Yara International Asa · OSL:YAR
Yara International Asa — Debt Investor Presentation (November 2017)
42 slides from Yara International Asa's debt investor presentation, Nov 27, 2017
Slide 1: Yara International ASA Fixed Income Investor Presentation
Yara International ASA Fixed Income Investor Presentation 27 - 28 November 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: Key credit highlights
Key credit highlights 1 World’s leading nitrogen-fertilizer company with 112 years history 1 2 Stable and long term Norwegian government ownership of 36.2% 3 Globally positioned with production and distribution in all major regions 4 Diversified business portfolio reduces exposure to the fertilizer
Slide 4: 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 5: 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 6: Agenda
Agenda Company overview Fertilizer market Business strategy Financial review Appendix 6
Slide 7: 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 8: Integrated business model which creates value above competitors through scale, flexibility and value chain
Integrated business model which creates value above competitors through scale, flexibility and value chain presence ~80% of 2016 revenue ~ 20% of 2016 Own Produced ~27mt1 Third Party Products ~8mt revenue 1) Yara deliveries 2016 8
Slide 9: 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 10: 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 11: 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 12: Crop Nutrition creates resilience in earnings through sustainable value-added premiums
Crop Nutrition creates resilience in earnings through sustainable value-added premiums NPK premium over blend1 Nitrogen upgrading margins2 USD/t USD/t 700 600 600 500 500 400 Weighted average global Nitrate 400 premium above blend cost premium 300 above urea Nitrate premium, CIF inland Germany 300 V
Slide 13: 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 14: Agenda
Agenda Company overview Fertilizer market Business strategy Financial review Appendix 14
Slide 15: Food demand drives fertilizer consumption – Grain is the key driver for nitrogen consumption growth
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 16: 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 17: 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 18: 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 19: 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 20: Urea prices are forecast to increase going forward
Urea prices are forecast to increase going forward Urea fob Black Sea 600 500 400 USD/ton 300 CRU Sep 2017 200 Fertecon Sep 2017 100 0 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 20
Slide 21: 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 22: Agenda
Agenda Company overview Fertilizer market Business strategy Financial review Appendix 22
Slide 23: Sustaining profitable growth and competitive edge within three focus areas
Sustaining profitable growth and competitive edge within three focus areas Organic growth and Continuous improvement Profitable step growth market development Bunge OFD Tata Urea Shape the markets where we are Fit for the future improving cost Drive growth through M&A, as present and grow our positi
Slide 24: 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 25: 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) EBITDA improvement3 (BNOK) 11.4 Improvement program Committed expansions + M&A 8.7 1.3 6.8 Improvement program: 4.0 + 2.8 BNOK (350 MUSD) cost improvement 7.9 +1.2 BNOK
Slide 26: Agenda
Agenda Company overview Fertilizer market Business strategy Financial review Appendix 26
Slide 27: Brief financial summary
Brief financial summary EBITDA (BNOK) Cash Return on Gross Investment Net Debt/EBITDA 25.0 25% 160 3.5x 23% 21% 140 3.0x 20.0 20% 120 17% 17% 2.5x 15.0 100 15% 14% 13% 2.0x 13% 80 10.0 10% 1.5x 2.9x 10% 9% 60 1.0x 40 5.0 5% 1.6x 1.4x 7% 20 0.5x 0.6x 0.7x 0.6x 0.8x 0.3x 0.3x - 0% 0 0.0x 0.1x '08 '09
Slide 28: Solid earnings and cash flow despite challenging market and peaking investment program
Solid earnings and cash flow despite challenging market and peaking investment program demonstrate financial discipline Summary of P&L Yara’s 2017 results impacted by (NOKm) YTD 2017 YTD 2016 Change YE 2016 • Lower fertilizer prices Revenue 69,875 74,843 (4,968) 97,170 • Higher energy prices EBIT 3,
Slide 29: Yara has access to a broad range of capital markets
Yara has access to a broad range of capital markets Yara’s interest-bearing debt per end 3Q17 Maturity profile (MNOK) MNOK MNOK 20,000 10,000 18,503 18,000 9,000 16,476 16,000 8,000 14,000 7,000 12,000 6,000 10,000 5,000 8,000 4,000 6,000 3,000 4,000 2,000 2,000 1,000 0 0 Bank NOK USD Capital Gross
Slide 30: Financial discipline and active risk management guides our strategy
Financial discipline and active risk management guides our strategy Financial Policy: Historical dividends as share of Net Income • Financial discipline is the basis for the development (%) NOK of Yara’s global leadership position 70% 16 • Total cash return to shareholders expected to 14 60% average
Slide 31: Summary
Summary • Globally positioned fertilizer company with integrated and diversified portfolio • On-going capex and improvement programs generating increased cash flow from 2018 • Clear long-term commitment to BBB/Baa2 rating S&P Global rating November 21, 2017 “…we believe that the company will balance
Slide 32: Disclaimer (1/2)
Disclaimer (1/2) • This document and any related oral presentations are confidential and have been prepared by Yara International ASA (the “Company”) solely for use in this presentation and may not be taken away, reproduced or redistributed to any other person. This document has not been reviewed by
Slide 33: Disclaimer (2/2)
Disclaimer (2/2) • IN RELATION TO THE UNITED STATES AND U.S. PERSONS, THIS DOCUMENT IS STRICTLY CONFIDENTIAL AND IS BEING FURNISHED SOLELY IN RELIANCE ON APPLICABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES DESCRIBED HEREIN (IF AN
Slide 34: Forward-looking statements
Forward-looking statements • Certain statements in this document are forward-looking. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-lo
Slide 35: Agenda
Agenda Company overview Fertilizer market Business strategy Financial review Appendix 35
Slide 36: Safe operations is our first priority and license to operate
Safe operations is our first priority and license to operate 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), res
Slide 37: The basis for mineral fertilizers: energy, ammonia and natural minerals
The basis for mineral fertilizers: energy, ammonia and natural minerals Nitrogen (N) from air Finished products: Ammonia • Urea • Nitrates (AN, CAN) • NPK • CN Natural • Industrial products gas Natural minerals: • Phosphorus (P) • Potassium (K) 37
Slide 38: 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 +21% 20,000 3Q 1,400 10,000 1,200 1H 3Q 0 1,000 2013 2014 2015 2016 2017 800 Kilotons 8,000 +5% 600 6,000 3Q 4
Slide 39: Increased yield and resource efficiency with nitrates
Increased yield and resource efficiency with nitrates Extra N required for same yield Protein content at identical N rate Yield at identical N rate % % % 118 114 8.6 12.6 12.3 8.3 100 8.3 12.1 AN UAN Urea AN UAN Urea AN UAN Urea To maintain the same yield, significantly Protein content was significa
Slide 40: Risk Management
Risk Management Risk management in Yara is centrally governed and an integrated part of strategy and business processes Corporate Risk Management is key facilitator of the risk management system Responsibility for day-to-day risk management is placed with the segments and expert functions supported
Slide 41: Innovation moves the world forward
Innovation moves the world forward 41
Slide 42: Useful Yara information
Useful Yara information Yara’s GRI Report 2016: • http://yara.com/doc/248982_Yara_Sustainability_GRI_Report_final.pdf Yara Annual Report 2016 • http://yara.com/doc/248987_Yara_Annual_report_en_web.pdf Yara Fertilizer Industry Handbook, January 2017 • http://yara.com/doc/245619_Fertilizer%20Industry%
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