Yara International ASA · OSL:YAR
Yara International ASA — Q3 2008 Earnings Presentation
57 slides from Yara International ASA's earnings presentation, Oct 17, 2008
Slide 1: Yara International ASA Third quarter 2008 results
Yara International ASA Third quarter 2008 results 17 October 2008
Slide 2: Industry Shaper Vision – leadership agenda
1 Industry Shaper Vision – leadership agenda Drive profitable revenue growth Leading Continuous enterprise in improvement agricultural to fine tune development operations Industry Shaper Performance Company- and positioning wide focus on on corporate environmental governance solutions IR - Date: 200
Slide 3: Summary third quarter 2008
2 Summary third quarter 2008 Strong results Good start to European season, nitrate stocks lower than last year Lower volumes, compensated by higher prices Saskferco acquisition completed 1 October IR - Date: 2008-10-17
Slide 4: Net income after minority interest
3 Net income after minority interest* NOK millions 5,000 4,415 4,500 4,000 3,360 3,500 3,000 2,808 2,500 2,044 2,000 1,403 1,422 1,487 1,500 1,041 1,085 853 891 1,000 500 0 2006 2007 2008 Accumulated NOK mill 4,188 6,037 10,584 USD mill 657 1,045 2,018 * Kemira GrowHow included from 4Q 2007 IR - Dat
Slide 5: Earnings per share
4 Earnings per share* NOK 16.00 15.14 14.00 11.55 12.00 9.63 10.00 8.00 7.01 6.00 4.68 4.85 5.10 3.42 3.67 4.00 2.77 3.01 2.00 0.00 2006 2007 2008 Accumulated NOK 13.86 20.60 36.32 * Average number of shares for 3Q 2008: 291.0 million (3Q 2007: 291.6 million). Kemira GrowHow included from 4Q 2007 IR
Slide 6: Earnings per share adjusted for foreign exchange gain / loss and special items
5 Earnings per share adjusted for foreign exchange gain / loss and special items* NOK 16.00 15.19 14.00 13.33 12.00 10.00 8.98 8.00 6.00 4.56 3.59 3.90 3.86 4.00 2.69 3.00 2.35 1.79 2.00 0.00 2006 2007 2008 Accumulated NOK 9.80 15.91 37.49 * After tax, Kemira GrowHow included from 4Q 2007. Average n
Slide 7: Overall fertilizer market development during quarter
6 Overall fertilizer market development during quarter Increased fertilizer export tax slows Chinese exports significantly Strong urea import demand globally through most of the quarter Declining grain prices Low demand for phosphate and potash Nitrogen deliveries in Europe up 2% on same quarter las
Slide 8: Earnings before interest, tax, depreciation and amortization (EBITDA)
7 Earnings before interest, tax, depreciation and amortization (EBITDA)* NOK millions 7,000 6,300 6,345 6,000 5,000 3,988 4,000 3,000 2,531 2,222 1,947 1,787 1,901 2,000 1,492 1,682 1,351 1,000 0 2006 2007 2008 Accumulated NOK mill 6,472 8,441 16,633 USD mill 1,014 1,450 3,161 * Kemira GrowHow inclu
Slide 9: EBITDA and operating income by segment
8 EBITDA and operating income by segment EBITDA (NOK millions) 3Q 2008 3Q 2007* Downstream 2,554 661 Industrial 181 258 Upstream 4,169 956 Other and eliminations (559) 26 Yara total 6,345 1,901 Operating income (NOK millions) 3Q 2008 3Q 2007* Downstream 2,124 448 Industrial 120 205 Upstream 2,949 44
Slide 10: Variance analysis Yara group
9 Variance analysis Yara group Third quarter NOK millions USD millions* EBITDA 2008 6,345 1,170 EBITDA 2007 1,901 329 Variance EBITDA in NOK 4,444 Conversion (NOK vs. USD) 117 Variance EBITDA 4,561 841 Kemira GrowHow 2007 (pro forma)** 235 43 Volume & mix (729) (134) Price/Margin 6,416 1,183 Energy
Slide 11: Special items
10 Special items EBITDA effect (NOK millions)* 3Q 2008 3Q 2007 Restructuring Kemira GrowHow (4) Asset disposal Glomfjord 23 Downstream (4) 23 Contract derivatives (17) (4) Industrial (17) (4) Restructuring Kemira GrowHow (11) Contract derivatives (132) (1) Upstream (143) (1) Restructuring Kemira Gro
Slide 12: Net interest-bearing debt Q3 2008
11 Net interest-bearing debt Q3 2008 NOK millions 14,000 644 13,000 1,366 12,083 404 12,000 972 11,000 809 10,000 6,400 9,000 7,879 4,826 8,000 7,000 6,000 5,000 4,000 277 3,000 2,000 1,000 0 Net interest- Cash Dividends Net Burrup Other Yara Foreign Other Net interest- bearing earnings* received**
Slide 13: Funding capacity
12 Funding capacity USD Funding billions capacity 6 Significant new short- 5.5 5.3 term funding secured Net interest- since July 5 bearing debt 4 3.6 New loans secured at Libor plus ~75bps 3 average Incl. 2 1.6 Saskferco Additional long-term funding when market 1 conditions improve 0 2Q08 3Q08 4Q08E
Slide 14: How is the financial crisis affecting the fertilizer industry?
13 How is the financial crisis affecting the fertilizer industry? Challenges: Cash withdrawal from commodity markets reducing crop prices Credit problems for customers: farmers, retailers, wholesalers, traders Higher financing costs for working capital Benefits for Yara: New capacity projects slowin
Slide 15: Downstream segment
14 Downstream segment Strong results driven by improved margins Good start to European nitrate season Slower sales outside Europe Write-down of third-party positions IR - Date: 2008-10-17
Slide 16: Downstream – EBITDA
15 Downstream – EBITDA* NOK millions 3,500 3,000 2,885 2,554 2,500 2,049 2,000 1,500 1,000 804 847 724 661 518 441 490 511 500 0 2006 2007 2008 Accumulated NOK mill 1,960 3,035 7,489 USD mill 305 521 1,428 * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-10-17
Slide 17: Downstream – fertilizer sales volume
16 Downstream – fertilizer sales volume* Europe Outside Europe Kt 6,104 6,284 6,017 6,000 2,835 2,575 3,015 5,256 5,179 4,883 4,763 5,000 4,786 4,685 2,388 2,827 4,742 4,437 2,697 2,275 2,507 2,629 2,180 1,848 4,000 3,710 3,000 3,269 2,868 3,002 2,589 2,511 2,562 2,000 2,352 2,178 2,186 2,135 1,000
Slide 18: NPK margins still higher than last year
17 NPK margins still higher than last year 1050 15-15-15 France 950 Blend cost proxy* 850 750 USD/ton 650 Average 550 differential has increased by 450 ~$75/ton 350 250 150 July Nov Nov Jun Jun Jun Jul Jul May May May Aug Jan 2006 Aug Jan 2007 Aug Jan 2008 Oct Oct Mar Apr Mar Apr Mar Apr Dec Dec Feb
Slide 19: Apparent nitrate stocks - EFMA
18 Apparent nitrate stocks - EFMA Index, June 2007=1 1.8 1.6 1.4 1.2 1 06/07 0.8 07/08 0.6 08/09 0.4 0.2 0 Jul Aug Sep Oct Nov Des Jan Feb Mar Apr May Jun IR - Date: 2008-10-17
Slide 20: Industrial segment
19 Industrial segment Stable underlying result Increase in sourcing costs Continued volume increase for all product groups IR - Date: 2008-10-17
Slide 21: Industrial – EBITDA
20 Industrial – EBITDA* NOK millions 1,200 1,007 1,000 800 600 400 252 258 276 205 181 166 165 153 174 200 139 0 2006 2007 2008 Accumulated NOK mill 736 1,645 596 USD mill 115 290 113 * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-10-17
Slide 22: Strong volume growth in Yara TAN
21 Strong volume growth in Yara TAN Sales volumes Kt 800 600 400 200 0 07 08 8 9 0 1 2 3 4 5 6 7 199 199 200 200 200 200 200 200 200 200 3Q 3Q YTD YTD IR - Date: 2008-10-17
Slide 23: Upstream segment
22 Upstream segment Strong results driven by higher prices Energy cost benefits from increased spot natural gas exposure Production problems in ammonia plants, now solved except Burrup IR - Date: 2008-10-17
Slide 24: Upstream – EBITDA
23 Upstream – EBITDA* NOK millions 4,500 4,169 4,000 3,500 3,165 3,000 2,500 1,994 2,000 1,500 1,168 1,202 926 911 956 1,000 797 728 673 500 0 2006 2007 2008 Accumulated NOK mill 3,563 3,797 9,328 USD mill 560 646 1,765 * Kemira GrowHow included from 4Q 2007 IR - Date: 2008-10-17
Slide 25: Upstream – production volume
24 Upstream – production volume* Kt Ammonia Finished fertilizer 5,000 4,589 4,362 4,500 2,895 4,027 4,042 2,738 4,000 2,615 2,579 3,357 3,437 3,443 3,500 3,247 3,312 3,256 3,175 1,999 2,053 2,051 2,010 1,983 1,994 3,000 1,914 2,500 2,000 1,500 1,694 1,624 1,358 1,384 1,392 1,412 1,463 1,329 1,262 1,
Slide 26: Estimated European energy cost: cost change on previous year
25 Estimated European energy cost Actual for quarter October 2008 estimate* NOK millions 2,000 Cost change on previous year 1,500 1,306 1,126 1,100 1,001 1,000 700 500 0 (500) 1Q08 2Q08 3Q08 4Q08 1Q09 * Based on forward prices as of 10 October 2008 IR - Date: 2008-10-17
Slide 27: Improved energy sourcing flexibility in Europe
26 Improved energy sourcing flexibility in Europe Yara’s European energy contract links: Hub Gas ~45% (~35%) LSFO 1% ~20% (~35%) Gasoil 0.2% ~10% (~10%) HFO ~10% (~10%) Naphtha ~10% (~10%) Crude ~5% (~ 0%) EBITDA EBITDA EPS Preliminary new sensitivities: USD mill. NOK mill. NOK Crude oil +1 USD/brl
Slide 28: Share of net income in non-consolidated investees
27 Share of net income in non-consolidated investees NOK millions 3Q 2008 3Q 2007 Qafco 510 219 Tringen 32 40 Rossosh 157 16 Burrup (61) 53 GrowHow Ltd 234 0 Other 142 80 Total 1013 409 IR - Date: 2008-10-17
Slide 29: Fertilizer price development
28 Fertilizer price development USD/ton 1,400 DAP fob US Gulf 1,200 1,000 800 600 400 Urea fob Black Sea 200 0 ay ay ar ar ov n n l l ct r g r g 7 08 b b p n c p Ju Ju Ap Ap Ju Ju Au Au J a De Fe Fe 0 Se Se O M M M M N 20 20 n Ja Source: International publications Source: IR - International publicat
Slide 30: 2Q urea trade: China still covering increased imports and lower exports elsewhere
29 2Q urea trade: China still covering increased imports and lower exports elsewhere 2Q08 compared to 2Q07: 1,200 Urea trade up 10% (704kt) to 7,880kt 162 1,137 602 262 147 1,000 113 800 210 11 '000 tons urea 167 600 407 400 200 0 Latin East Asia North South Rest of Rest of Russia Egypt Indonesia Ch
Slide 31: Strong deliveries to Brazil and Thailand
30 Strong deliveries to Brazil and Thailand Accumulated urea import Kt Kt Brazil Thailand 3,000 2,000 2007 1,800 2007 2,500 2008 1,600 1,400 2,000 2006 2008 1,200 2006 1,500 1,000 800 1,000 600 400 500 200 0 0 May Mar Jun Jan Nov Jul Aug Apr Oct May Mar Feb Sep Dec Jan Jun Nov Jul Aug Apr Oct Feb Se
Slide 32: Indian urea imports stable compared to last year
31 Indian urea imports stable compared to last year Kt 7,000 Sales - Production 07/08 6,000 5,000 06/07 4,000 08/09 3,000 2,000 05/06 1,000 04/05 0 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
Slide 33: Reduced Chinese exports
32 Reduced Chinese exports Net urea exports Kt 6,000 May-Aug 2007 : 1.4 million tons May-Aug 2008: 1.1 million tons 2007 5,000 Oct-Apr 07/08: 5.9 million tons 2008 4,000 2004 3,000 2,000 2005 2006 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: BOABC IR - Date: 2008-10-17
Slide 34: Declining agricultural commodity prices
33 Declining agricultural commodity prices Corn Wheat Soybeans Rice Source: Chicago Board of Trade, 16 October 2008; November/December 2009 contracts IR - Date: 2008-10-17
Slide 35: Non-commercials net long position in corn at CBOT
34 Non-commercials net long position in corn at CBOT (futures and options) Thousand contracts 400 350 300 250 200 150 100 50 0 10/3/2007 11/3/2007 12/3/2007 10/3/2008 1/3/2007 2/3/2007 3/3/2007 4/3/2007 5/3/2007 6/3/2007 7/3/2007 8/3/2007 9/3/2007 1/3/2008 2/3/2008 3/3/2008 4/3/2008 5/3/2008 6/3/200
Slide 36: Fertilizer costs are up, but variable costs in US corn production well below corn price
35 Fertilizer costs are up, but variable costs in US corn production is well below the corn price USD/bu 5.5 Corn price Assumptions 5.0 Target corn yield: 180 bu/acre Corn price 4.5 Fertilizer application: 4.0 NH3: 265 lb/acre 3.5 DAP: 100 lb/acre 3.0 MOP: 220 lb/acre 2.5 Prices(USD/st) : Jan08 Sep0
Slide 37: Grain stocks to remain stable at a low level
36 Grain stocks to remain stable at a low level Million tons 2,300 35% 115 days inventory 2,200 30% 2001-2008: 1.7% growth/year 25% 2,100 20% 2,000 Consumption 15% 1,900 10% 62 days inventory Production 1,800 5% 1995-2001: 0.8% growth/year 1,700 0% 1995 1997 1999 2001 2003 2005 2007 2009F 1995 1997
Slide 38: Food consumption unaffected in Asia crisis
37 Food consumption unaffected in Asia crisis % GDP growth (annual %) 10 9 8 7 6 5 4 3 2 1 0 -1 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 Food consumption growth(kcal/cap/day) Source: World Bank, FAO IR - Date: 2008-10-17
Slide 39: US Ethanol production: slower growth likely
38 US Ethanol production: slower growth likely IR - Date: 2008-10-17
Slide 40: Further delays to new urea capacity
39 Further delays to new urea capacity Global urea capacity Year Driving regions growth estimate* World Excluding China World Ex. China 2007 4.5% (4.5%) 2.4% (2.4%) China 66% Egypt 51% Egypt 17% Iran 26% 2008 2.5% (2.5%) 1.9% (2.4%) China 53% Iran 48% Iran 23% Egypt 22% 2009 8.0% (6.3%) 5.5% (4.5%)
Slide 41: Prospects fourth quarter 2008
40 Prospects fourth quarter 2008 Yara global business model with flexible sourcing and distribution mitigates slow-down Fertilizer deliveries short term slowing down due to credit crunch Slow-down more significant for commodities and NPK Low nitrate inventories Estimated European energy cost NOK 1.1
Slide 42: Prospects next twelve months
41 Prospects next twelve months Grain inventories remain at historical low despite strong harvest Food demand less exposed to financial turmoil Fundamentals for Chinese urea export restrictions remain Start-ups of new urea capacity continue to be delayed Financial turmoil may create interesting inve
Slide 43: Additional information
cg YARA Additional intormation
Slide 44: Business model and global presence support profitability and growth
43 Business model and global presence support profitability and growth EBITDA*, pro forma until 2005 USD millions . 4,000 3,780 Knowledge Margin 296 Local market knowledge 3,500 Strong customer relations Agronomic and application 3,000 competence 1,584 . Differentiation and branding 2,500 Sourcing &
Slide 45: Global optimization creates value
44 Global optimization creates value 2007 fertilizer and nitrogen chemicals volumes in million tonnes* Global Marketing and Sales Product source** optimization Fertilizer Europe Yara production 17.9 13.5 Europe Latin America 4.7 Yara production 2.9 outside Europe Sourcing Business Asia 28.2 2.5 Allo
Slide 46: Yara fertilizer sales by market and product
45 Yara fertilizer sales by market and product* YTD 2008: 17 million tons (2007: 23.6 million tons) 14 12.5 Million tons product 12 2007 YTD 2008 9.3 10 8 6 4.7 4 3.2 2.5 1.5 2.1 1.5 1.8 2 1.2 0 Europe Latin America Asia North America Africa Million tons product 9.4 10 8 2007 YTD 2008 6.4 6.1 6 4.5
Slide 47: Downstream net operating capital turnover
46 Downstream net operating capital turnover* Downstream external operating revenues / external net operating capital 5.5 5.3 5.2 5.1 5.0 4.9 4.8 4.8 4.6 4.5 4.4 4.3 4.3 4.3 4.0 3.5 3.0 2006 2007 2008 * 12-month rolling average IR - Date: 2008-10-17
Slide 48: Spot natural gas versus Yara average
47 Spot natural gas versus Yara average* Yearly averages 2000 – 2006, quarterly averages for 2007 and 2008 with forward prices for 2008** USD/MMBtu Yara European 16 oil & gas cost (weighted average) 13.6 14 12.9 12.3 12.5 European spot 12 gas price 11.2 US spot gas price (Zeebrugge Hub) 10 11.0 (Hen
Slide 49: Income statement
48 Income statement NOK millions 3Q 2008 3Q 2007 Revenue and other income 25,000 12,828 Operating income 4,607 1,101 Share of net income in non-consolidated investees 1,013 409 Interest income and other financial income 235 67 Interest expense and other financial items (243) (147) Foreign exchange g
Slide 50: Consolidated balance sheet
49 Consolidated balance sheet NOK millions 30 Sep 2008 30 Sep 2007 Deferred tax assets 1,541 967 Property, plant and equipment 11,391 7,419 Other non-current assets 16,204 9,202 Inventories 18,991 7,154 Receivables 12,061 6,846 Other current assets 3,221 1,904 Cash and cash equivalents 3,321 872 Tot
Slide 51: Third party volumes supplement own production to maximize capacity utilization
50 Third party volumes supplement own production to maximize capacity utilization Yara produced products is Third party volumes significant for approximately 70% of total nearly all Yara products Million Million tons tons (2007) 25 12 Third party and JV production Own production incl. bulk blends 10
Slide 52: Grain stocks recovery slower than before
51 Grain stocks recovery slower than before Million tonnes 700 40% Stocks Percent 600 35% 30% 500 25% 400 20% 300 15% 200 10% 100 5% 0 0% 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Source: USDA, October 2008 IR - Date:
Slide 53: Still high values in phosphate production
52 Still high values in phosphate production* Value of phos.acid production Value of DAP production USD/ton USD/ton 2,500 1,400 DAP price Phos.acid price 1,200 2,000 1,000 Value above raw materials 1,500 800 Sulphur 600 1,000 400 500 Ammonia Phos.rock 200 Value above raw materials Phos.acid 0 0 2006
Slide 54: Key value drivers – quarterly averages
53 Key value drivers – quarterly averages Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 900 800 761 600 800 764 511 700 464 573 500 700 600 404 600 507 500 400 466 291 500 364 359 400 300 400 281 228 254 291 300 300 200 200 200 100 100 100 0 0 0 3Q 07 4Q 07
Slide 55: Key value drivers – 10-year history
54 Key value drivers – 10-year history Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 350 264 308 300 229 240 245 300 245 250 250 212 185 250 220 223 186 200 200 200 175 165 138 146 150 121 139 150 119 111 110 100 150 110 103 100 84 101 96 94 86 100 84 1
Slide 56: 10-year fertilizer prices – monthly averages
55 10-year fertilizer prices – monthly averages Ammonia fob Black Sea USD/t 1000 900 800 700 600 500 400 CAN cif Germany 300 USD/t 200 100 500 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 400 300 200 Urea prilled fob Black Sea USD/t 100 900 0 800 1998 1999 2000 2001 2002 2003 2004 2005 2
Slide 57: 10-year grain/oilseed prices – yearly averages
56 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/t USD/t 400 800 350 700 300 600 250 500 200 400 150 300 100 200 50 100 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 TD08 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 TD08 Corn (US Gulf) USD/t Soyb