 2007 1,901 329 EBITDA 2006 1,947 308 Variance EBITDA in NOK (46) Conversion (NOK vs. USD) 165 Variance EBITDA 119 21 Volume & mix 115 20 Price/Margin 784 136 Energy arbitrage (25) (4) Energy cost in Europe 158 27 Oil and
Slide 25: Special items
24 Special items EBITDA effect (NOK millions) 3Q 2007 3Q 2006 Nitric acid plant sale 70 Asset disposal Glomfjord 23 Downstream 23 70 Ceylon Oxygen Ltd. sale 36 Contract derivatives (4) (18) Industrial (4) 18 Shipping fleet sale 832 Contract derivatives (1) (5) Upstream (1) 827 Total 18 915 *Special
Slide 26: Downstream segment
25 Downstream segment Strong results driven by improved margins Strong deliveries in the Americas Increased nitrate exports from Europe reflect global optimization IR - Date: 2007-10-19
Slide 27: Downstream – EBITDA
26 Downstream – EBITDA NOK millions 900 804 800 724 700 665 661 628 600 518 511 490 500 441 373 400 319 300 200 100 0 2005 2006 2007 Accumulated NOK mill 1,984 1,960 2,189 USD mill 311 305 365 IR - Date: 2007-10-19
Slide 28: Downstream – fertilizer sales volume
27 Downstream – fertilizer sales volume Europe Outside Europe Kt 6,000 5,257 5,179 5,002 5,000 4,640 4,783 4,692 4,868 2,389 4,763 2,559 4,507 4,605 4,441 2,827 2,275 2,683 2,629 2,094 2,130 2,514 2,324 1,847 4,000 3,000 2,868 2,546 2,475 2,594 2,511 2,443 2,352 2,000 2,183 2,178 2,185 2,135 1,000 0
Slide 29: Growth in Argentina
28 Growth in Argentina Yara sales by quarter Kt Strong market growth driven YTD’07 vs. YTD’05: by global grain demand 160 50% increase 143 140 Top 3 products are soybeans, 120 114 wheat and corn 98 101 100 82 World no. 2 corn exporter 80 75 75 60 52 Great growth potential, 42 application rates lower
Slide 30: Industrial segment
29 Industrial segment Strong results Volume growth for all product groups Margin improvement for environmental applications and industrial gases IR - Date: 2007-10-19
Slide 31: Industrial – EBITDA
30 Industrial – EBITDA NOK millions 300 252 258 250 207 205 195 200 174 173 166 165 146 153 150 100 50 0 2005 2006 2007 Accumulated NOK mill 720 736 638 USD mill 112 115 107 IR - Date: 2007-10-19
Slide 32: Improved TAN margins with increased own production
31 Improved TAN margins with increased own production Sales (Kt) 700 Conversion of Köping plant to Own Third party 100% TAN adds 130 kt capacity 600 and improves margins 500 400 Yara sales growth in Latin America, Africa and the Arabian peninsula 300 200 Increased focus on end-user sales with constr
Slide 33: Upstream segment
32 Upstream segment Strong results driven by higher prices Lower energy cost in hub-based contracts Production up 7% IR - Date: 2007-10-19
Slide 34: Upstream – EBITDA
33 Upstream – EBITDA NOK millions 1,400 1,168 1,202 1,200 1,004 988 987 1,000 944 926 956 911 797 800 673 600 400 200 0 2005 2006 2007 Accumulated NOK mill 3,922 3,563 3,069 USD mill 611 560 512 IR - Date: 2007-10-19
Slide 35: Upstream – production volume
34 Upstream – production volume* Kt Ammonia Finished fertilizer 4,000 3,357 3,437 3,443 3,500 3,180 3,253 3,286 3,246 3,247 3,312 3,175 3,256 1,999 2,053 2,051 1,915 1,940 1,889 2,010 1,983 1,994 3,000 1,965 1,914 2,500 2,000 1,500 1,339 1,346 1,356 1,329 1,358 1,384 1,392 1,215 1,237 1,262 1,262 1,
Slide 36: Strong production performance
35 Strong production performance Le Havre plant in full production since start of 2007 based on new gas contract Sustained high operating rates Sluiskil Burrup plant running strongly, 1 million tonnes production milestone achieved Improvements also in other plants reflecting continuous focus on oper
Slide 37: Share of net income in non-consolidated investees
36 Share of net income in non-consolidated investees NOK millions 3Q 2007 3Q 2006 YTD 2007 YTD 2006 Qafco 219 177 601 553 Tringen 40 41 154 131 Rossosh 16 14 91 102 Burrup 53 (45) 95 (45) Other 81 231 263 333 Total 409 418 1,204 1,074 IR - Date: 2007-10-19
Slide 38: Prospects fourth quarter 2007
37 Prospects fourth quarter 2007 Tight European fertilizer market Higher urea prices allow faster nitrate price increases Large Chinese urea exports contracted, reflected in current market prices. Logistical bottlenecks may limit exports Kemira GrowHow will be consolidated in Yara’s financial statem
Slide 39: Prospects next twelve months
38 Prospects next twelve months Grain markets to remain tight, further drop in global grain stocks forecast. Grain prices at historical high levels European Commission has released the 10% set-aside land in EU15 European fertilizer capacity to be reduced with closure of Severnside and conversion of
Slide 40: Additional information
cg YARA Additional information
Slide 41: Three segments mitigate cyclicality and create value for Yara
40 Three segments mitigate cyclicality and create value for Yara EBITDA, pro forma until 2005 . USD millions Knowledge Margin Local market knowledge 1,400 Strong customer relations 1,200 Agronomic and application 130 competence Differentiation and branding . 1,000 112 104 115 444 Logistics Leverage
Slide 42: Downstream – variance analysis
41 Downstream – variance analysis Third quarter NOK millions USD millions* USD/tonne** EBITDA 2007 661 114 24 EBITDA 2006 490 77 16 Variance EBITDA in NOK 171 Conversion (NOK vs. USD) 45 Variance EBITDA 216 37 8 Volume & mix 14 2 1 Margin 263 45 10 Margin excluding ammonia effect 336 58 12 Ammonia e
Slide 43: Industrial – variance analysis
42 Industrial – variance analysis Third quarter NOK millions USD millions* EBITDA 2007 258 45 EBITDA 2006 252 40 Variance EBITDA in NOK 6 Conversion (NOK vs. USD) 22 Variance EBITDA 28 5 Volume & mix 83 14 Margin (28) (5) Margin excluding ammonia effect (11) (2) Ammonia effect on margin (16) (3) Spe
Slide 44: Upstream – variance analysis
43 Upstream – variance analysis Third quarter NOK millions USD millions* USD/tonne** EBITDA 2007 956 165 48 EBITDA 2006 1,168 186 54 Variance EBITDA in NOK (211) Conversion (NOK vs. USD) 94 Variance EBITDA (118) (20) (6) Volume & mix 98 17 5 Price/Margin 518 90 26 Energy arbitrage (25) (4) (1) Energ
Slide 45: Downstream net operating capital turnover
44 Downstream net operating capital turnover* Downstream external operating revenues / external net operating capital 5.0 4.8 4.8 4.6 4.5 4.5 4.5 4.4 4.4 4.3 4.3 4.3 4.3 4.0 3.5 3.0 2005 2006 2007 * 12-month rolling average IR - Date: 2007-10-19
Slide 46: US natural gas versus Yara average
45 US natural gas versus Yara average Yearly averages 2000 – 2005, quarterly averages for 2006 and 2007 with forward prices for 07/08* USD/MMBtu 14 European spot gas price (Zeebrugge Hub) 12 European long-term 10 gas contracts (Heren index) 8 US spot gas price 7.3 (Henry Hub) 6 6.3 6.0 5.4 5.6 5.5 5
Slide 47: Key value drivers – quarterly averages
46 Key value drivers – quarterly averages Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 281 350 250 227 233 228 259 254 295 293 214 223 249 281 250 300 217 200 250 232 200 212 200 150 150 150 100 100 100 50 50 50 0 0 0 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 3Q 0
Slide 48: Key value drivers – 10-year history
47 Key value drivers – 10-year history Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 250 220 223 250 240 245 212 250 229 200 186 175 200 185 165 200 139 146 150 150 140 138 117 124 119 111 150 121 101 96 110 103 110 84 94 100 100 100 86 100 84 67 50 50
Slide 49: 10-year fertilizer prices – monthly averages
48 10-year fertilizer prices – monthly averages Ammonia fob Black Sea USD/t 350 300 250 200 150 CAN cif Germany USD/t 100 50 250 0 200 150 100 Urea prilled fob Black Sea USD/t 50 350 0 300 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 250 200 150 100 50 0 Average prices 1997 - 2006 1997 199
Slide 50: 10-year grain/oilseed prices – yearly averages
49 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/t USD/t 240 350 220 300 200 180 250 160 140 200 120 100 150 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 9M07 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 9M07 Corn (US Gulf) USD/t Soybeans (cif Rotte
Slide 51: Income statement
50 Income statement NOK millions 3Q 2007 3Q 2006 Revenue and other income 12,828 11,898 Operating income 1,101 1,149 409 418 Share of net income in non-consolidated investees Interest income and other financial income 67 59 Interest expense and other financial items (147) (141) Foreign exchange gain
Slide 52: Consolidated balance sheet
51 Consolidated balance sheet NOK millions 30 Sep 2007 30 Sep 2006 Deferred tax assets 967 1,406 Property, plant and equipment 7,419 7,291 Other non-current assets 9,202 6,802 Inventories 7,154 6,764 Receivables 6,846 6,745 Other current assets 1,904 2,179 Cash and cash equivalents 872 1,201 Total a
Slide 53: Definition of EBITDA and CROGI
52 Definition of EBITDA and CROGI Operating income before financial items Total assets + Share of net income in non-consolidated investees - Cash and other liquid assets + Interest income - Deferred tax assets + Net gain/loss on securities - Other current liabilities + Dividends received from 0-20 c