Post on 31-Dec-2016
Yara International ASA
2016 second quarter
results
21 July 2016
IR – 21 July 2016
Safe operations is our first priority
2
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0TRI1
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 – 21 July 2016
Summary second quarter
3
Results impacted by lower fertilizer prices
Positive impact from lower energy prices and stronger US dollar
Deliveries of Yara-produced fertilizer up 8%
Continued strong production performance, especially ammonia
Gain of NOK 1.6 billion from sale of CO2 business
Improvement program: at least USD 500 million identified
IR – 21 July 2016
Earnings per share*
4
8.04
6.69 5.66
0.23
6.40
8.26
6.18 6.74
2.65
10.59
14.56
1.58
10.22
11.23
8.52
7.97
5.62
2.65
7.03 7.74 7.62
8.17
10.51 9.58
7.41
3.97
9.14
6.37
NOK 20.67 27.59 29.38 21.45
Annual 2013 2014 2015 2016
*Average number of shares for 2Q 2016: 273.5 million (2Q 2015: 275.3 million).
EPS excluding currency and
special items
IR – 21 July 2016
2Q catch-up in European fertilizer industry deliveries;
full season in line with a year earlier
5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
11/12 12/13 13/14 14/15 15/16
Domestic production Imports
Full-season deliveries (12m ending 30 Jun) Quarterly deliveries
Million tons N Million tons N -1%
Source: Yara estimate for fertilizer deliveries to selected West European countries.
1,703
1,881
2,353
1,653 1,613
1,832
2,303
1,749
3Q 4Q 1Q 2Q
14/15 15/16
+6%
IR – 21 July 2016
Season-to-date (1H) fertilizer deliveries
Brazil: 1H industry deliveries up 13%, Yara up 19%
6
0
5,000
10,000
15,000
1H12 1H13 1H14 1H15 1H16
Th
ou
san
ds
+13%
0
100
200
300
400
500
600
700
1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16
+47%
Season-to-date premium product deliveries Kilotons Kilotons
Source: ANDA, Yara
0
1,000
2,000
3,000
4,000
1H12 1H13 1H14 1H15 1H16
Th
ou
san
ds
+19%
Kilotons
Yara Brazil Industry Galvani Trade
IR – 21 July 2016
Yara 2Q fertilizer sales by market and product
7
2,204
1,820
640
1,031
683 515
2,293 1,986
631
1,143
569 298
Europe Brazil Latin America North America Asia Africa
2Q15 2Q16
1,141 986 1,240
1,473 1,292
438 327
1,132 1,124 1,353 1,326 1,160
483 343
Nitrate Urea Other products UAN CNCompound NPK1 Blend NPK
1) Yara-produced compound NPK and third party sourced (Total NPK minus blend NPK)
Kilotons
IR – 21 July 2016
Reduced exports from China amid lower prices…
8
180
200
220
240
260
280
300
320
340
360
380
400
420
440
460
USD/t
Urea fob Black Sea Urea prilled fob China
Urea granular fob Egypt
0
50
100
150
200
250
300
350
400
450
500
550
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Chinese exports and urea price Declining urea pricing Black Sea
USD/t Kilotons
Source: BOABC, CFMW
IR – 21 July 2016
…and increased production elsewhere
9
2018 2017
3.0
2019 2020
3.5
2016
7.8 7.6
2.0
~3 Mt
consumption
growth
Gross capacity additions, excl. China
(mill. tonnes urea1)
Source: CRU, gross capacities, June 2016 1) Using 50% operating rate in new plants’ first year of production
Indonesia 0.7
India 0.7
Egypt 0.6
Malaysia 0.6
Mexico 0.5
Bangladesh 0.3
USA 1.7
Algeria 1.2
Nigeria 0.7
Iran 0.5
Russia 0.3
India 0.7
Malaysia 0.5
Indonesia 0.5
Mexico 0.5
Azerbaijan 0.4
Bolivia 0.3
Bangladesh 0.3
USA 2.5
Nigeria 0.7
Iran 0.5
Russia 0.3
USA 0.9
Brazil 0.6
Turkmenistan 0.6
Azerbaijan 0.4
Bolivia 0.3
Iran 0.5
Russia 0.3
Brazil 0.6
Turkmenistan 0.6
Russia 1.0
Nigeria 1.3
Algeria 1.2
Russia 0.7
Nigeria 1.3
IR – 21 July 2016
Yara Improvement Program will deliver cost and revenue
improvements throughout the organization Overview of main initiatives
10 Note: Size of boxes does not indicate relative EBITDA potential from initiatives
Production Supply Chain/Other Commercial
Plant productivity
improvement and portfolio
optimization
Crop roadmap
implementation
Small site
productivity
improvement
Sales
excellence
Brazil post
integration
improvement
program
Supply Chain
transformation
Procurement
excellence
IT
optimization
Expert
Functions
optimization
The program is expected to deliver at least USD 500 million EBITDA improvement by 2020
IR – 21 July 2016
Earnings before interest, tax, depreciation and
amortization (EBITDA)
11
4,184
4,039 3,318
1,858
3,591
4,227
3,964
4,625 4,794 5,179
7,884
3,504
5,055
5,489
4,149
4,103
3,223 2,363
3,830 4,185
4,002 4,528
5,742
5,055
4,614
3,508
5,050
3,958
2013 2015 2014 2016
NOK millions
EBITDA excluding special
items
NOK
millions 13,399 16,407 21,361 10,544
Annual
IR – 21 July 2016
EBITDA development
12
2,730
1,165
367
1,407
5,4895,179
Special
items
Currency
translation
Energy costs Price/Margin Volume
181
EBITDA 2Q15 EBITDA 2Q16 Other
81
NOK millions
IR – 21 July 2016
Lower prices mainly impact Production segment
13
1,572
1,330
335
1,693
3,133
2,120
1,605
1,330
335
360
2,976
1,923
2Q15 2Q16
EBITDA
(NOK millions)
EBITDA excluding special items
Crop Nutrition Industrial Production
IR – 21 July 2016
Lower natural gas cost in Europe
14
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
USD/ MMBtu
TTF (1-month lag) Yara Europe
Yara European gas & oil cost Change in spot energy cost
(588)
(151)
(588)
(923)
(1,042)
(650)
(250)
(1,200)
(1,000)
(800)
(600)
(400)
(200)
0
2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
NOK millions
July 2016 estimate* Actual
Source: Yara, World Bank, Argus/ICIS Heren *Dotted lines denote forward prices as of 12 July 2016
IR – 21 July 2016
Lower European nitrate premiums at end of season
15
0
100
200
300
400
500
600
700
2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16
USD/t
Nitrogen upgrading margins1 (monthly publication prices)
CAN (46% N) NH3 CFR (46% N) Urea Egypt CFR proxy
Yara EU gas cost *20
Nitrate
premium
above urea
Value above
ammonia
Value
above gas
0
10
20
30
40
50
60
70
80
90
100
2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16
European nitrate premium2 (quarterly Yara realized) USD/t
2) Yara European realized nitrate prices (excl. sulphur grades)
compared with urea publication prices (Egypt CFR proxy) with
1 month time lag. All numbers in USD per tonne of CAN equivalents. 1) All prices in urea equivalents
IR – 21 July 2016
Value above
raw material
0
100
200
300
400
500
600
2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16
USD/t Phosphate upgrading margins
DAP, fob USG
Weighted average global
premium above blend cost
Lower commodity phosphate margins, solid compound
NPK premiums
16
1) Export NPK plants, average grade 19-10-13, net of
transport and handling cost.
Rock, fob North Africa *1.4
NH3, fob Black Sea *0.22
0
100
200
300
400
500
600
700
2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16
USD/t NPK premium over blend1
DAP, CIF inland Germany
MOP, CIF inland Germany
Urea, CIF inland Germany
Nitrate premium, CIF inland Germany
IR – 21 July 2016
Net interest-bearing debt development
17
3,817
4,150
1,894
2,830
2,758
869
9,698
8,465
Yara dividend
and share
buy-backs
Investments
(net)
Net debt
Mar 16
Cash
earnings*
Net operating
capital change
Other Foreign
currency
translation
gain
122
Sale of CO2
business
Net debt
Jun 16
* Operating income plus depreciation and amortization, minus tax paid, net gain/loss on disposals, net interest expense and bank charges
NOK millions
IR – 21 July 2016
Prospects
18
Supportive farm margin outlook overall, with lower input prices
On-going production increases elsewhere displacing Chinese exports
Improved pre-buying incentives in Europe; strong Yara order book
Continued demand growth in Brazil, but P&K demand in other regions impacted by
lower crop prices
NOK ~900 million reduction in Yara’s spot-priced gas cost for next 2 quarters
IR – 21 July 2016
Additional information
IR – 21 July 2016
Strong growth pipeline
20
1) Yara’s share of capex
5.6
0.4
2.1
2015
14.4
6.0
4.2
3.3
0.9
7.4
1.9
5.6
5.6
2017
12.6
1.3
8.8
2018
6.2
2016
1.3
16.1
Committed growth
M&A
Cost&capacity improvements
Maintenance
NOK bn
Capex plan1
2) Finished fertilizer and industrial products, excl. bulk blends. Including Yara share of production in
JVs. 2015 numbers excl. Growhow UK (~300 kt)
3) Committed projects only. TAN Pilbara: 160 kt, Porsgrunn: 250kt, Glomfjord: 185kt, Uusikapunki:
250kt, Köping: 90kt, Sluiskil: net 160kt, Galvani (Salitre - 60% of ~ 2 mill.tons)
4) Excl. Growhow UK (~200 kt). Including 100% ownership in Pilbara NH3 plant
5) Rio Grande expansion ads 0.5 million tons SSP and 1 million ton blends by 2020
0.8
2.3
22.1
Production
end 2018
Committed
growth3
Regularity
improvement
18.9
Production
20152
Production growth 2015 - end 20185
0.7
8.3
7.2
Regularity
improvement
Production
20154
Production
end 2018
BASF JV
0.5
Finished fertilizer Ammonia
Mill.tons
IR – 21 July 2016
Increasing coal prices
21
CFMW Anthracite prices July 2016 (RMB/mt) CIF ARA1 November 2016 ($/mt)
1) Amsterdam, Rotterdam, Antwerp
IR – 21 July 2016
Continued strong production performance
22
0
500
1,000
1,500
2,000
2,500
Kilotons
2016 2015 2013 2014
Ammonia1
1) Including share of equity-accounted investees
0
1,000
2,000
3,000
4,000
5,000
6,000
Kilotons
Urea Nitrates NPK CN UAN SSP - based fertilizer
2015 2013 2014 2016
Finished fertilizer & industrial products1
IR – 21 July 2016
Fertilizer deliveries
23
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
Europe Outside Europe
Kilotons
2012 2009 2010 2011 2013 2014 2015 2016
IR – 21 July 2016
Fertilizer deliveries by product and source
24
1,240 1,353
1,141 1,132 986
1,124
1,473 1,326
438 483
1,619 1,503
2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16 2Q15 2Q16
Yara-produced deliveries Joint venture & third party sourced
NPK compounds NPK blends Urea UAN Other
Kilotons
Nitrate
IR – 21 July 2016
YaraMila and YaraBela deliveries
25
0
200
400
600
800
1,000
1,200
1,400
1,600
2Q12 2Q13 2Q14 2Q15 2Q16
Yara-produced YaraMila deliveries
-
200
400
600
800
1,000
1,200
1,400
1,600
2Q12 2Q13 2Q14 2Q15 2Q16
Yara-produced YaraBela deliveries Kilotons
Outside Europe Europe Outside Europe Europe
Kilotons
IR – 21 July 2016
Strong premium product deliveries in Brazil
26
1) YaraBela, YaraMila and YaraLiva deliveries
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2Q12 2Q13 2Q14 2Q15 2Q16
378
116
188
62
235
406
147
279
48
204
294
248
296
52
201
Asia Brazil LatinAmerica excl.
Brazil
Africa NorthAmerica
Value-added fertilizer deliveries1 Value-added fertilizer deliveries1
CAGR
6%
Outside Europe Europe
2Q16 2Q15 2Q14
IR – 21 July 2016
Value-added and distribution make up larger part of Yara’s contribution
27
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
Commodity overseas
Upgrade & distribution
Trade
4Q12 2Q13 4Q13 2Q14 4Q14
Commodity Europe
4Q11 2Q11 4Q10 4Q15 2Q15 2Q10 2Q16 2Q12
Total Yara contribution
IR – 21 July 2016
AdBlue deliveries
28
0
50
100
150
200
250
300
350
400
450
500
2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16
Kilotons
IR – 21 July 2016
Industrial volume development
29
889847
829815
892859864852849
816866
819844
571538
577541540
482511
438456
382432
242
308328
385364333346
380361339367364358
3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 2Q13
368
1Q14 4Q13 3Q13
374
2Q16 1Q16 4Q15
Other Environmental products Industrial N-chemicals
Kilotons
IR – 21 July 2016
Debt/equity ratio
30
0.20
0.07
-0.04
0.05
0.13
0.11
0.22
0.08
0.01
0.06
0.15
0.13 0.12
0.06 0.06
0.08
0.06
0.12
0.02
0.06
0.17 0.16
2011 2012 2013 2014 2015 2016
Net interest-bearing debt / equity ratio (end of period)
IR – 21 July 2016
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Urea Nitrates Compound NPK Other
Yara stocks
31
Kilotons
Finished fertilizer Bunge Fertilizer
included from 3Q 2013
IR – 21 July 2016
65.5
15.5
49.9
59.5
11.3
70.8
0
10
20
30
40
50
60
70
80
Pro
duction
Exp
ort
Do
mestic
Do
mestic
Exp
ort
Pro
duction
Million tons
5.0
5.2
5.4
5.6
5.8
6.0
6.2
6.4
6.6
6.8
7.0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Million tons
Source: CFMW
13/14
Increased production and lower export have boosted domestic
supply strongly so far this season
Chinese urea production Domestic urea balance
Jul-May 14/15 Jul-May 15/16
19%
14/15
15/16
32
IR – 21 July 2016
European producers’ nitrate stocks
33
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
15/16 10/11 11/12 12/13 13/14 14/15
Source: Fertilizers Europe, Yara estimate for June
Index
June 2007 = 1
IR – 21 July 2016
Energy cost
34
4.0 4.4
4.0
2.8
3.7
5.2 4.6
3.9 3.8
2.9 2.7 2.7 2.1 2.0 2.1 2.1
2.7 3.0
4.8
5.7
8.2 8.0 8.0 8.1
6.9
6.1 6.5
5.9 5.7 5.3 5.2
4.1 3.8 4.2
4.6 4.7
6.6
9.2 9.4
10.5 9.8
7.6 7.0
8.1
7.0 6.8 6.5
5.4
4.2 4.4 4.7
5.4
6.6
7.6
10.7 11.0 11.4 11.3
9.2
7.5
8.5
7.6 7.5 7.0
6.2
5.0 4.6
5.1 5.5
2009 2010 2011 2012 2013 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge 2009-2012) Yara Europe
Yearly averages 2009 – 2013, quarterly averages for 2014-16 with forward prices* for 3Q16 and 4Q16.
*Dotted lines denote forward prices as of 12 July 2016 Source: Yara, World Bank, Argus/ICIS Heren
IR – 21 July 2016
Global grain balance
35
1,950
2,000
2,050
2,100
2,150
2,200
2,250
2,300
2,350
2,400
2,450
2,500
2,550
2,600
07 08 09 10 11 12 13 14 15 16E 17F
Million tons
Consumption Production
Grain consumption and production Days of consumption in stocks
55
60
65
70
75
80
85
90
95
07 08 09 10 11 12 13 14 15 16E 17F
Days
Source: USDA July 2016
IR – 21 July 2016
Non-commercials’ net long position in corn
36
-200
-100
0
100
200
300
400
500
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
Thousand contracts
Source: US Commodity Futures Trading Commission
IR – 21 July 2016
Weaker farm economics in USD, affecting particularly P
and K demand
37
0
50
100
150
200
250
300
1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016
Index
FAO price index
Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg.
Source: FAO
IR – 21 July 2016
Key value drivers – quarterly averages
38
277 268 250 207 198
297 281 270 233
208
2Q15 3Q15 4Q15 1Q16 2Q16
Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (dotted line, USD/t)
273 257 255 249
197
2Q15 3Q15 4Q15 1Q16 2Q16
CAN cif Germany (USD/t)
2.7 2.7
2.1 2.0 2.1
2Q15 3Q15 4Q15 1Q16 2Q16
US gas price Henry Hub (USD/MMBtu)
6.8 6.4
5.5
4.1 4.3
2Q15 3Q15 4Q15 1Q16 2Q16
TTF day ahead (USD/MMBtu)
7.8
8.2
8.5 8.7
8.3
2Q15 3Q15 4Q15 1Q16 2Q16
NOK/USD exchange rate
393 388 355
270 274
2Q15 3Q15 4Q15 1Q16 2Q16
Ammonia fob Black Sea (USD/t)
Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
IR – 21 July 2016
10-year fertilizer prices – monthly averages
39
0
200
400
600
800
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t Urea prilled fob Black Sea/Urea granular fob Egypt
Average prices 2006 - 2015
0
200
400
600
800
1,000
1,200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t DAP fob US Gulf/MOP granular fob Vancouver
0
100
200
300
400
500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t CAN cif Germany
0
200
400
600
800
1,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD/t Ammonia fob Black Sea