Yara International ASA Paris roadshow. Torgeir Kvidal, CFO Kjetil Storås, IR

Transcription

1 Yara International ASA Paris roadshow Torgeir Kvidal, CFO Kjetil Storås, IR

2 Integrated business model creates value through scale, flexibility and value chain presence 2

3 Summary second quarter 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 CO 2 business Improvement program: at least USD 5 million identified 3

4 Strong earnings despite supply driven market NOK EPS excluding currency and special items H 216 4

5 EBITDA development NOK millions 5, , ,489 2, ,165 EBITDA 2Q15 Volume Price/Margin Energy costs Currency translation Special items Other EBITDA 2Q16 5

6 Lower natural gas cost in Europe USD/ MMBtu 8. Yara European gas & oil cost NOK millions Change in spot energy cost (2) (4) (151) (25) (6) (8) (588) (588) (65) Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 TTF (1-month lag) *Dotted lines denote forward prices as of 12 July 216 Source: Yara, World Bank, Argus/ICIS Heren Yara Europe (1,) (1,2) (923) (1,42) 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 Actual July 216 estimate* 6

7 Lower European nitrate premiums at end of season USD/t Nitrogen upgrading margins 1 (monthly publication prices) 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 CAN (46% N) NH3 CFR (46% N) Urea Egypt CFR proxy 1) All prices in urea equivalents Yara EU gas cost *2 Nitrate premium above urea Value above ammonia Value above gas USD/t European nitrate premium 2 (quarterly Yara realized) 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 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. 7

8 Lower commodity phosphate margins, solid compound NPK premiums USD/t 6 Phosphate upgrading margins USD/t 7 NPK premium over blend NH3, fob Black Sea *.22 Value above raw material Weighted average global premium above blend cost Nitrate premium, CIF inland Germany Urea, CIF inland Germany 1 Rock, fob North Africa *1.4 1 DAP, CIF inland Germany 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 DAP, fob USG MOP, CIF inland Germany 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 1) Export NPK plants, average grade , net of transport and handling cost. 8

9 Brazil: 1H industry deliveries up 13%, Yara up 19% Kilotons 15, Season-to-date (1H) fertilizer deliveries +13% Kilotons 7 Season-to-date premium product deliveries 1, 6 +47% 5, 5 Kilotons 4, 1H12 1H13 1H14 1H15 1H , 2, 1, +19% 2 1 1H12 1H13 1H14 1H15 1H16 1H7 1H8 1H9 1H1 1H11 1H12 1H13 1H14 1H15 1H16 Industry Yara Brazil Galvani Trade Source: ANDA, Yara 9

10 Reduced exports from China amid lower prices USD/t Declining urea pricing Kilotons 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, Chinese exports and urea price Black Sea USD/t Urea fob Black Sea Urea granular fob Egypt Urea prilled fob China Source: BOABC, CFMW 1

11 and increased production elsewhere Gross capacity additions, excl. China (mill. tonnes urea 1 ) 7.6 Nigeria.7 Russia.3 Iran Nigeria.7 Russia.3 Iran.5 Algeria 1.2 Algeria 1.2 USA 1.7 Indonesia.7 India.7 Egypt.6 Malaysia.6 Mexico.5 Bangladesh.3 USA 2.5 India.7 Malaysia.5 Indonesia.5 Mexico.5 Azerbaijan.4 Bolivia.3 Bangladesh.3 3. Russia.3 Iran.5 USA.9 Brazil.6 Turkmenistan.6 Azerbaijan.4 Bolivia Nigeria 1.3 Russia 1. Brazil.6 Turkmenistan.6 2. Nigeria 1.3 Russia.7 ~3 Mt consumption growth Source: CRU, gross capacities, June 216 1) Using 5% operating rate in new plants first year of production 11

12 Lower Chinese utilization rates and higher anthracite coal prices CFMW Chinese urea utilization rates September 216 CFMW Anthracite prices September 216 (RMB/mt) 12

13 Production Export Domestic Domestic Export Production The new season starts with reduced production and exports, keeping domestic supply stable Million tons /17 15/16 Chinese urea production 14/15 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Million tons Domestic urea balance -2% Source: CFMW Jul 15/16 Jul 16/17

14 Yara Improvement Program will deliver cost and revenue improvements throughout the organization Overview of main initiatives Production Commercial Supply Chain/Other 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 5 million EBITDA improvement by 22 Note: Size of boxes does not indicate relative EBITDA potential from initiatives 14

15 Yara acquires Tata Chemicals urea business in India for USD 4 million Integrated world scale urea plant in Babrala, Uttar Pradesh ~.7 million tons ammonia production ~1.2 million tons urea production Commissioned in 1994 World-class operations and energy efficiency Workforce is committed to high HESQ standards; solid safety track record Energy consumption below 21 mmbtu/t, on par with Sluiskil Significant distribution footprint Warehouses: 4 own and approx. 1 third-party operated Salesforce: 5 own, and approx. 6 on contract Acquisition provides footprint to accelerate premium product growth Yara India 17% p.a. growth in premium product sales since 21 Yara Brazil premium products growth also provides a strong reference 15

16 Strategic growth with financial discipline: Profitable growth through brownfield expansion and M&A, while maintaining credit rating Expand premium products sales and supply Expand commodity scale based on attractive fullcost growth opportunities Act on attractive opportunities to grow industrial sales and supply Structurally secure P and K supply Divest non-core businesses OFD (Latin America) CN/NPK expansion Porsgrunn (Europe) NPK expansion Uusikapuunki (Europe) Greenbelt Fertilizers (Africa) West Sacramento import terminal (USA) Bunge (Crop Nutrition) (Brazil) Freeport ammonia JV (newbuild in USA) Pilbara (acq. of remaining 49% stake)(australia) New ammonia vessels OFD (Latin America) Pilbara TAN (newbuild in Australia) Köping TAN (Europe) Small-scale TAN Le Havre (Europe) Environmental solution bolt-on (Europe) Galvani (Brazil) Dallol 1 (Africa) GrowHow UK (5% stake) European CO 2 business Net debt / EBITDA evolution Net debt/ebitda Dividend and share buy-backs, share of net income 32% 7% 25% 48% 25% 23% 48% 3% 18% 26% 7% 19% 21% 5% 16% 41% 6% 34% 19% 1% 18% 23% 6% 17% 47% 12% 35% 64% 16% 48% 53% 6% 47% BBB rating ~ 2x 57% 6% 51% Not yet committed Target range 4-45% Share buy-backs Dividends 16

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18 Safe operations is our first priority TRI (Total recordable injuries 12-month rolling) ) 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

19 Strong growth pipeline NOK bn Capex plan Cost&capacity improvements M&A Committed growth Maintenance Mill.tons Production growth end Finished fertilizer Ammonia Production Regularity improvement Babrala Committed growth 3 Production end 218 Production Regularity improvement BASF JV Babrala Production end 218 2) Finished fertilizer and industrial products, excl. bulk blends. Including Yara share of production in JVs. 215 numbers excl. Growhow UK (~3 kt) 3) Committed projects only. TAN Pilbara: 16 kt, Porsgrunn: 25kt, Glomfjord: 185kt, Uusikapunki: 25kt, Köping: 9kt, Sluiskil: net 16kt, Galvani (Salitre - 6% of ~ 2 mill.tons) 4) Excl. Growhow UK (~2 kt). Including 1% ownership in Pilbara NH 3 plant 5) Rio Grande expansion ads.5 million tons SSP and 1 million ton blends by 22 1) Yara s share of capex 19

20 Fertilizer portfolio is being driven towards greater product differentiation and profit Product portfolio (215/16 season volume) 19% Differentiation improves margins and reduces exposure to commodity price volatility 24% 21% 36% Standard products (Urea, UAN and Ammonia) Differentiated products (CAN, AN) Specialty (CN, Compound NPK, Fertigation) NPK blends On-going efforts to further increase differentiation through: Capacity expansions compound NPK, CN, nitrate and urea+s On-going optimization of NPK portfolio towards higher value segments Innovation and market growth in high-value fertigation markets Continued YaraVita growth 2

21 Value-added and distribution make up larger part of Yara s contribution 11, Total Yara contribution 1, 9, 8, 7, 6, 5, Trade Upgrade & distribution 4, 3, 2, Commodity overseas 1, 2Q1 4Q1 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 Commodity Europe 21

22 Net interest-bearing debt development NOK millions 4,15 1,894 2,83 8,465 3,817 2, ,698 Net debt Mar 16 Investments (net) Yara dividend and share buy-backs Cash earnings* Net operating capital change Sale of CO 2 business Foreign currency translation gain Other Net debt Jun 16 * Operating income plus depreciation and amortization, minus tax paid, net gain/loss on disposals, net interest expense and bank charges 22

23 Crop Nutrition creates resilience in earnings Key financials (NOKm) 1H 216 1H 215 Change YE 215 Revenue and other income 1 37,76 41,95 (4,19) 8,189 EBITDA 3,18 3,415 (37) 6,188 Operating income 2,476 2,854 (378) 4,973 % margin 6.6% 6.8% N/A 6.1% CROGI (12-month rolling avg.) 16.3% 17.9% N/A 17.5% 215 Highlights Offers the industry s most comprehensive product portfolio and has a strong position in value-adding crop solutions. Increased market presence in Africa and North America by signing agreements to acquire the Greenbelt Fertilizer and the Sacramento Terminal Continued investments in solutions for precision farming and water scarcity. Investments in 215 amounted to a total of NOK 1.5 bn Fertilizer volumes by region Kilotons Europe Latin America North America Asia Africa 23,668 26,317 26,544 25, 2, 15, 1, 5, Share of fertilizer volumes by product NPK OTHFER UREA CN NITRA UAN 1% 8% 6% 4% 2% % External revenue and other income 23

24 Market depth by adding distribution and agronomic competence Evolved focus and aspiration Farmer Crop Product Asset Farmer centric solutions and tools Sell what we produce Place new capacity Manage seasonality Build product reputation High quality products Viking ship brand Build crop solutions Crop knowledge Product portfolio Application competence Our next strategic step to build Yara s knowledge margin Time 24

25 Industrial segment reduces cyclicality and seasonality Key financials 215 Highlights (NOKm) 1H 216 1H 215 Change YE 215 Revenue and other income 1 9,85 8, ,233 EBITDA 2, ,367 1,489 Operating income 2,3 62 1,428 1,174 % margin 22.3% 7.1% N/A 6.8% CROGI (12-month rolling avg.) 43.6% 18.8% N/A 22.% Industrial sales by product 2 Kilotons Environmental products Base Chemicals Mining Applications Animal Nutrition CO2 and feed phosphates 6,255 6,593 7,3 6, Significantly expansion of terminal and logistics network in North America and Brazil to better and more efficiently serve the automotive Nox abatement markets with respectively DEF (Diesel Exhaust Fluid) and Arla 32 reagent Increased deliveries of air pollution abatement products by 2% and achieved strong growth parameters for Nutriox business (waste water treatment) and increasing demand for related services and monitoring technologies Agreement to sell European CO2 business 4,5 3, 1, External revenue and other income 2 Including Yara share of production in equity-accounted investees 3 Including share of JVs 25

26 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 Environmental Solutions Mining Applications Gas and Industrial applications Key product and service offering Chemical applications for food, feed, automotive, space, pharmaceutical and construction industries Abatement of emissions from heavy duty vehicles NO x and SO x abatement for maritime sector Solutions to the Civil explosives industry Based on Technical nitrates for mining and construction CO 2 as gas, liquid and Dry ice CN for Industrial Applications Animal nutrition Strategic fit Optimization of Upstream assets Utilize technology, logistic advantage and infrastructure footprint Handling, storage and economies of scale Monetize secondary products into primary markets applications Geographical market Europe Global Global Global Market drivers GDP growth Legislation, GDP growth GDP growth, infrastructure projects, supply security GDP growth, standard of living EBITDA (NOKm) EBITDA not adjusted for eliminations between Business Units 26

27 Production segment has plants and mines across the globe which provide scale and flexibility Key financials 215 Highlights (NOKm) 1H 216 1H 215 Change YE 215 Revenue and other income 1 22,881 28,266 (5,385) 55,812 EBITDA 4,965 6,17 (1,52) 14,414 Operating income 2,132 4,364 (-2,232) 8,842 % margin 9.3% 15.4% N/A 15.8% CROGI (12-month rolling avg.) 11.% 11.4% N/A 12.1% In the US, Yara and BASF started construction of a world-scale ammonia plant in Freeport. In Australia, Yara secured full ownership of the Pilbara ammonia plant and increased ownership in the Pilbara TAN plant. Construction started on the project to increase the capacity of value-added production in Sluiskil, the Netherlands. Yara sold its 5% stake in GrowHow UK. Total production ended at 26.5mm tons, ammonia production decreased by 1% and finished fertilizer and industrial products increased by 2% Production volumes by product 2 Kilotons Ammonia Urea Nitrate NPK CN UAN SSP Gas consumption by region in Million MMBtu 159 3, 26,9 25,924 26,259 25, 2, 19 15, 1, 5, Europe 22 Canada RoW 1 Including Yara share of production in equity-accounted investees; 2 Including share of JVs 27

28 Continued strong production performance Kilotons 2,5 Ammonia 1 Kilotons 6, Finished fertilizer & industrial products 1 2, 5, 1,5 1, 5 4, 3, 2, 1, Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accounted investees 28

29 Fertilizer deliveries Kilotons 7, 6,5 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, Europe Outside Europe 29

30 AdBlue deliveries Kilotons Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3

31 Industrial volume development Kilotons Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Industrial N-chemicals Environmental products Other 31

32 Yara stocks Kilotons Finished fertilizer 7, Bunge Fertilizer included from 3Q 213 6, 5, 4, 3, 2, 1, - Urea Nitrates Compound NPK Other 32

33 European producers nitrate stocks Index June 27 = Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Source: Fertilizers Europe, Yara estimate for June 15/16 1/11 11/12 12/13 13/14 14/15 33

34 Energy cost Yearly averages , quarterly averages for with forward prices* for 3Q16 and 4Q Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge ) Yara Europe *Dotted lines denote forward prices as of 12 July 216 Source: Yara, World Bank, Argus/ICIS Heren 34

35 Global grain balance Grain consumption and production Million tons 2,6 2,55 2,5 2,45 2,4 2,35 2,3 2,25 2,2 2,15 2,1 2,5 2, 1, E 17F Days of consumption in stocks Days E 17F Consumption Production Source: USDA July

36 Weaker farm economics in USD, affecting particularly P and K demand FAO price index Index /24 1/25 1/26 1/27 1/28 1/29 1/21 1/211 1/212 1/213 1/214 1/215 1/216 Source: FAO Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. 36

37 Key value drivers quarterly averages TTF day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (dotted line, USD/t) CAN cif Germany (USD/t) Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank 37

38 1-year fertilizer prices monthly averages USD/t Ammonia fob Black Sea 1, USD/t CAN cif Germany USD/t Urea prilled fob Black Sea/Urea granular fob Egypt USD/t DAP fob US Gulf/MOP granular fob Vancouver 1,2 1, Average prices