2015 07-29 - Yara International ASA Q2 2015 Presentation
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Yara International ASA Second quarter results 2015 21 July 2015
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Transcript of 2015 07-29 - Yara International ASA Q2 2015 Presentation
Yara International ASA
Second quarter results
2015
21 July 2015
1
IR – 21 July 2015
Strong result driven by increased deliveries
Continued benefit from lower gas prices and stronger US dollar
Positive start to the new fertilizer season in Europe
Continued growth for premium fertilizer products in Latin America and Asia
Industrial deliveries up 9% driven by AdBlue and process chemicals in Europe
Summary second quarter
2
IR – 21 July 2015
10.54
9.82 9.25
7.67 8.04
6.69
5.66
0.23
6.40
8.26
6.18
6.74
2.65
10.59
8.32
10.80
9.00
7.21
8.52
7.97
5.62
2.65
7.03 7.74 7.62
8.17
10.51
9.58
Earnings per share*
*Average number of shares for 2Q 2015: 275.3 million (2Q 2014: 276.5 million).
NOK 37.31 20.67 27.59 13.24
Annual 2012 2013 2014
EPS excluding currency and
special items
2015
3
IR – 21 July 2015
Tighter domestic market in China triggers urea price rebound
Western Europe nitrogen fertilizer industry deliveries down 5% on second
quarter last year; lower by 2% for the season
Brazil fertilizer industry deliveries down 14% on a year earlier; 10% lower
year to date
Phosphate fertilizer prices similar to last year, stronger upgrading margins
from rock
Strong demand for value-added fertilizer products
Market development
4
IR – 21 July 2015
Normal deliveries in Europe and USA
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10/11 11/12 12/13 13/14 14/15
Domestic production Net imports
-2%
USA West Europe
Million tons N Million tons N
Source: Yara estimate for fertilizer deliveries to selected West European countries.
Total nitrogen deliveries based on TFI, US Trade Commission, Blue-Johnson and Yara estimates
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
10/11 11/12 12/13 13/14 14/15
Domestic production Net imports
+5%
5
IR – 21 July 2015
64.7
10.8
54.0 50.6
15.5
66.1
0
10
20
30
40
50
60
70
Pro
duction
Exp
ort
Do
mestic
Do
mestic
Exp
ort
Pro
duction
Million tons
Source: BOABC, CFMW
Tighter Chinese domestic urea balance
Jul-May 13/14 Jul-May 14/15
-6%
200
220
240
260
280
300
320
340
360
380
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15
USD/t
Urea price China (inland proxy price) Urea fob Black Sea
Urea price rebound
Urea price rebound on tighter Chinese
domestic balance
6
IR – 21 July 2015
Brazil: Lower deliveries of commodity products
but increased value-added sales
Brazil 1H fertilizer industry deliveries
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1H 2011 1H 2012 1H 2013 1H 2014 1H 2015
Th
ou
san
ds
Brazil industry
deliveries Yara Brazil deliveries
-16%
-10%
Kilotons Kilotons
Source: ANDA, Yara
Yara Brazil value-added product 1H deliveries
0
50
100
150
200
250
300
350
400
450
1H07 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15
YaraMila (Compound NPK) YaraBela (CAN) YaraLiva (CN)
7
IR – 21 July 2015
360
96 110
52
136
374
103 121
49
138
403
123
200
37
142
Asia Brazil LatinAmerica excl.
Brazil
Africa NorthAmerica
Long-term growth in YaraMila and YaraLiva
deliveries outside Europe
Kilotons
YaraMila and YaraLiva deliveries Outside Europe YaraMila and YaraLiva deliveries
Kilotons
2Q15 2Q14 2Q13
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2Q11 2Q12 2Q13 2Q14 2Q15
Outside Europe Europe
CAGR
9%
8
IR – 21 July 2015
Products designed for foliar
application, seed treatment,
fertigation and fertilizer coating
Produced in Yara’s Pocklington site
in UK
Total 2014 contribution of USD 64
million
Annual capacity of ~ 32 million units
Planned capacity expansion in
Sumaré, Brazil of 12 million units
YaraVita - global brand name for Yara’s range of
micronutrients
0
5
10
15
20
25
30
2010/2011 2011/2012 2012/2013
CAGR 11%
2013/2014 2014/2015
Million units
9
IR – 21 July 2015
Earnings before interest, tax, depreciation and
amortization (EBITDA)
4,310
4,966
4,103 3,591
4,184
4,039 3,318
1,858
3,591
4,227
3,964
4,625
4,794 5,179
3,935
5,196
4,186
3,541
4,149
4,103
3,223 2,363
3,830 4,185
4,002 4,528
5,742
5,055
2012 2014 2013 2015
NOK
millions 16,970 13,399 16,407 9,973
Annual
EBITDA excluding special
items NOK millions
10
IR – 21 July 2015
EBITDA development
429294
516
Volume & mix EBITDA
2Q14
4,227
5,179
EBITDA
2Q15
Special
items
83
Currency
1,251
Other Price/margin
NOK millions
of which
OFD+Galvani
+477 million
of which EU
energy
+588 million
of which
OFD+Galvani
-279 million
11
IR – 21 July 2015
Improved earnings in Downstream and Upstream
1,525
1,572
365 335
2,498
3,133
1,502
1,605
365 335
2,479
2,976
Downstream Industrial Upstream
EBITDA excluding special items
2Q14 2Q15
EBITDA1 (NOK millions)
1) 2Q 2015 result reflects new segment structure as described in note 3 of the financial report.
12
IR – 21 July 2015
Lower natural gas cost in Europe
4.0
5.0
6.0
7.0
8.0
9.0
10.0
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
USD/ MMBtu
TTF (1-month lag) Yara Europe
(660)
(891)
(726)
(1,314)
(588)
(50)
(350)
(1,400)
(1,200)
(1,000)
(800)
(600)
(400)
(200)
0
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
NOK millions
July 2015 estimate*
Source: Yara, World Bank, Argus/ICIS Heren
*Dotted lines denote forward prices as of 13 July 2015
Yara European gas & oil cost
Actual
Change in European energy cost
13
IR – 21 July 2015
Stable European nitrate premium
0
100
200
300
400
500
600
700
2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15
USD/t
Nitrogen upgrading margins1 (monthly publication prices)
Urea Black sea CFR proxy CAN (46% N)
NH3 CFR (46% N) Urea Egypt CFR proxy
Value
above gas
Value above
ammonia
Nitrate
premium
above urea
Yara EU gas cost *20
0
20
40
60
80
100
120
140
160
180
2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15
European nitrate premium2 (quarterly Yara realized) USD/t
2) Yara European realized nitrate prices compared with urea
publication prices with one month time lag. All numbers in USD
per ton of CAN equivalents.
1) All prices in urea equivalents
14
IR – 21 July 2015
Stable commodity phosphate margins and solid
NPK compound premiums
0
100
200
300
400
500
600
700
2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15
USD/t
NPK premium over blend1
0
100
200
300
400
500
600
2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15
USD/t
Phosphate upgrading margins
DAP, fob USG
Rock, fob NA *1.4
Value above
raw material
NH3, fob Black Sea *0.22
DAP, CIF inland Germany
MOP, CIF inland Germany
Urea, CIF inland Germany
Weighted average global
premium above blend cost
1) Export NPK plants, average grade 19-10-13, net of
transport and handling cost.
Nitrate premium, CIF inland Germany
15
IR – 21 July 2015
Net interest-bearing debt development
10,471
Net debt
Jun 15
Other
142
FX gain
342
Yara dividend
3,396
Investments
net
1,765
Net operating
capital change
186
Dividends
from equity-
accounted
investees
11
Cash earnings*
3,651
Net debt
Mar 15
8,985
* Operating income plus depreciation and amortization, minus tax paid, net gain/loss on disposals, net interest expense and bank charges
NOK millions
16
IR – 21 July 2015
Improved incentives for fertilizer application as grain prices have increased
on supply concerns
Key crop producing regions continue to benefit from stronger US dollar
Positive start to the new fertilizer season in Europe; healthy Yara nitrate
order book for third quarter
Brazil pick-up expected in second half
Chinese urea production costs and currency remain key for global nitrogen
commodity prices
Closing of GrowHow UK sale on 31 July
Prospects
Additional information
18
IR – 21 July 2015
Yara 2Q fertilizer sales by market and product
2,183 2,492
954
537 329
2,203 2,462
1,031
683 515
Europe Latin America North America Asia Africa
2Q14 2Q15
1,114 1,360
1,119 1,331
870
407 295
1,141 986
1,240 1,473
1,290
438 327
NPK compounds NPK blends Nitrate Urea Other products UAN CN
Kilotons
19
IR – 21 July 2015
0
200
400
600
800
1,000
1,200
1,400
1,600
2Q11 2Q12 2Q13 2Q14 2Q15
YaraMila and YaraBela deliveries
Kilotons
-
200
400
600
800
1,000
1,200
1,400
1,600
2Q11 2Q12 2Q13 2Q14 2Q15
Yara-produced nitrate deliveries
Kilotons
Yara-produced compound NPK deliveries
Overseas Europe Overseas Europe
20
IR – 21 July 2015
2Q YaraBela volume phasing
Source: International publications, Yara
17%
37%
46%
28%
31%
42%
29% 26%
45%
40%
30% 30% 27%
24%
49%
0%
10%
20%
30%
40%
50%
60%
2Q 2015 2Q 2013 2Q 2014
Yara-produced YaraBela deliveries in 2Q
2Q 2012 2Q 2011
21
IR – 21 July 2015
Continued Industrial volume growth
914885
864852849816
866
819844
792
540
482511
438456
382
432
364333346
380361
339367364358
328
1Q15 4Q14 3Q14 2Q14 1Q14 4Q13 3Q13
374
2Q13
368
1Q13
343
2Q15
Other Environmental products Industrial N-chemicals
Kilotons
22
IR – 21 July 2015
0
50
100
150
200
250
300
350
400
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15
Europe North America Rest Of World
AdBlue deliveries
Kilotons
23
IR – 21 July 2015
0
1,000
2,000
3,000
4,000
5,000
6,000
Kilotons
Urea Nitrates NPK CN UAN SSP - based fertilizer
2014 2011 2012 2013 2015
Yara production volume*
0
500
1,000
1,500
2,000
2,500
Kilotons
2015
* Including share of equity-accounted investees
Finished fertilizer and industrial products Ammonia
2014 2011 2012 2013
24
IR – 21 July 2015
0.49
0.20
0.07
-0.04
0.05
0.13
0.38
0.22
0.08
0.01
0.06
0.15
0.32
0.12
0.06 0.06
0.08
0.27
0.12
0.02
0.06
0.17
2010 2011 2012 2013 2014 2015
Debt/equity ratio
Net interest-bearing debt / equity ratio (end of period)
25
IR – 21 July 2015
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Kilotons Finished fertilizer
Urea Nitrates Compound NPK Other
Yara stocks
Bunge Fertilizer
included from 3Q 2013
26
IR – 21 July 2015
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
Index June 2007=1
14/15 10/11 11/12 12/13 13/14
Source: Fertilizers Europe, Yara estimate for June
European producers’ nitrate stocks
27
IR – 21 July 2015
4.0 4.4
4.0
2.8
3.7
5.2
4.6
3.9 3.8
2.9 2.7 2.7 2.8 3.0
4.8
5.7
8.2 8.0 8.0 8.1
6.9
6.1 6.5
6.0 5.7 5.5 5.7 4.7
6.6
9.2 9.4
10.5
9.8
7.6
7.0
8.1
6.8 6.8 7.0
6.6
7.6
10.7 11.0 11.4 11.3
9.2
7.5
8.5
7.6 7.5 7.2 7.4
2009 2010 2011 2012 2013 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge 2009-2012) Yara Europe
Energy cost
USD per MMBtu
Source: Yara, World Bank, Platts/Argus/ICIS Heren
Yearly averages 2009 – 2013, quarterly averages for 2014-15 with forward prices* for 3Q15 and 4Q15.
*Dotted lines denote forward prices as of 13 July 2015
28
IR – 21 July 2015
Currency exposure affecting Profit & Loss
At the beginning of the third quarter 2015
1. The US dollar debt generating Profit & Loss exposure was USD 1,500
million
• Kept as hedge of future earnings and to finance inventories in emerging markets
• Around 60% towards BRL with the rest mainly towards other emerging market
currencies and EUR
• The debt level in emerging markets will fluctuate with fertilizer seasons
2. Additional Profit & Loss exposure from internal currency positions vs.
NOK
• Payables mainly CAD (450 million)
• Receivables mainly EUR (150 million)
29
IR – 21 July 2015
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
Index
FAO price index
Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg.
Farm economics support fertilizer demand, even
in USD based economies
Source: FAO
30
IR – 21 July 2015
Source: USDA July 2015
For 2015/16, initial estimate calls for balance
between production and consumption
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
07 08 09 10 11 12 13 14 15E 16F
Million tons
Consumption Production
Grain consumption and production Days of consumption in stocks
55
60
65
70
75
80
85
07 08 09 10 11 12 13 14 15E 16F
Days
31
IR – 21 July 2015
-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
Thousand contracts
Source: US Commodity Futures Trading Commission
Non-commercials’ net long position in corn
32
IR – 21 July 2015
Source: CRU urea update June 2015 (March 2015 in brackets) . Consumption data source is IFA.
Year Driving regions Urea capacity growth relative
to nitrogen capacity
Excluding China Excluding China
2014 Algeria 23%
Iran 20% 1.1% (1.1%)
2015 Algeria 18%
Saudi Arabia 16% 2.6% (2.6%)
2016 USA 29%
Algeria 14% 3.1% (3.3%)
2017 USA 33%
Nigeria 30% 2.3% (2.3%)
2018 Nigeria 29%
Russia 20% 1.6% (1.3%)
Gross annual addition 2014-2018 ~2.1%
Assumed annual closures ~0.5%
Net annual addition 2014-2018 ~1.6%
Trend consumption growth from 2002 2.0%
Projected nitrogen capacity additions outside
China
33
IR – 21 July 2015
Key value drivers – quarterly averages
299 320 315
295 277
358 358 355 337
297
2Q14 3Q14 4Q14 1Q15 2Q15
Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (dotted line, USD/t)
354
309 310 295 273
2Q14 3Q14 4Q14 1Q15 2Q15
CAN cif Germany (USD/t)
4.6
3.9 3.8
2.9 2.7
2Q14 3Q14 4Q14 1Q15 2Q15
US gas price Henry Hub (USD/MMBtu)
7.6
7.0
8.1
7.0
6.8
2Q14 3Q14 4Q14 1Q15 2Q15
TTF day ahead (USD/MMBtu)
6.0 6.3 6.9
7.7 7.8
2Q14 3Q14 4Q14 1Q15 2Q15
NOK/USD exchange rate
485 488
572
413 393
2Q14 3Q14 4Q14 1Q15 2Q15
Ammonia fob Black Sea (USD/t)
Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
34
IR – 21 July 2015
10-year fertilizer prices – monthly averages
Source: Average of international publications
0
200
400
600
800
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
USD/t Urea prilled fob Black Sea/Urea granular fob Egypt
Average prices 2005 - 2015
0
200
400
600
800
1,000
1,200
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
USD/t DAP fob US Gulf/MOP granular fob Vancouver
0
100
200
300
400
500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
USD/t CAN cif Germany
0
200
400
600
800
1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
USD/t Ammonia fob Black Sea
