Yara International Asa · OSL:YAR
Yara International Asa — SEB Nordic Seminar (January 2017)
58 slides from Yara International Asa's conference presentation, Jan 11, 2017
Slide 1: Yara International ASA
Yara International ASA SEB Nordic Seminar Petter Østbø, EVP Production 11 January 2017 IR – January 2017
Slide 2: Strong growth and profitability track record
Strong growth and profitability track record Cash return on gross investments Average annual shareholder return of 23%1 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% 250 0 14.1% 100 14.1% 13.3%14.0% 12.6% 200 10.7% 80 0 10% target 150 8.
Slide 3: Safe operations is our first priority
Safe operations is our first priority 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours 2) OFD and Galvani included in statistics from January 2016 IR – January 2017 3
Slide 4: Market
Market IR – January 2017
Slide 5: Steady growth in grain consumption, and pick-up in food prices
Steady growth in grain consumption, and pick-up in food prices Steady growth in grain consumption FAO food price index increase L12M Million tons Index 2,600 220 2,500 200 2,400 180 2,300 160 2,200 140 2,100 120 2,000 100 07 08 09 10 11 12 13 14 15 16E 17F Jan-14 Jun-14 Nov-14 Apr-15 Sep-15 Feb-16 J
Slide 6: Lower urea prices and higher input cost have reduced Chinese urea production and exports
Lower urea prices and higher input cost have reduced Chinese urea production and exports… 1,600 Urea price Chinese urea exports 1,400 Black Sea 1,200 USD/t 1,000 Kilotons 800 600 16,000 600 400 500 14,000 200 12,000 0 400 10,000 300 8,000 6,000 200 4,000 100 2,000 0 0 IR – January 2017 Source: BOABC
Slide 7: …but on-going capacity additions elsewhere are in excess of trend consumption growth
…but on-going capacity additions elsewhere are in excess of trend consumption growth Gross projected capacity additions, excl. China (mill. tonnes urea1) 7.4 6.9 Nigeria 0.7 Nigeria 0.7 Russia 0.3 Iran 0.5 Russia 0.3 Iran 0.5 Algeria 1.2 Algeria 1.2 4.5 Russia 0.3 4.1 Iran 0.5 3.5 USA 2.5 Nigeria 1.
Slide 8: Yara
Yara IR – January 2017
Slide 9: 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 – January 2017 9
Slide 10: Differentiated product portfolio represents a key source of competitive edge
Differentiated product portfolio represents a key source of competitive edge Fertilizer product portfolio (2015/16 season volume) NPK blends Standard products 19% (Urea, UAN, Ammonia) 36% 24% Specialty 21% (CN, Compound NPK, Differentiated products Fertigation) (CAN, AN) IR – January 2017 10
Slide 11: Yara return on assets more stable and resilient than commodity-oriented players
Yara return on assets more stable and resilient than commodity- oriented players 15.0 13.6 10.4 9.2 8.4 7.6 7.8 8.0 7.2 6.9 6.8 6.4 6.8 6.4 6.6 5.9 6.3 5.3 4.6 4.5 3.5 3.7 3.6 1.9 Yara CF Agrium Mosaic K&S PCS 2013 2014 2015 L4Q Source: Thomson One IR – January 2017 11
Slide 12: 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) 10 9 8 7 6 5 4 3 2 1 0 99 19 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Acquisition Acquisition Acquisition Divestment Acquisition 60% IR – January 2017 12
Slide 13: 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 14: 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 15: Brazil: focus on premium products and solutions drives growth
Brazil: focus on premium products and solutions drives growth Yara Brazil premium product deliveries (kt) 1,518 +43% 2007 2008 2009 2010 2011 2012 2013 2014 2015 L4Q Source: ANDA, Yara IR – January 2017 15
Slide 16: Outlook and strategy
Outlook and strategy IR – January 2017
Slide 17: Sustaining profitable growth and competitive edge within three focus areas
Sustaining profitable growth and competitive edge within three focus areas Implications of market outlook Strategic response 1 • Increased relative strength of integrated Organic growth and Shape the markets where we are business model market development present, and grow our positions • Reduced tra
Slide 18: Strategic growth with financial discipline: brownfield expansions, acquisitions and occasional divestments
Strategic growth with financial discipline: brownfield expansions, acquisitions and occasional divestments OFD Greenbelt Fertilizers Expand premium products sales and CN/NPK expansion Porsgrunn West Sacramento import supply NPK expansion Uusikapuunki terminal Bunge (Crop Nutrition) Expan
Slide 19: Yara growth project pipeline adds ~5 NOK earnings per share by 2020
Yara growth project pipeline adds ~5 NOK earnings per share by 2020 at current market prices Profitable growth through expansions and M&A Incremental earnings at current prices1 (NOK/share) 5.3 CN/NPK expansion Porsgrunn (2H 2017) 4.0 Expand premium products NPK expansion Uusikaupunki (2H 2016)
Slide 20: Yara Improvement Program: significant progress towards full program launch
Yara Improvement Program: significant progress during second half towards full program launch first quarter 2017 2Q 2016 presentation • All units working to establish and detail improvement initiatives • Several large-impact initiatives have started execution, with positive results so far • Work so
Slide 21: Plant productivity improvement and portfolio optimization will make our upstream position more robust
Plant productivity improvement and portfolio optimization will make our upstream position more robust Systemic assessment across Yara Production Intensive rollout with up to three parallel groups of organization identified a number of improvement areas implementations for the next 2.5 years, startin
Slide 22: Acquisition of Tata Chemicals' fertilizer business in India
Acquisition of Tata Chemicals’ fertilizer business in India provides footprint to accelerate premium product growth Integrated world scale urea plant in Babrala, Uttar Pradesh • ~0.7 million tons ammonia production • ~1.2 million tons urea production • Commissioned in 1994 World-class operations and
Slide 23: Strong rationale for creating value through further growth
Strong rationale for creating value through further growth We are positioned to grow Expand premium product sales and supply Strong balance sheet Global presence Expand commodity scale based on attractive We can grow profitably full-cost growth opportunities Strong track record of profitable g
Slide 24: IR – January 2017
IR – January 2017
Slide 25: 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 5,489 4,794 5,179 4,625 5,055 3,958 4,227 5,055 4,103 5,050 4,184 3,830 4,002 4,528 4,185 4,149 4,039 3,318 3,964 3,508 3,591 3,004 3,504 3,223 2,968 2,363 1,858 2013 2
Slide 26: Decline in nitrogen fertilizer prices since 2014, but improvement in 4Q 2016
Decline in nitrogen fertilizer prices since 2014, but improvement in 4Q 2016 Nitrogen upgrading margins1 European nitrate premium2 USD/t (monthly publication prices) USD/t (quarterly Yara realized) 700 100 90 600 80 500 70 60 400 Nitrate premium 50 above urea 300 40 Value above ammonia 30 200 Value
Slide 27: Lower commodity phosphate margins, stable compound NPK premiums
Lower commodity phosphate margins, stable compound NPK premiums Phosphate upgrading margins NPK premium over blend1 USD/t USD/t 600 700 600 500 500 400 Weighted average global premium above blend cost 400 Value above 300 raw material Nitrate premium, CIF inland Germany 300 NH3, fob Black Sea *0.22 U
Slide 28: Domestic Chinese supply by reduced by 11% so far in the 2016/17 season
Domestic Chinese supply by reduced by 11% so far in the 2016/17 season Million tons Chinese urea production Domestic urea balance Million tons 7.0 25 6.8 15/16 19.5 6.6 20 14/15 16.7 6.4 -11% 17.2 2.8 14.8 6.2 15 6.0 2.4 5.8 16/17 10 5.6 5.4 5 5.2 5.0 0 Export Export Domestic Domestic Production Pro
Slide 29: Strategic growth with financial discipline
Strategic growth with financial discipline: Profitable growth through brownfield expansion and M&A, while maintaining credit rating Net debt / EBITDA evolution OFD (Latin America) 2.5 Net debt/EBITDA CN/NPK expansion Porsgrunn (Europe) Expand premium products BBB NPK expansion Uusikapuunki (Eu
Slide 30: Strong growth pipeline
Strong growth pipeline Capex plan1 16.2 Production growth 2015 - end 20185 NOK bn 14.4 1.3 Cost&capacity improvements 14.2 0.9 M&A Finished fertilizer Ammonia 1.4 3.3 0.4 Committed growth 22.7 3.3 Maintenance Mill.tons 9.0 0.7 9.0 1.7 0.5 7.0 7.2 0.7 4.2 6.2 1.3 2.1 1.2 6.0 5.5 5.4 5.6 18.9 0.8 2015
Slide 31: Earnings per share
Earnings per share* EPS excluding currency and special items 14.56 7.41 11.23 10.51 10.59 10.22 6.37 9.58 8.52 2.65 9.14 8.26 8.04 7.97 8.17 7.62 7.03 7.74 6.74 6.69 6.18 5.66 6.40 5.62 3.97 2.65 3.46 1.58 3.00 0.23 2013 2014 2015 2016 Annual NOK 20.67 27.59 29.38 24.46 *Average number of shares for
Slide 32: Lower prices mainly impact Production segment
Lower prices mainly impact Production segment 6,221 EBITDA (NOK millions) 2,937 EBITDA excluding special items 1,534 1,502 1,519 1,502 894 432 403 857 432 403 Crop Nutrition Industrial Production 3Q15 3Q16 IR – January 2017 32
Slide 33: EBITDA development
EBITDA development NOK millions 7,884 3,233 223 2,641 3,004 156 241 857 EBITDA 3Q15 Special Volume Price/Margin Energy costs Currency Other EBITDA 3Q16 items translation IR – January 2017 33
Slide 34: Crop Nutrition creates resilience in earnings…
Crop Nutrition creates resilience in earnings… Key financials 2015 Highlights Offers the industry’s most comprehensive product portfolio and (NOKm) 1H 2016 1H 2015 Change YE 2015 has a strong position in value-adding crop solutions. Revenue and other income1 37,760 41,950 (4,190) 80,189 Increase
Slide 35: … by adding distribution and agronomic competence
… by adding distribution and agronomic competence Farmer Evolved focus and aspiration Crop Product Asset Market depth Farmer centric solutions and tools Build crop • Our next strategic step to solutions build Yara’s knowledge Build product margin • Crop knowledge reputation • Product portfolio Sell
Slide 36: Industrial segment reduces cyclicality and seasonality…
Industrial segment reduces cyclicality and seasonality… Key financials 2015 Highlights (NOKm) 1H 2016 1H 2015 Change YE 2015 Significantly expansion of terminal and logistics network in North Revenue and other income1 9,085 8,520 565 17,233 America and Brazil to better and more efficiently serve t
Slide 37: …by securing stable off-take from production plants
…by securing stable off-take from production plants and the unseasonal nature of its businesses Four business lines with focused strategy and operations Base Chemicals Gas and Industrial Environmental Solutions Mining Applications applications Chemical applications for Abatement of emissions from So
Slide 38: Production segment has plants and mines across the globe
Production segment has plants and mines across the globe which provide scale and flexibility… Key financials 2015 Highlights In the US, Yara and BASF started construction of a world-scale (NOKm) 1H 2016 1H 2015 Change YE 2015 ammonia plant in Freeport. In Australia, Yara secured full ownership of
Slide 39: Net interest-bearing debt development
Net interest-bearing debt development NOK millions 10,390 26 114 32 210 9,698 3,146 2,836 Net debt Cash earnings* Investments Yara dividend Net operating Foreign Other Net debt Jun 16 (net) and share capital change currency Sep 16 buy-backs translation loss * Operating income plus depreciation and a
Slide 40: Value-added and distribution make up larger part of Yara's contribution
Value-added and distribution make up larger part of Yara’s contribution Total Yara contribution 11,000 10,000 9,000 8,000 7,000 Trade 6,000 5,000 Upgrade & distribution 4,000 3,000 2,000 Commodity overseas 1,000 Commodity Europe 0 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16
Slide 41: Production
Production Ammonia1 Finished fertilizer & industrial products1 Kilotons Kilotons 2,500 6,000 2,000 5,000 4,000 1,500 3,000 1,000 2,000 500 1,000 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accounted investees IR – January 2
Slide 42: Yara 3Q fertilizer sales by market and product
Yara 3Q fertilizer sales by market and product Kilotons 3,190 3Q15 3Q16 2,930 2,085 2,100 582 619 526 427 577 591 235 322 Europe Brazil Latin America North America Asia Africa 1,603 1,750 1,419 1,415 1,448 1,347 1,101 998 1,210 913 236 229 234 279 Compound NPK1 Blend NPK Nitrate Urea Other products
Slide 43: 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 2009 2010 2011 2012 2013 2014 2015 2016 Europe Outside Europe IR – January 2017 43
Slide 44: Fertilizer deliveries by product and source
Fertilizer deliveries by product and source Kilotons 1,750 1,603 1,582 1,488 1,415 1,448 1,419 1,101 998 913 236 229 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced IR – January 2
Slide 45: YaraMila and YaraBela deliveries
YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Yara-produced YaraBela deliveries Kilotons Kilotons 1,600 1,600 1,400 1,400 1,200 1,200 1,000 1,000 800 800 600 600 400 400 200 200 0 - 3Q12 3Q13 3Q14 3Q15 3Q16 3Q12 3Q13 3Q14 3Q15 3Q16 Outside Europe Europe
Slide 46: Strong premium product deliveries
Strong premium product deliveries Value-added fertilizer deliveries1 Value-added fertilizer deliveries1 3,500 499 3,000 2,500 2,000 303 305 300 302 250 236 1,500 231 CAGR 8% 148 1,000 128 84 85 84 500 41 37 0 3Q12 3Q13 3Q14 3Q15 3Q16 Asia Brazil Latin Africa North America excl. America Outside Europ
Slide 47: Industrial volume development
Industrial volume development Kilotons 892 889 893 866 849 852 864 859 847 819 816 815 829 577 571 572 540 541 538 511 482 432 456 438 374 364 367 382 380 364 385 339 361 346 333 328 308 242 207 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Industrial N-chemicals Environmental pro
Slide 48: AdBlue deliveries
AdBlue deliveries Kilotons 500 450 400 350 300 250 200 150 100 50 0 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 IR – January 2017 48
Slide 49: Yara stocks
Yara stocks Kilotons Finished fertilizer Bunge Fertilizer included from 3Q 2013 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other IR – January 2017 49
Slide 50: Normal start to the European season, slow in the US
Normal start to the European season, slow in the US Million tons N West Europe Million tons N US 1.8 5.0 +2% 4.5 -13% 1.6 4.0 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 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 Domestic production Imports Domestic production Im
Slide 51: 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 16/17 10/11 11/12 12/13 13/14 14/15 15/16 Source: Fertilizers Europe, Yara estimate for September IR – January 2017 51
Slide 52: Energy cost
Energy cost Yearly averages 2009 – 2013, quarterly averages for 2014-16 with forward prices* for 4Q16 and 1Q17. 11.0 11.4 11.3 10.7 10.5 9.2 9.8 8.5 9.2 9.4 7.6 7.5 7.6 7.5 7.0 8.2 8.0 8.0 8.1 7.6 8.1 6.6 7.0 6.2 6.6 7.0 6.8 5.8 6.9 6.5 5.0 4.9 5.2 6.5 5.4 4.6 6.1 5.9 5.1 5.3 4.7 5.7 5.7 4.2 5.2 5.3
Slide 53: Increasing coal prices
Increasing coal prices CIF ARA1 December 2016 ($/mt) China anthracite prices November 2016 (RMB/mt) 1) Amsterdam, Rotterdam, Antwerp Source: CME Group, China Fertilizer Market Weekly IR – January 2017 53
Slide 54: Global grain balance
Global grain balance Grain consumption and production Days of consumption in stocks Million tons Days 2,600 95 2,550 90 2,500 2,450 85 2,400 2,350 80 2,300 75 2,250 2,200 70 2,150 2,100 65 2,050 60 2,000 1,950 55 07 08 09 10 11 12 13 14 15 16E 17F 07 08 09 10 11 12 13 14 15 16E 17F Consumption Produ
Slide 55: Non-commercials' net long position in corn
Non-commercials’ net long position in corn Thousand contracts 500 400 300 200 100 0 -100 -200 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: US Commodity Futures Trading Commission IR – January 2017 55
Slide 56: Weak grain production economics, affecting particularly P and K demand
Weak grain production economics, affecting particularly P and K demand 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 Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. Source: FAO IR – January 2017 5
Slide 57: 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) 6.4 5.5 4.3 4.2 268 281 250 270 257 255 249 4.1 233 207 198 208 183 193 197 166 3Q15 4Q15 1Q16 2Q16 3Q16 3Q15 4Q15 1Q16 2Q16 3Q16 3
Slide 58: 10-year fertilizer prices – monthly averages
10-year fertilizer prices – monthly averages USD/t Ammonia fob Black Sea USD/t CAN cif Germany 1,000 500 800 400 600 300 400 200 200 100 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 USD/t Urea prilled fob Black Sea/Urea granular fo
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