Yara International ASA SEB Investment Grade seminar

Transcription

1 Yara International ASA SEB Investment Grade seminar 24 Aug 2017 Thor Giæver, Investor Relations

2 Safe operations is our first priority 4,5 4,0 TRI (Total recordable injuries 12-month rolling) 1 3,5 3,0 2,5 2,0 1,5 Jan '16 Feb Mar Apr May June Jul Aug Sep Oct Nov Dec Jan '17 Feb Mar Apr May June 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours. 2

3 Yara in numbers Close to 15,000 employees Sales to about 160 countries Revenue NOK 95.2 Billion (USD 11.4 Billion) In

4 We deliver a complete portfolio of offerings What We offer Crop Nutrition solutions Industrial solutions Environmental solutions Basic products Ammonia Urea SSP Nitric Acid Nitrates NPK CN TAN 4

5 Integrated business model creates value through scale, flexibility and value chain presence 5

6 Our global presence is growing ~ The number of people we employ +160 The number of countries we sell to +60 The number of countries we operate in 300 million people our products help to feed 50 million citizens our products deliver fresh air for 240 million tons of grains our products help produce 15 million The number of farmers we work with 6

7 We sold 34.1 million tonnes of products and solutions globally in Sales figures mill. tonnes Fertilizers Industrial products & solutions %= total sales *Ammonia trade not included North America 12.1% 0.7 Latin- America 35,5% 11.4 Europe 41.4% Africa 4.4% Asia 6.6%

8 Strong commodity nitrogen over-supply Capacity additions, excl. China (mill. tonnes urea 1 ) Egypt 0.9 Indonesia 0.8 Saudi Arabia 0.5 Malaysia 0.3 Bangladesh 0.1 Argentina 0.1 Vietnam 0.1 Romania Nigeria Nigeria 0.7 Russia 0.1 Iran 1.4 India 0.7 Bolivia 0.5 Azerbaijan 0.5 Turkmenistan 0.3 Indonesia 0.3 Kuwait Russia 0.7 Algeria 0.8 USA 1.0 USA 2.4 Malaysia 0.9 India 0.7 Romania 0.7 Indonesia 0.5 Bangladesh 0.5 Bolivia Russia 0.4 Iran 0.9 USA Iran 0.8 Turkmenistan 0.9 Indonesia 0.3 Azerbaijan 0.2 Uzbekistan India 1.0 Uzbekistan 0.2 ~3 Mt = 10 year historical trend consumption growth 1.8 Nigeria 1.3 India 0.3 Tajikistan 0.2 Czech Rep. -0,2 Indonesia -0,7 Bangladesh -0,1 Bangladesh -0,5 Romania Source: CRU, June Numbers include both additions and closures of capacity. CRU year-over-year production change 8

9 Yara has expected commodity nitrogen over-supply, and has focused its growth pipeline on premium & industrial products Growth focused on premium & industrial Pipeline tonnes by product (kt) 1 Expand premium products sales and supply Uusikaupunki NPK (3Q 2016) Porsgrunn/Glomfjord CN/NPK (4Q 2017) Sluiskil urea+s (4Q 2017) Rio Grande NPK/NPK blends (2H 2020) Rio Gr. 400 Nordic NPK CN Urea+S NPK Blends Expand commodity scale based on attractive full-cost growth opportunities Freeport ammonia JV (4Q 2017) Babrala urea acquisition (3Q 2017) Ammonia Urea Act on attractive opportunities to grow industrial sales and supply Pilbara TAN (1H 2017) Köping TAN (2Q 2018) 250 TAN Structurally secure P and K supply Galvani / Salitre (mining: 1Q18, chemical 4Q18) SSP/NP Exposure to commodity nitrogen prices: Low Medium High 1 Including Yara s share of volume in non-consolidated investees. Fully consolidated entities presented at 100% basis 9

10 Yara Improvement Program targets sustained improvement of minimum $500MM EBITDA, plus cash benefits USD$MM, vs baseline and 2015 prices Sustained EBITDA improvement 64 1 ~150 ~300 ~ ~30% ~15% ~30% ~25% Production volume Consumption factor Variable unit cost Fixed cost Sustained capex improvement Sustained capex improvement: Target under development One-off working capital release ~40 ~40 ~15 ~15 ~15 (~125MM total) One-off cost ~10 ~30 ~20 ~10 ~10 EBITDA impact (~80MM total) One-off capex ~70 ~170 ~170 ~90 (~500M total) * Effects calculated on 2015 prices. If actual prices in 2016 are applied, the total is $25M; Only confirmed 2016 benefits included 10

11 Improvement and growth investments drive major earnings improvement by 2020 Improvement and growth capex 1 (BNOK) Improvement program Committed expansions + M&A EBITDA improvement 2 (MUSD) 1,150 1, Improvement program: MUSD cost improvement +150 MUSD volume improvement: -> 0.4 mill. tonnes ammonia -> 0.7 mill. tonnes fertilizer Committed expansions + M&A: mill. tonnes ammonia mill. tonnes fertilizer Earnings improvement 2 (NOK per share) Excluding maintenance capex on existing assets see page 28. Yara s share of capex. Fully consolidated entities presented at 100% basis 2 Measured at 2015 conditions. Main average market prices: Ammonia fob Yuzhny 390 USD/t, Urea fob Yuzhny 275 USD/t, DAP fob Morocco 495 USD/t. 11

12 Differentiated product portfolio represents a key source of competitive edge Fertilizer product portfolio (2015/16 season volume) NPK blends 19% 36% Standard products (Urea, UAN, Ammonia) 24% Specialty (CN, Compound NPK, Fertigation) 21% Differentiated products (CAN, AN) 12

13 Yara Brazil: Strong market presence complements differentiated product portfolio Unrivalled presence: 28 sites in 11 states Farmer-centric strategy drives growth > 20,000 growers using Yara solutions Yara (offices, production, blending and distribution of fertilizers, port operation) Galvani (fertilizer production, mining and port operation) > 200 Yara agronomists and 600 sales representatives > 55% of Yara deliveries are direct to farmer > 55,000 interactions with growers p.a. 13

14 Yara Brazil: Focus on premium products and solutions drives growth Brazil season-to-date (1H) fertilizer deliveries Kilotons % Kilotons 1H13 1H14 1H15 1H16 1H % Season-to-date premium product deliveries Kilotons % H13 1H14 1H15 1H16 1H17 0 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 Industry (ANDA) Yara Brazil Galvani Trade 14

15 CVI Crop Value Index a key guide to our approach High value, Low volume Double price premium for high quality 2% yield increase= USD/ha What is CVI: Crop revenue Fertilizer costs Take the position in cash crop but not enough scale Key parameters: Quality and yield Build positions for crop with both value and scale Yield, quality and productivity Optimal cost position for lower value segments Low level of differentiation Global area grown (ha) Low value - High volume Limited price premiums for quality Nutrient use efficiency is key USD/ha = 50% yield increase 15

16 Digital Farming: Yara stepping up its investment in digital farming solutions 16

17 Illustrative example for Brazil Farmer and Yara benefits from our advanced digital offerings Farmer gets Highest quality crop nutrition services Precision nutrition planning Digitized soil/tissue analytics Variable rate fertilizer application Better customer service Direct interaction with Yara agronomists Facilitated order and delivery services Example Professional cereals farmer in Brazil 700 acre farm Analytics engine Precision nutrition solution MyYara 2.0 interaction N-sensor MegaLab 4.0 Satellite imagery Drone sensors Yara gets Benefits from "Marketing 2.0" Direct learning about farm and farmer preferences Ability to position the advantages of our products New revenue pool Service business from premium precision nutrition solutions 17

18 Track record of strong returns and stable rating Average cash return on gross investment (CROGI) well above the Yara CROGI target of 10% 14.4% 14.1% 14.1% 16.1% 22.8% 8.5% 17.4% 20.9% 17.3% 13.3% 14.0% 12.6% 2004 '06 '08 '10 '12 '14 16 Ex special items 9,5 % Yara avg. gross investment, 12M rolling % target Yara aims to maintain a long-term midinvestment grade rating level, i.e. BBB according to Standard & Poor s methodology and Baa2 according to Moody s methodology. This implies that the company should normally operate with a net debt below two times EBITDA, and that larger acquisitions would normally be accompanied by new equity issuance. Report of the Board of Directors Yara financial report

19 Financial discipline and active risk management will continue to guide our growth strategy Financial Policy Financial discipline will be the basis for the development of Yara s global leadership position Total cash return to shareholders expected to average 40-45% of net income over the business cycle Ordinary dividend a minimum 30% of net income over the business cycle Financial Targets Long-term credit rating target Mid investment grade (minimum Baa2/BBB) Relative competitiveness EBITDA/Total assets in best quartile of peers Solid profitability CROGI over the cycle > 10% as average New investment profitability Hurdle rate: IRR nominal, after tax > 9% Share buyback will constitute the rest 19

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