Yara International Asa · OSL:YAR
Yara International Asa — Q4 2018 Earnings Presentation
38 slides from Yara International Asa's earnings presentation, Feb 8, 2019
Slide 1: Yara International ASA 2018 fourth quarter results
Yara International ASA 2018 fourth quarter results 8 February 2019
Slide 2: Safe operations is our first priority
Safe operations is our first priority TRI1 (12-month rolling) 5 4.5 1.4 0 Jan'16 Dec'18 1 TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours. 2
Slide 3: 2018: Profitability improvement on track - execution of new strategy well underway
2018; Profitability improvement on track - execution of new strategy well underway Main points Key items Improved operations and profitability, however still unsatisfactory returns - Improvement program on track; ~355 MUSD annual improvements realized • Improved results, but - EBITDA ex. special ite
Slide 4: Improved results in fourth quarter
Improved results in fourth quarter Profitability improvement on track Key items L12M1 EBITDA excl. special items (MUSD) Yara 4Q results show improved profitability MUSD - EBITDA excluding special items up 21% with 2,400 improved margins 2,200 - Lower deliveries due to downtime and slow off- 2,000 se
Slide 5: Yara Improvement Program on track
Yara Improvement Program on track Start: 2016 2017 2018 2019 2020 End: 2020 Today EBITDA benefits of ~355 MUSD delivered • High activity and initiative in all parts of the program • Recent examples: • European packaging cost: 20% savings potential (~15 MUSD p.a.) through simplification and standardi
Slide 6: Capex reducing in 2019, while volumes and revenues ramp up
Capex reducing in 2019, while volumes and revenues ramp up Capex plan1 Volume ramp-up from growth portfolio2 USD Billions Million tonnes 6.1 2.2 Growth - M&As Ammonia 1.4 Growth - expansions +37% 0.7 Finished products Cost&capacity improvements 4.3 1.6 Maintenance 0.0 1.3 1.4 0.5 3.2 0.6 1.0 Growth
Slide 7: New strategy in place, execution well underway
New strategy in place, execution well underway Yara – The Crop Nutrition Company for the Future Why What How Mission & Vision Corporate Strategy Yara Operating Model Responsibly feed - Operational Excellence - Customer Centricity the world and - Scalable Solutions - New Business Development protect
Slide 8: Operating model adjusted to new strategy
Operating model adjusted to new strategy • Simplifying operating model to Production strengthen customer focus and drive value creation • The new operating model and segment structure is effective 1 January 2019 Sales and Marketing • Emphasis on active portfolio management New Business • On-going ev
Slide 9: On-going evaluation of strategic options for Yara Environmental Solutions
On-going evaluation of strategic options for Yara Environmental Solutions Yara Environmental Solutions Yara Environmental Solutions comprises three business areas: • Reagents: Yara’s AdBlue business for land-going vehicles • Maritime: global leader in SOX & NOX abatement for seagoing EBITDA (MUSD) 6
Slide 10: Higher fertilizer and gas prices
Higher fertilizer and gas prices Higher global urea prices Increased realized nitrate and Higher natural gas prices NPK prices Urea price development1 (USD/t) Yara’s realized CAN and NPK price2 (USD/t) Spot gas prices1 (USD/mmbtu) +14% +7% +40% +11% 311 405 302 378 11.1 272 272 +23% +16% 8.2 7.9 241
Slide 11: Improving earnings trend
Improving earnings trend EBITDA ex. SI Earnings per share ex. SI and currency USD millions USD/share 659 1.03 411 424 350 0.60 296 0.49 0.41 0.19 4Q14 4Q15 4Q16 4Q17 4Q18 4Q14 4Q15 4Q16 4Q17 4Q18 671 411 242 312 430 Reported Figures 0.83 0.15 (0.14) 0.38 0.58 11
Slide 12: EBITDA 21% higher YoY as higher sales prices and a stronger USD more than offset higher energy costs
EBITDA 21% higher YoY as higher sales prices and a stronger USD more than offset higher energy costs EBITDA ex. SI USD millions +21% 27 93 424 135 6 11 350 4Q17 Price/ Margin Currency Energy costs Volume Other 4Q18 12
Slide 13: Higher upgrading margins in Production, structural volume growth in Crop Nutrition and Industrial
Higher upgrading margins in Production, structural volume growth in Crop Nutrition and Industrial MUSD, excluding special items +25% 4Q17 293 4Q18 235 +14% +16% 100 88 59 69 Production Crop Nutrition Industrial • Improved nitrogen and phosphate • Positive margin effect and increased • Positive contr
Slide 14: Yara is set to deliver growth after period of heavy investments
Yara is set to deliver growth after period of heavy investments 2018 1Q 2Q 3Q 4Q 2019 2020 Expansion projects Babrala (India) Cubatão (Brazil) Sluiskil (NL) Köping (Sweden) Acquisition of urea Salitre (Brazil) Rio Grande (Brazil) N and P production Revamp and urea+S Nitric acid revamp plant and dist
Slide 15: Yara Improvement Program effects
Yara Improvement Program effects USD million 2018 Highlights Production volume • Strong realization of procurement related 355 Consumption factor improvements during 2018 supported 310 Variable unit cost improvements in variable costs 133 Fixed cost 101 • Continued finished product volume improvemen
Slide 16: Full year 2018 Profit and Loss statement
Full year 2018 Profit and Loss statement USD millions, except share information 2018 2017 Variance Main comments Revenue and other income 13,054 11,400 1,654 Raw materials, energy costs and freight expenses -9,952 -8,547 -1,404 Payroll and related costs -1,207 -1,090 -117 • Depreciation increase ref
Slide 17: Balance sheet
Balance sheet USD millions 31-Dec-18 31-Dec-17 Main comments Assets • Babrala and Cubatão acquisitions increased non-current assets Total non-current assets 11,337 11,000 Total current assets 5,319 4,783 • Increased inventory and receivables mainly due to acquisitions, but also higher market Total a
Slide 18: Net interest-bearing debt increase from higher capex
Net interest-bearing debt increase from higher capex 2018 Net interest-bearing debt USD millions +60% 3,794 41 2,041 2,367 1,082 428 Net debt Cash earnings¹ Net operating Investments (net) Other Net debt Dec 17 capital change Dec 18 1 Operating income plus depreciation and amortization, minus tax pa
Slide 19: Yara's leading global market presence and differentiated product portfolio represent key sources of competitive edge
Yara’s leading global market presence and differentiated product portfolio represent key sources of competitive edge Key value drivers 8.9 • Global presence and farmer interaction 3.0 Europe 31.1% 3.7 North America • Global agronomic crop 10.5% Asia 13.1% knowledge 1.3 • Crop-specific nutrition solu
Slide 20: Higher 4Q18 Crop Nutrition EBITDA
Higher 4Q18 Crop Nutrition EBITDA Higher earnings and volumes from Volume growth from acquisitions partly Increased realized prices acquisitions offset by delayed European deliveries EBITDA ex. SI (MUSD) Volumes (kt) Revenues (MUSD) +2% +12% +14% 6.7 6.8 2,551 100 +5% 165 0.4 -7% 0.6 2,270 0.4 180 1
Slide 21: Long-term premium product growth strategy is showing results
Long-term premium product growth strategy is showing results High value premium1 Total fertilizer deliveries Premium NPK deliveries YaraVita deliveries deliveries Million tons Million tons Million tons Million units +7% +24% +15% +55% 26.5 28.5 5.9 1.7 39 4.8 1.5 25 2015 2018 2015 2018 2015 2018 201
Slide 22: YaraVita represent a compelling growth case in core of Yara's strategy
YaraVita represent a compelling growth case in core of Yara’s strategy 48% growth since 2015, doubling of current volumes expected in 3-4 years • YaraVita: a high-margin and knowledge-intensive Yara Vita volumes (units) solution • Micronutrients are needed for both cash crops and 88 commodity crops
Slide 23: Attractive Yara prospects
Attractive Yara prospects Attractive industry Operating cash flow fundamentals and improvement with strict Focused long-term strategy supply-demand outlook capital allocation • Growing population and dietary • Operating cash flow improving • Crop nutrition focus; #1 market improvement drives demand
Slide 24: Welcome to Yara Capital Markets Day: 26 June
Welcome to Yara Capital Markets Day: 26 June • Save the date • Location: TBD (London) 24
Slide 25: Appendix
Appendix 25
Slide 26: New segment structure effective 1 January 2019
New segment structure effective 1 January 2019 Sales and Marketing New Business Yara Birkeland Decarbonize Yara Crop Nutrition units New Business Circular Economy Production Scale-up Innovation Support & Research Environmental ex Industrial Animal Base Industry Industry Reagents Nitrates Nutrition C
Slide 27: Businesses subject to evaluation of strategic options
Businesses subject to evaluation of strategic options Yara Environmental solutions is comprised of Yara Marine Technologies, Transport Reagents and Stationary: Environmental Solutions – Reagents: Yara’s AdBlue business for landbased vehicles – Maritime: global leader in SOx & NOx abatement for sea
Slide 28: Yara Improvement Program on track
Yara Improvement Program on track Start: 2016 2017 2018 2019 2020 End: 2020 Today Annual impact, USD million, vs. 2015 baseline, at 2015 margins 500 450 350 355 2018 EBITDA benefits reached Sustained 242 targets (in 2015 terms): EBITDA improvement 84 Strong realization of procurement related imp
Slide 29: Major improvement and growth investments in 2018; main earnings improvement from 2019 onwards
Major improvement and growth investments in 2018; main earnings improvement from 2019 onwards1 EBITDA improvement2 Earnings improvement2 USD Millions USD/share 2.0 1,100 780 500 1.2 1.1 0.9 495 450 0.6 282 355 1.1 600 0.9 124 0.7 242 330 0.2 0.6 140 0.2 40 40 0.0 0.0 2016 2017 2018 2019 2020 2016 20
Slide 30: Sensitivities improvement and growth investments
Sensitivities improvement and growth investments Improvement program: Impact1 of +100 USD/t price change Growth: Impact1 of +100 USD/t price change (USD/share) (USD/share) 0.09 0.30 0.06 0.19 0.10 Ammonia Urea Ammonia Urea DAP 2 Main average 2015 market prices: Ammonia fob Yuzhny 390 USD/t, Urea fob
Slide 31: Key sensitivities (based on 2018 production capacities)
Key sensitivities (based on 2018 production capacities) Operating income EBITDA EPS USD million USD million USD Urea sensitivity +10 USD/t 45 54 0.16 …of which pure Urea 38 47 0.14 …of which UAN 7 7 0.02 Nitrate sensitivity CAN +10 USD/t 101 101 0.28 …of which pure Nitrates 61 61 0.17 …of which NPKs
Slide 32: European nitrogen upgrading margin and global NPK premium slightly below last year
European nitrogen upgrading margin and global NPK premium slightly below last year Nitrogen upgrading margins1 NPK premium over blend2 USD/t (monthly publication prices) USD/t 500 450 251 86 88 264 Yara’s NPK price CAN Weighted average global premium above blend cost Urea Egypt Nitrate premium, CIF
Slide 33: Energy cost
Energy cost Yearly averages 2010-2016, quarterly averages for 2017-2018 with forward prices* for 1Q19 and 2Q20 11.4 11.0 10.7 9.4 10.5 9.1 9.2 9.4 8.2 8.2 7.7 8.1 7.8 7.6 8.4 8.2 7.1 7.4 7.4 8.2 8.0 8.0 8.1 6.6 7.7 7.2 6.5 6.6 5.7 6.9 5.6 6.5 6.4 6.6 5.0 5.7 6.3 6.2 6.0 5.5 5.9 6.1 5.7 5.5 5.2 4.5 5
Slide 34: Yara stocks
Yara stocks Kilotons Finished fertilizer 8,000 Other Compound NPK Nitrates Urea 0 34
Slide 35: 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 18/19 12/13 13/14 14/15 15/16 16/17 17/18 Source: Fertilizers Europe 35
Slide 36: Nitrogen supply growth is forecast to reduce significantly
Nitrogen supply growth is forecast to reduce significantly Global urea capacity additions excl. China (mill. tonnes) India Iran USA Others Russia Algeria Nigeria 6.7 4.7 4.1 2.8% consumption growth 3.4 3.1 2.7 2.3 2.0 1.1 1.2 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: CRU December 201
Slide 37: Higher global urea prices
Higher global urea prices Urea price development1 (USD/t) 350 Urea inland proxy China Urea granular fob Egypt 170 Dec-16 Dec-18 1 Source: BOABC, CFMW 37
Slide 38: Knowledge grows