Yara International Asa · OSL:YAR
Yara International Asa — BofAML conference, London 2017
51 slides from Yara International Asa's conference presentation, Dec 5, 2017
Slide 1: Yara International ASA
Yara International ASA Thor Giæver, SVP Investor Relations BofAML conference London, 5 December 2017
Slide 2: Our planet faces massive challenges – Yara is part of the solution
Our planet faces massive challenges – Yara is part of the solution 9.7 billion + 50 % -40 to -70% people Increased food production Reduced greenhouse gas emissions* Our Mission Our Values Responsibly feed the world and protect the planet. Ambition, Curiosity, Collaboration and Accountability Source:
Slide 3: Yara drives sustainable agriculture with the right nitrogen fertilizer products and precision farming tools
Yara drives sustainable agriculture with the right nitrogen fertilizer products and precision farming tools Lower volatilization losses* with Yara’s premium Precision farming tools promote sustainable fertilizers agriculture % NH3-N per unit N applied 19.9 10.8 3.0 1.8 0.7 • Precision farming promot
Slide 4: Safe operations is our first priority
Safe operations is our first priority 4.5 TRI (Total recordable injuries 12-month rolling)1 4.0 3.5 3.0 2.5 2.0 1.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep '16 '17 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medica
Slide 5: Integrated business model creates value through scale, flexibility and value chain presence
Integrated business model creates value through scale, flexibility and value chain presence IR – December 2017 5
Slide 6: Yara's leading global position and differentiated product portfolio
Yara’s leading global position and differentiated product portfolio represent key sources of competitive edge Global #1 in Nitrates1 9.4 7.4 4.5 3.2 2.7 2.3 3.1 4.7 2.1 1.0 Yara Eurochem Ostchem Uraichem Borealis Europe North 41.4% 0.2 America Asia 6.6% Global #1 in NPK2 5.3 12.1% 3.3 2.7 2.7 1.2 1.
Slide 7: Strong growth and profitability through the cycle
Strong growth and profitability through the cycle Average cash return on gross investment (CROGI) Average annual shareholder return of 23%1 well above the Yara CROGI target of 10% NOK/share 400 0 160 22.8% 20.9% 350 140 0 300 17.4% 17.3% 120 16.1% 14.4% 100 250 0 14.1% 14.1% 13.3%14.0% 12.6% 80 200
Slide 8: Urea oversupply outside China is offset by lower Chinese exports
Urea oversupply outside China is offset by lower Chinese exports Capacity additions, excluding China (Mt urea) Urea exports from China (Mt urea) 7.2 16 13.7 13.7 14 4.7 12 10 8.9 3.8 ~3Mt = 10 year historical 3.1 trend consumption growth 8 2.1 2.1 6 2.0 1.6 3.5 4 0.9 2 0 '14 '15 '16 '17 '18 '19 '20
Slide 9: Increased coal prices in China have driven nitrogen prices higher
Increased coal prices in China have driven nitrogen prices higher China anthracite and urea prices (RMB/mt)1 Increasing urea prices 350 330 310 290 USD/tons 270 250 230 210 190 170 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Urea fob Black Sea Urea prilled fob China Urea inland proxy China 1) Source:
Slide 10: Western Europe producers have clear cost advantage over China
Western Europe producers have clear cost advantage over China Urea pricing derived from a Chinese export price European gas cost2 FOB Black Sea prices typically at ~10 12 USD below FOB China; EU prices in turn correspond to FOB Black Sea + freight 10 USD/ 10 MMBTU + 30 8 315 285 USD/t USD/t 1,750 RM
Slide 11: Growth pipeline focused on premium & industrial products
Yara has expected commodity nitrogen oversupply, and has focused its growth pipeline on premium & industrial products Growth focused on premium & industrial Pipeline tonnes by product (kt)1 1,000 Uusikaupunki NPK (3Q 2016) Expand premium products Porsgrunn/Glomfjord CN/NPK (4Q 2017) 500 Rio Gr. 250
Slide 12: Yara Improvement Program targets minimum USD 500 million sustained annual EBITDA improvement by 2020
Yara Improvement Program targets minimum USD 500 million sustained annual EBITDA improvement by 2020 USD 500m Improvement Program Progress Annualized EBITDA improvement, USDm1 500 2017 2018 2019 2020 210 Start: Today End: 150 2016 2020 120 64 90 2017as Status 2018 as Status Status 2019 as Status 202
Slide 13: Yara Improvement Program ahead of schedule
Yara Improvement Program ahead of schedule Program progress Financial benefits Annualized EBITDA improvement, USD million, vs. 2015 2017 2018 2019 2020 baseline, at 2015 prices 500 Start: Today End: 2016 2020 Program still progressing according 210 to plan, with benefits ahead of target 120 150 64
Slide 14: Major improvement and growth investments in 2017; main earnings improvement from 2018 onwards
Major improvement and growth investments in 2017; main earnings improvement from 2018 onwards1 Improvement and growth capex2 (BNOK) Improvement program EBITDA improvement3 (MUSD) Committed expansions + M&A 11.4 1,100 850 1.3 500 600 450 Improvement program: 250 300 600 + 350 MUSD cost improvement 10
Slide 15: Additional information
Additional information IR – December 2017
Slide 16: Global leadership by growing knowledge for 112 years
Global leadership by growing knowledge for 112 years About the company: Stable ownership structure: • Headquarters in Norway • Norwegian State 36.2% • President and CEO: Svein Tore Holsether • Norwegian National Insurance Scheme Fund 5.3% • Present in more than 60 countries, sales to ~160 countries
Slide 17: Three operating segments supported by a global supply chain function cover the value chain
Three operating segments supported by a global supply chain function cover the value chain Production Crop Nutrition Industrial Runs large-scale production of nitrogen- Provides worldwide sales, marketing and Develops and markets environmental Description based products, the starting point for our c
Slide 18: Supply Chain delivers industry-leading economies of scale
Supply Chain delivers industry-leading economies of scale Biggest industrial buyer of natural gas in Europe Third single biggest buyer of P&K globally 2016 gas consumption, Million MMBtu* 2016 P&K purchases (mt) 157 7.0 7.0 109 3.9 3.4 22 1.1 Europe Canada RoW Phosphate** Potash, MOP China India Yar
Slide 19: Yara has strong cost and market positions globally
Yara has strong cost and market positions globally Leading cost position in Europe Strong competitive positions outside Europe 110 • North America: World class low-cost European production assets in core agriculture market 100 average* 90 • Brazil: Unrivalled distribution network with 28 sites in 11
Slide 20: Production scale advantage and variable cost flexibility due to asset set-up and product mix
Production scale advantage and variable cost flexibility due to asset set-up and product mix Diversified product portfolio1 High ammonia flexibility Yara’s operating cash costs are mainly variable Mill tons 2016FY Mill tons 2016FY NOK billions, 2016FY Ammonia 8 Nitrates 6 2.9 Urea 5 Variable costs (
Slide 21: Industrial segment delivers growth and offsets fertilizer cyclicality and seasonality
Industrial segment delivers growth and offsets fertilizer cyclicality and seasonality Base Chemicals Environmental Solutions Mining Applications Industrial Applications1 Chemical applications for food, CN and associated solutions for Key product and automotive, space, NOx and SOx abatement of Techni
Slide 22: Yara has a strong position in value-added fertilizer, while urea is the main reference product
Yara has a strong position in value-added fertilizer, while urea is the main reference product for nitrogen pricing Nitrogen – The most important nutrient1 Urea is the key commodity N-product2 Other 10% Potassium (K) 19% Ammonia 4% DAP/MAP Urea 7% 50% Phosphorus (P) 24% Total 186 million tons nutrie
Slide 23: Growth and capex pipeline
Growth and capex pipeline Capex plan1 Production growth 2015 - 20203 NOK bn 16.5 Finished products4 Ammonia Cost&capacity improvements 2) 1.5 M&A 14.2 Mill.tons 23.8 9.0 Committed growth 1.5 3.5 Maintenance 0.4 2.3 1.2 10.9 1.6 1.2 0.3 7.0 0.4 6.9 6.3 0.7 0.2 7.5 19.2 0.2 3.0 0.7 1.3 0.3 1.1 0.4 1.6
Slide 24: Improvement and growth investments; earnings and sensitivities
Improvement and growth investments; earnings and sensitivities1 EBITDA improvement2 (MUSD) Improvement program: Impact3 of +100 USD/t price change (NOK/share) 1,100 850 500 0.7 600 450 0.4 300 250 600 104 150 400 300 40 100 Ammonia Urea 2016 2017 2018 2019 2020 Growth: Impact3 of +100 USD/t price ch
Slide 25: Yara Improvement Program targets sustained improvement of minimum $500MM EBITDA, plus cash benefits
Yara Improvement Program targets sustained improvement of minimum $500MM EBITDA, plus cash benefits USD$MM, vs. 2015 baseline and 2015 prices 500 ~450 Production volume ~30% Sustained ~300 Consumption factor ~15% EBITDA ~150 ~30% Variable unit cost improvement 641 Fixed cost ~25% Sustained capex Sus
Slide 26: The improvement program is organized into concrete projects across the company
The improvement program is organized into concrete projects across the company Improve safety, customer Support function Standardize processes in supply Yara Productivity responsiveness, reliability, cost, chain and finance to improve efficiency and EBITDA target1 System productivity and quality on
Slide 27: Volume and energy consumption improvement targets
Volume and energy consumption improvement targets Ammonia production, Finished fertilizers production, thousand tonnes thousand tonnes 6,471 ~18,7001 ~6,4001 ~700 Production ~400 17,961 volume 697 243 5,755 17,348 2015 2016 2020 2015 2016 2020 Energy consumption, Mmbtu (HHV2) per tonne Ammonia Ammon
Slide 28: Yara Productivity System in practice
Base production (excluding effect of Yara Productivity System in practice planned maintenance stops) Total production at site, thousand tonnes Uusikaupunki 292 3321 262 +14% Sluiskil 1,476 1,444 1,505 +2% Belle Plaine 490 535 439 +9% 3Q15 3Q16 3Q17 IR – December 2017 28 1 Includes 58kt production vo
Slide 29: Higher European nitrate premiums
Higher European nitrate premiums Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 600 90 80 500 70 400 Nitrate 60 premium above urea 50 300 Value above 40 ammonia 200 30 Value above gas 20 100 Yara EU gas cost *20 10 0 0 3Q14 1Q
Slide 30: Solid commodity phosphate margins and compound NPK premiums
Solid commodity phosphate margins and compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 Weighted average global 400 premium above blend cost 300 Value above Nitrate premium, CIF inland Germany raw material 300 200 NH3, fob Black Sea *0.22 U
Slide 31: Yara has invested for the long term in Brazil; Bunge acquisition brought critical mass
Yara has invested for the long term in Brazil; Bunge acquisition brought critical mass in distribution Volume (MM tons) 9.3 8.2 7.8 3.2 3.3 2.8 2.7 2.4 2.2 2.2 1.8 2.0 1.7 1.8 1.3 1.5 0.8 0.5 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Acquisition Acquisition Acquisition Divestment Acquisi
Slide 32: Yara Brazil today: unrivalled market presence and farmer-centric strategy
Yara Brazil today: unrivalled market presence and farmer-centric strategy Unrivalled presence: 28 sites in 11 states Farmer-centric strategy drives growth > 20,000 growers using Yara solutions Yara (offices, production, blending > 200 Yara agronomists and 600 sales and distribution of fertilizers, p
Slide 33: Crop Value Index – a key guide to our approach
Crop Value Index – a key guide to our approach What is CVI: Crop revenue High value, Low volume Fertilizer costs Double price premium for high quality 2% yield increase= +1200 USD/ha Take the position in cash crop – but not enough scale Key parameters: Quality and yield Build positions for crop with
Slide 34: Brazil: focus on premium products and solutions drives growth
Brazil: focus on premium products and solutions drives growth Brazil season-to-date fertilizer deliveries Brazil season-to-date premium product deliveries Kilotons Kilotons 30,000 +1% 1,600 Thousands 25,000 +21% 20,000 3Q 1,400 15,000 1,200 3Q 10,000 1H 5,000 1,000 0 Kilotons 2013 2014 2015 2016 201
Slide 35: Earnings before interest, tax, depreciation and amortization (EBITDA)
Earnings before interest, tax, depreciation and amortization (EBITDA) EBITDA excluding special items NOK millions 7,884 4,614 5,742 5,179 5,489 4,794 5,055 5,055 3,958 4,625 5,050 4,227 3,830 4,002 4,528 4,185 3,508 3,591 3,964 3,335 2,992 3,504 3,004 2,728 3,216 2,873 2,968 2,474 2,386 2,015 2014 2
Slide 36: Debt/equity ratio
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period) 0.22 0.22 0.18 0.17 0.17 0.15 0.16 0.14 0.13 0.13 0.11 0.07 0.08 0.08 0.06 0.06 0.06 0.06 0.06 0.05 0.02 0.01 -0.04 2012 2013 2014 2015 2016 2017 IR – December 2017 36
Slide 37: Fertilizer deliveries
Fertilizer deliveries Kilotons 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2010 2011 2012 2013 2014 2015 2016 2017 Europe Outside Europe IR – December 2017 37
Slide 38: Higher finished fertilizer and ammonia production
Higher finished fertilizer and ammonia production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 +8% +7% 5,000 2,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2014 2015 2016 2017 2014 2015 2016 2017 Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including sha
Slide 39: Strong premium product deliveries
Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 4,000 618 3,500 517 3,000 2,500 398 2,000 305 300 302 268 250 1,500 CAGR 236 16% 1,000 128 117 85 84 78 500 37 0 3Q13 3Q14 3Q15 3Q16 3Q17 Asia Brazil Latin Africa North America excl. America Outsi
Slide 40: YaraMila (compound NPK) and YaraBela (nitrate) deliveries
YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Yara-produced YaraBela deliveries Kilotons Kilotons 1,600 1600 1,400 1400 1,200 1200 1,000 1000 800 800 600 600 400 400 200 200 0 0 3Q13 3Q14 3Q15 3Q16 3Q17 3Q13 3Q14 3Q15 3Q16 3Q17 Outside Europe Europe Outs
Slide 41: AdBlue deliveries
AdBlue deliveries Kilotons 600 500 400 300 200 100 0 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 IR – December 2017 41
Slide 42: Industrial volume development
Industrial volume development Kilotons 967 939 938 892 900 912 866 849 852 864 859 847 866 816 815 829 663 637 640 618 577 571 572 540 541 538 511 482 456 438 432 382 380 385 367 361 346 364 339 333 328 310 299 177 171 172 152 135 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17
Slide 43: Yara stocks
Yara stocks Kilotons Finished fertilizer Bunge Fertilizer included from 3Q 2013 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR – December 2017 43
Slide 44: Food demand drives fertilizer consumption
Food demand drives fertilizer consumption – Grain is the key driver for nitrogen consumption growth Grain consumption and production1 Global nitrogen consumption growth2 1.3% 2,650 mt 112 120 106 107 109 110 111 105 103 104 5 4 4 4 4 4 2,550 4 3 3 100 10 10 10 8 8 9 9 9 8 2,450 15 Million tons 80 15
Slide 45: Strong urea oversupply outside China
Strong urea oversupply outside China Capacity additions, excl. China 7.2 (mill. tonnes urea) Nigeria 0.7 Egypt 0.6 Russia 0.2 Indonesia 0.5 India 0.9 Saudi Arabia 0.5 Iran 1.4 Bolivia 0.5 Malaysia 0.3 Azerbaijan 0.5 Bangladesh 0.1 Vietnam 0.1 4.7 Turkmenistan 0.3 Indonesia 0.1 Romania -0.8 Kuwait -1
Slide 46: Import catch-up need in India
Import catch-up need in India Calendar year Season-to-date (Apr – Aug) +2.7% + 3% +1.5% 32.5 31.5 29.6 29.7 30.2 - 2% 29.4 Million 12.1 Million 11.8 tonnes 26.9 27.3 tonnes 26.4 25.5 24.4 9.9 23.5 23.7 9.7 22.6 22.3 23.0 22.7 21.5 22.0 20.8 20.7 19.7 20.1 20.0 2005 2016 2016 2017 Production Sales IR
Slide 47: Normal start to the European fertilizer season, slow in USA like last season
Normal start to the European fertilizer season, slow in USA like last season West Europe USA Million tons N Million tons N +1% 1.8 4.5 1.6 4.0 +0% 1.4 3.5 1.2 3.0 1.0 2.5 0.8 2.0 0.6 1.5 0.4 1.0 0.2 0.5 0.0 0.0 3Q13 3Q14 3Q15 3Q16 3Q17 3Q13 3Q14 3Q15 3Q16 3Q17 Domestic Imports Domestic Net imports S
Slide 48: European producers' nitrate stocks
European producers’ nitrate stocks Index June 2007 = 1 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 17/18 12/13 13/14 14/15 15/16 16/17 Source: Fertilizers Europe, Yara estimate for September IR – December 2017 48
Slide 49: Energy cost
Energy cost Yearly averages 2009 – 2015, quarterly averages for 2016-18 with forward prices* for 4Q17 and 1Q18. 11.0 11.4 10.7 10.5 9.1 9.2 9.4 7.6 8.1 7.1 6.9 8.2 6.5 6.5 6.6 8.0 8.0 6.6 5.7 6.3 6.9 6.4 5.6 6.2 5.0 4.9 5.3 4.6 5.8 5.0 5.5 5.7 5.4 4.7 5.5 5.4 5.3 5.1 4.8 4.2 4.4 4.2 4.7 4.6 4.4 4.4
Slide 50: Relatively weak grain economics
Relatively weak grain economics Index FAO price index 300 250 200 150 100 50 0 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 1/2017 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – December 2017 50
Slide 51: Key value drivers – quarterly averages
Key value drivers – quarterly averages TTF day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea CAN cif Germany (USD/t) granular fob Egypt (dotted line, USD/t) 5.8 5.5 5.4 5.0 4.2 265 233 242 234 231 206 190 201 207 198 205 183 193 166 184 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 3