Yara International ASA 2018 first quarter results. 20 April 2018

Transcription

1 Yara International ASA 218 first quarter results 2 April 218

2 Safe operations is our first priority 5 TRI (Total recordable injuries 12-month rolling) 1 Jan'16 Mar May Jul Sep Nov Jan '17 Mar May July Sep Nov Jan'18 Mar'18 1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours. 2

3 Yara s 1Q results reflect the business environment Urea supply increases in 218, higher than trend demand growth Food prices increasing recently, but nitrogen demand still muted European nitrogen deliveries and gas prices impacted by cold weather 6.6 Global capacity additions ex China Trend consumption growth FAO food price index Urea fob Egypt USD/t USD/ MMBtu Yara European natural gas cost Yara Europe 7.1 TTF (1-month lag) /214 1/214 7/215 4/216 1/217 1/217 3/218 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 3

4 Improved margins offset by lower European deliveries USD/t 6 Nitrogen upgrading margins 1 (monthly publication prices) Million tonnes N 7 Western Europe industry deliveries (first nine months of season) -7% Urea Egypt CFR proxy CAN (46% N) Imports Ammonia CFR (46% N) Domestic Yara EU gas cost *2 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 1) All prices in urea equivalents and 1 month s lag 2) Upgrading margin from gas to nitrates in 46% N (USD/t) Source: Fertilizer Market Publications 13/14 14/15 15/16 16/17 17/18 Source: Yara estimate for fertilizer deliveries to selected West European countries 4

5 Lower deliveries in Brazil; Yara focused on premium growth, and chose not to compete in lowest margin segments Kilotons 8, First-quarter industry deliveries (ANDA) -1% Kilotons 5 Yara first-quarter premium product deliveries +2% Kilotons 2, First-quarter Yara deliveries -12%

6 Strong ammonia production performance Kilotons Ammonia 1 Kilotons Finished fertilizer & industrial products 1 2,2 +13% 5,5 +2% Urea Nitrates NPK CN UAN SSP 1) Including share of equity-accounted investees 6

7 Earnings per share impacted by lower deliveries and higher depreciation x.xx EPS excluding currency and special items Annual USD *Average number of shares for 1Q 218: million (1Q 217: million). 7

8 Yara is delivering on its growth pipeline; multiple plant expansions and M&A coming on stream in 218 Production growth Mill.tonnes (mt) Finished products Ammonia Yara-operated plants GrowHow UK (divested mid-215) Yara share of Qafco & Lifeco Uusikaupunki (3Q 216) TAN Pilbara (2Q 217) Babrala (1Q 218) Por/Glo (1Q 218) Sluiskil (2Q 218) Cubatão (3Q 218) Köping Rio Grande (3Q 218) (2Q 22) Salitre (2Q 219) Est Pilbara 4 Babrala (1Q 218) Freeport (2Q 218) Cubatão (3Q 218) Est. 22 1) Adjusted to normalized / 216 turnaround level (.7mt finished fertilizer and.2mt NH 3 ) and regularity level (.7mt finished fertilizer and.4mt NH 3 ) 2) Salitre will reach 1.1 mill.tonnes in 222 3) Rio Grande expansion also adds 1 million tonnes NPK blends by 22 4) Including 1% ownership in Pilbara NH 3 plant (not included in committed growth pipeline) 5) TAN Pilbara started up in 2Q 217, but has been down for technical reasons since 3Q 217. Expected re-start 2Q 218 8

9 7 growth projects starting up during 218 (1) Babrala (India) Acquisition of urea plant and distribution assets - Take-over 12 January mt urea and approx 4 MUSD EBITDA p.a. - Provides footprint to accelerate premium product growth Porsgrunn (Norway) NPK and calcium nitrate expansion - Start-up in 1Q - Adds 25 ktpa and approx. 5 MUSD EBITDA p.a. - Record nitric acid production in March (5,127 tpd) Freeport (US) Hydrogen-based ammonia newbuild JV with BASF (Yara 68%) - Start-up in progress - 55 ktpa and approx. 1 MUSD EBITDA p.a. (Yara share) - Strengthens Yara s global ammonia position 9

10 7 growth projects starting up during 218 (2) Sluiskil (NL) Revamp and urea+s expansion - Start-up in 2Q - Adds approx. 21 ktpa and 3 MUSD EBITDA p.a. - Improved product mix - from urea prills to nitrates and urea+s Salitre (Brazil) Phosphate mine - Start-up in 2Q (rock production only) - Adds approx. 1.1 mtpa SSP equivalents by 22 - Limited earnings until chemical production starts mid-219 Cubatao (Brazil) N and P production facility acquisition - Closing expected mid mtpa and approx. 6 MUSD EBITDA p.a. - Strengthens production and industrial footprint in Brazil Köping (Sweden) Nitric acid revamp and TAN expansion - Start-up in 3Q - 9 ktpa and approx. 5 MUSD EBITDA p.a. - Strong long-term fundamentals for civil explosives industry 1

11 AdBlue: record deliveries and expansion in Brunsbüttel > 2million tonnes delivered last 12 months Brunsbüttel AdBlue facility opened in February Kilotons % CAGR Facility comprising storage tank, truckloading station and harbor facilities to increase sales and exports of AdBlue Annual AdBlue production capacity of 1.1 million tonnes This is enough AdBlue to remove around half a million tonnes of NO X emissions a year; enough to abate all road transport-related NO X emissions of Germany, Austria and Switzerland combined

12 Underlying EBITDA down 5% USD millions xxx EBITDA excluding special items Annual USD millions ,545 1,854 1,

13 EBITDA: Stronger margins more than offset by lower deliveries, higher energy cost and weaker US dollar USD millions EBITDA 1Q17 Volume Price/Margin Energy costs Currency Special items Other EBITDA 1Q18 13

14 Higher net interest-bearing debt as investments and net operating capital change more than offset cash earnings Net interest-bearing debt Capex plan 1 USD millions ,879 USD bn Cost&capacity improvements 2) M&A Committed growth 2, Maintenance Net debt Dec 17 Cash earnings* Dividends received equity acc. Inv. Net operating capital change Investments (net) FX translation gain Other Net debt Mar * Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges 14

15 Yara Improvement Program on track Start: 216 End: Today 218 EBITDA benefits on track (in 215 terms): Yara Productivity System rolled out to 15 out of 3 sites. Good reliability improvements in ammonia production Energy efficiency improvements ahead of full target for 218 Focus for this year is to reach target but also to enable the organization to sustain already achieved benefits. Annual impact, USD million, vs. 215 baseline, at 215 margins Sustained EBITDA improvement One-off Benefits 1 Cost Investments Q target 219 target 22 target 1 One-off benefits are related to working capital improvements and white certificates 2 Target One-off investments reduced as effect of Capex reduction program (total ~5mUSD less for 218) 15

16 Peak of new capacity was in 217, but higher production growth forecast for 218 Global urea capacity additions excl. China (mill. tonnes) 6.6 India Russia Iran Algeria USA Others Production % consumption growth Source: CRU March CRU has removed Dangote Fertilizer, Nigeria (3 mill tons) from the medium-term forecast and shifted the project to

17 Major improvement and growth investments in 218; main earnings improvement from 219 onwards 1 EBITDA improvement3 (MUSD) Improvement and growth capex 2 (BUSD) Improvement program Committed expansions + M&A 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 1 Currency assumptions for 218 onwards: USD/NOK 7.8, EUR/USD: 1.2, USD/BRL: Excluding maintenance capex on existing assets. Yara s share of capex. Fully consolidated entities presented at 1% basis 3 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 Earnings improvement 3 (USD per share)

18 Backup / additional information

19 Yara has expected commodity nitrogen oversupply, and has focused its growth pipeline on premium & industrial products Growth focused on premium & industrial Expected start up Pipeline EBITDA (215 prices, USDm) 1 Expand premium products sales and supply Uusikaupunki NPK Porsgrunn/Glomfjord CN/NPK Sluiskil urea+s Rio Grande NPK/NPK blends 3Q 216 1Q 218 2Q 218 2H Expand commodity scale based on attractive full-cost growth opportunities Freeport ammonia JV Babrala urea acquisition 2Q 218 1Q Act on attractive opportunities to grow industrial sales and supply Pilbara TAN Köping TAN Cubatão N and P 2Q Q 218 3Q Structurally secure P and K supply Galvani / Salitre mining 2Q18, chemical 1H ) Including Yara s share of volume in non-consolidated investees. Fully consolidated entities presented at 1% basis 2) Plant started up in 2Q 217, but has been down for technical reasons since 3Q 217. Expected re-start 2Q 218. Sum

20 Improvement and growth investments; earnings and sensitivities 1 EBITDA improvement 2 (MUSD) ,1 5 Improvement program: Impact 3 of +1 USD/t price change (USD/share) Ammonia Urea Earnings improvement 2 (USD per share) 2.1 Growth: Impact 3 of +1 USD/t price change (USD/share) Ammonia Urea DAP 1 Currencies for all amounts from 218: USD/NOK 7.8, EUR/USD: 1.2, USD/BRL: 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. 3 Improvement: 22 numbers. Growth: At full capacity (219 for urea and ammonia, 22 for DAP). 4 Phosphate-driven price change, equivalent to 138 USD/t phosphate rock (72 bpl) 4 2

21 Higher margins in Crop Nutrition and Industrial segment EBITDA (USD millions) EBITDA excluding special items Crop Nutrition Industrial Production 1Q17 1Q18 21

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

23 Improved European nitrate premiums USD/t 6 Nitrogen upgrading margins 1 (monthly publication prices) USD/t 9 European nitrate premium 2 (quarterly Yara realized) Urea Egypt CFR proxy CAN (46% N) Ammonia CFR (46% N) Yara EU gas cost *2 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 1) All prices in urea equivalents and 1 month s lag 2) Upgrading margin from gas to nitrates in 46% N (USD/t) Source: Fertilizer Market Publications 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 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. 23

24 Solid commodity phosphate margins and compound NPK premiums USD/t 6 Phosphate upgrading margins USD/t 7 NPK premium over blend 1 DAP FOB US Gulf 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 Rock, fob North Africa *1.4 DAP, CIF inland Germany 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 Source: Fertilizer Market Publications MOP, CIF inland Germany 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 1) Export NPK plants, average grade , net of transport and handling cost. 24

25 Higher natural gas cost expected for the next two quarters USD/ MMBtu Yara European natural gas cost 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 TTF (1-month lag) Yara Europe *Dotted lines denote forward prices as of 3 January 218 Source: Yara, World Bank, Argus/ICIS Heren Change in global natural gas cost USD millions Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 EU/US actual EU/US estimate* Pilbara actual 25

26 Energy cost Yearly averages , quarterly averages for with forward prices* for 1Q18 and 2Q Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge ) Yara Europe *Dotted lines denote forward prices as of 3 January 218 Source: Yara, World Bank, Argus/ICIS Heren 26

27 Fertilizer deliveries Kilotons 7, Outside Europe Europe

28 Yara 1Q fertilizer deliveries by market and product Kilotons 2,752 2,262 1Q17 1Q18 1,529 1, Europe Brazil Latin America North America Asia Africa 1,547 1, ,535 1,36 1,418 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 1,535 1,36 1,547 1,42 1,17 1, Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 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, 3, , 2,5 2, 1,5 CAGR 8% , Q14 1Q15 1Q16 1Q17 1Q18 Outside Europe Europe 1) YaraBela, YaraMila and YaraLiva deliveries Asia Brazil Latin America excl. Brazil 1Q16 1Q17 Africa 1Q18 North America 3

31 AdBlue deliveries Kilotons 6 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 31

32 Yara stocks Kilotons Finished fertilizer 8, Other Compound NPK Nitrates Urea 32

33 Steady growth in grain consumption, while production growth is more volatile due to weather variations Million tons 2,6 2, Grain consumption and production E 18F Days Days of consumption in stocks E 18F Consumption Production Source: USDA April

34 Relatively weak grain 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 1/218 Source: FAO Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. 34

35 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 Jan-18 Source: US Commodity Futures Trading Commission 35

36 China: Increased coal prices have driven 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 36

37 Higher domestic price and lower exports from China are offsetting oversupply elsewhere Increasing urea pricing (USD/ton) Chinese export is falling (1 tons) 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, Urea fob Black Sea Urea granular fob Egypt Source: BOABC, CFMW Urea prilled fob China Urea inland proxy China 37

38 Chinese domestic supply stable, as export decline offsets lower production Chinese urea production down vs last year (million tons) Export reduction so far kept supply stable (million tons) /17 17/ % Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Production Export Domestic Domestic Export Production Source: CFMW, covering close to 1% of production Jul-Feb 16/17 Jul-Feb 17/18 38

39 Deliveries in USA and Europe lagging last season, partly due to late spring Million tons N 14 USA Million tons N West Europe -5% -7% 7 Net imports Production Production Domestic 13/14 14/15 15/16 16/17 17/18 13/14 14/15 15/16 16/17 17/18 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 39

40 European producers nitrate stocks Index June 27 = Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 17/18 12/13 13/14 14/15 15/16 16/17 Source: Fertilizers Europe, March estimate by Yara 4

41 Modest import catch-up need in India Calendar year Season-to-date (Apr Mar) +2.6% +1.7% Million tonnes Million tonnes + 2% % Production Sales 41

42 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) Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank 42

43 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 Source: Fertilizer Market Publications USD/t DAP fob US Gulf/MOP granular fob Vancouver 1,2 1, Average prices

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