Yara International ASA 2017 second quarter results. 18 July 2017

Transcription

1 Yara International ASA 217 second quarter results 18 July 217

2 Safe operations is our first priority TRI (Total recordable injuries 12-month rolling) 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 Summary second quarter Results reflect lower commodity margins Strong finished fertilizer production, but lower ammonia production Continued growth in Industrial deliveries Improvement program on track 3

4 Earnings per share* EPS excluding currency and special items Annual YTD 217 NOK *Average number of shares for 2Q 217: million (2Q 216: million). 4

5 Higher finished fertilizer production; lower ammonia production Kilotons 2,5 Ammonia 1 Kilotons 6, Finished fertilizer & industrial products 1 +1% 2, -7% 5, 1,5 4, 3, 1, 2, 5 1, Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accounted investees 5

6 Brazil: focus on premium products and solutions drives growth Brazil season-to-date (1H) fertilizer deliveries Kilotons 15, +% 1, 5, Kilotons 1H13 1H14 1H15 1H16 1H17 4, 3, +6% 2, 1, Season-to-date premium product deliveries Kilotons 9 +23% H13 1H14 1H15 1H16 1H17 1H8 1H9 1H1 1H11 1H12 1H13 1H14 1H15 1H16 1H17 Industry (ANDA) Yara Brazil Galvani Trade 6

7 Earnings before interest, tax, depreciation and amortization (EBITDA) EBITDA excluding special items NOK millions 7,884 4,614 3,83 3,591 4,227 4,185 4,625 4,2 4,528 3,964 5,742 4,794 5,179 5,55 3,58 3,54 5,55 5,5 5,489 3,958 3,4 2,968 2,474 2,15 3,335 3,216 2,992 2,873 Annual NOK millions YTD ,47 21,361 15,563 6,28 7

8 EBITDA development NOK millions 5, , ,992 EBITDA 2Q16 Volume Price/Margin Energy costs Currency translation Special items Other EBITDA 2Q17 8

9 Lower prices mainly impact Production segment EBITDA (NOK millions) 1,33 EBITDA excluding special items 1, ,12 1,923 1,531 1,412 1,5 373 Crop Nutrition Industrial Production 2Q16 2Q17 9

10 Net interest-bearing debt development NOK millions ,831 14,454 2,732 2,238 2,742 1,214 Net debt Mar 17 Cash earnings* Net operating capital change Investments (net) Yara dividend Foreign currency translation loss Other Net debt Jun 17 * Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges 1

11 Natural gas cost USD/ MMBtu Yara European natural gas cost 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 TTF (1-month lag) *Dotted lines denote forward prices as of 1 July 217 Source: Yara, World Bank, Argus/ICIS Heren Yara Europe NOK millions 1, (2) (4) (6) (8) (1,) (1,2) Change in global natural gas cost (251) (74) (1,42) 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 EU/US actual EU/US estimate* Pilbara actual Pilbara estimate 11

12 European nitrate premiums in line with a year earlier USD/t Nitrogen upgrading margins 1 (monthly publication prices) 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 CAN (46% N) NH3 CFR (46% N) Urea Egypt CFR proxy 1) All prices in urea equivalents Nitrate premium above urea Value above ammonia Value above gas Yara EU gas cost *2 USD/t European nitrate premium 2 (quarterly Yara realized) 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 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. 12

13 Solid commodity phosphate margins and 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 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 DAP, fob USG MOP, CIF inland Germany 2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 1) Export NPK plants, average grade , net of transport and handling cost. 13

14 Four strategic responses shape our approach to the market Strengthened and aligned brand positioning Develop farmer centric solutions that commercially integrate knowledge, digital tools and services to our product portfolio Actively develop aligned market channels that enable knowledge sharing with the farmer Actively develop profitable local and global partnerships along the value chain Be in the forefront of innovation and R&D, and pursue smaller M&A to add new knowledge areas Safety and compliance key priority in everything we do 14

15 Digital Farming: Yara to step up its investment in digital farming solutions 15

16 Cornerstones of our Crop Nutrition digital strategy Our offer We stand for worldleading crop nutrition knowledge which is also our core digital offer We offer best-in-class digital crop nutrition solutions that make a real difference for the farmer tailored to the needs in each market Our customers We target all farmers wanting to step up efficiency and yield through best-in-class crop nutrition advisory We work with our partners in distribution and retail and selectively collaborate with partners in our value chains Our plan We will step up our development plans and capabilities through a dedicated Digital Farming unit We will prioritize speed and agility: establish a leading position by fast launch and rapid roll-out of digital products in key Yara markets 16

17 Our key focus will be to advance our digital offering within three areas Professional Farmers Reinvent our digital customer experience Broaden our offer within Precision nutrition solutions Upgrade MyYara features with more convenience of use Intensify two-way interaction with farmers Roll out solutions faster globally Re-launch N-sensor with higher connectivity Broaden our offer to include precision nutrition planning Introduce new sensors (e.g. drones, satellites) Smallholder markets Expand into the smallholder markets Develop digital solutions for farmers in Africa and Asia Meet farmer-specific and crop-specific needs Increase productivity and sustainable farming 17

18 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 7 acre farm Analytics engine Precision nutrition solution MyYara 2. interaction N-sensor MegaLab 4. Satellite imagery Drone sensors Yara gets Benefits from "Marketing 2." 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 18

19 Strong urea over-supply outside China Capacity additions, excl. China (mill. tonnes urea 1 ) Egypt.9 Indonesia.8 Saudi Arabia.5 Malaysia.3 Bangladesh.1 Argentina.1 Vietnam.1 Romania Nigeria.7 Russia.7 Algeria.8 USA Nigeria.7 Russia.1 Iran 1.4 USA 2.4 Malaysia.9 India.7 Romania.7 Indonesia.5 Bangladesh.5 Bolivia Russia.4 Iran.9 USA 1.4 India.7 Bolivia.5 Azerbaijan.5 Turkmenistan.3 Indonesia.3 Kuwait Iran.8 Turkmenistan.9 Indonesia.3 Azerbaijan.2 Uzbekistan India 1. Uzbekistan.2 ~3 Mt = 1 year historical trend consumption growth 1.8 Nigeria 1.3 India.3 Tajikistan.2 Czech Rep. -,2 Indonesia -,7 Bangladesh -,1 Bangladesh -,5 Romania Source: CRU, June 217. Numbers include both additions and closures of capacity. CRU year-over-year production change 19

20 Non-Chinese fob prices reduced to displace Chinese urea exports USD/t Increasing 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 2

21 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 216) Porsgrunn/Glomfjord CN/NPK (4Q 217) Sluiskil urea+s (4Q 217) Rio Grande NPK/NPK blends (2H 22) 1, 5 Rio Gr. 4 Nordic NPK CN Urea+S NPK Blends Expand commodity scale based on attractive full-cost growth opportunities Freeport ammonia JV (4Q 217) Babrala urea acquisition (3Q 217) 5 1,2 Ammonia Urea Act on attractive opportunities to grow industrial sales and supply Pilbara TAN (1H 217) Köping TAN (2Q 218) 25 TAN Structurally secure P and K supply Galvani / Salitre (mining: 1Q18, chemical 4Q18) 1, 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 1% basis 21

22 Yara Improvement Program well on track, despite plant outages Program progress Financial benefits Start: Today End: 22 Annualized EBITDA improvement, $MM, vs. 215 baseline, at 215 prices 5 Program progressing according to plan Yara Productivity System: 8 plants through diagnostic phase (5 this quarter) Procurement: Second wave of category teams about to start Further $8MM one-off cash improvement realized, primarily working capital release 64 Status as of Q Status as of Q Status as of Q target 22 target Accumulated one-off program costs: opex $36MM and capex $116MM 22

23 Major improvement and growth investments in 217; main earnings improvement from 218 onwards Improvement and growth capex 1 (BNOK) Improvement program Committed expansions + M&A EBITDA improvement 2 (MUSD) 1,15 1, Improvement program: + 35 MUSD cost improvement +15 MUSD volume improvement: ->.4 mill. tonnes ammonia ->.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 1% basis 2 Measured at 215 conditions. Main average market prices: Ammonia fob Yuzhny 39 USD/t, Urea fob Yuzhny 275 USD/t, DAP fob Morocco 495 USD/t. 23

24 Additional information

25 Growth and capex pipeline Capex plan 1 Production growth NOK bn Cost&capacity improvements 2) M&A Committed growth Maintenance Finished products 3 Mill.tons Ammonia Committed growth (NOK bn): Total ) Yara s share of capex. Fully consolidated entities presented at 1% basis. 2) Includes Yara Improvement program Capex and other improvements Porsgrunn Köping Sluiskil.7.8, BASF JV 1.6,9.5 Rio Grande.1 1,6.5.5 Salitre Other projects T/R 5 Regularity Babrala Other growth 6 Est. 22 GrowHow UK (divested mid-215) Yara s share of Qafco & Lifeco Regularity Pilbara 7 Freeport Est. 22 & Babrala 2) Rio Grande expansion also adds 1 million tonnes NPK blends by 22 3) Finished fertilizer and industrial products, excl. bulk blends 4) Including Yara share of production in non-consolidated investees 5) Adjustment to normalized / 216 turnaround level 6) Committed projects only. TAN Pilbara: 16 kt, Porsgrunn: 235kt, Glomfjord: 15kt, Uusikapunki: 25kt, Köping: 9kt, Sluiskil: net 16kt, Galvani (Salitre ~ 1 mill.tons), Rio Grande: 5kt 7) Including 1% ownership in Pilbara NH 3 plant T/R 5 Yara-operated 25

26 Improvement and growth investments; earnings and sensitivities EBITDA improvement 1 (MUSD) 1, , Improvement program: Impact 2 of +1 USD/t price change (NOK/share).5 Ammonia.8 Urea Earnings improvement 1 (NOK per share) Growth: Impact 2 of +1 USD/t price change (NOK/share) Ammonia Urea DAP 1 Measured at 215 conditions. Main average market prices: Ammonia fob Yuzhny 39 USD/t, Urea fob Yuzhny 275 USD/t, DAP fob Morocco 495 USD/t. 2 Improvement: 22 numbers. Growth: At full capacity (219 for urea and ammonia, 22 for DAP). 3 Phosphate-driven price change, equivalent to 138 USD/t phosphate rock (72 bpl) 3 26

27 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 27

28 Yara 2Q fertilizer deliveries by market and product Kilotons 2,292 2,39 1,986 2,165 2Q16 2Q , Europe Brazil Latin America North America Asia Africa 1,132 1,189 1,363 1,124 1,116 1,136 1,326 1,239 1,15 1, Compound NPK 1 Blend NPK Nitrate Urea Other products UAN CN 1) Yara-produced compound NPK and third party sourced (Total NPK minus blend NPK) 28

29 Fertilizer deliveries by product and source Kilotons 1,363 1,136 1,132 1,189 1,124 1,116 1,326 1,239 1,494 1, Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 2Q16 2Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced 29

30 Strong premium product deliveries Value-added fertilizer deliveries 1 Value-added fertilizer deliveries 1 4, 46 3,5 3, 2, , ,5 CAGR 4% 147 1, Q13 2Q14 2Q15 2Q16 2Q17 Outside Europe Europe 1) YaraBela, YaraMila and YaraLiva deliveries Asia Brazil Latin America excl. Brazil 2Q15 2Q16 Africa 2Q17 North America 3

31 YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Kilotons 1,6 1,4 1,2 1, Q13 2Q14 2Q15 2Q16 2Q17 Yara-produced YaraBela deliveries Kilotons 1,6 1,4 1,2 1, Q13 2Q14 2Q15 2Q16 2Q17 Outside Europe Europe Outside Europe Europe 31

32 Industrial volume development Kilotons Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Industrial N-chemicals Environmental products Other 32

33 AdBlue deliveries Kilotons Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 33

34 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period)

35 Yara stocks Kilotons Finished fertilizer 8, Bunge Fertilizer included from 3Q 213 7, 6, 5, 4, 3, 2, 1, - Urea Nitrates Compound NPK Other 35

36 Seasonal deliveries stable in Europe, down in USA Million tons N /13 13/14 14/15 15/16 16/17 Domestic West Europe Million tons N US Imports 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 +1% 12/13 13/14 14/15 15/16 16/17 Production -5% Net imports 36

37 Production Export Domestic Domestic Export Production Chinese urea production suffering from increased production costs, domestic demand lower this season Million tons Chinese urea production 15/16 14/15 Million tons Domestic urea balance -14% /17 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2 1 Source: CFMW Jul-May 15/16 Jul-May 16/17 37

38 Increased coal prices drove nitrogen prices higher Coal price in China (fob Qinhuangdao 55, RMB/mt) China anthracite and urea prices (RMB/mt) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IHS, CFMW 38

39 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 16/17 12/13 13/14 14/15 15/16 39

40 Energy cost Yearly averages , quarterly averages for with forward prices* for 3Q17 and 4Q Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge ) Yara Europe *Dotted lines denote forward prices as of 1 July 217 Source: Yara, World Bank, Argus/ICIS Heren 4

41 Reduction in grain inventories expected for this season Grain consumption and production Million tons 2,65 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 18F Days of consumption in stocks Days E 18F Consumption Production Source: USDA July

42 Non-commercials net long position in corn Thousand contracts Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: US Commodity Futures Trading Commission 42

43 Relatively weak grain and food production economics Index 3 FAO price index /26 1/27 1/28 1/29 1/21 1/211 1/212 1/213 1/214 1/215 1/216 1/217 Source: FAO Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. 43

44 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) Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank 44

45 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