Yara International ASA SEB Investment Grade seminar 24 Aug 2017 Thor Giæver, Investor Relations
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
Yara in numbers Close to 15,000 employees Sales to about 160 countries Revenue NOK 95.2 Billion (USD 11.4 Billion) In 2016 3
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
Integrated business model creates value through scale, flexibility and value chain presence 5
Our global presence is growing ~15 000 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
We sold 34.1 million tonnes of products and solutions globally in 2016 9.4 Sales figures mill. tonnes Fertilizers Industrial products & solutions %= total sales *Ammonia trade not included 3.1 1.0 North America 12.1% 0.7 Latin- America 35,5% 11.4 Europe 41.4% 4.7 1.2 0.3 Africa 4.4% 2.1 0.2 Asia 6.6%
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 -0.8 5.1 Nigeria 0.7 8.1 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 -1.2 3.6 0.8 2.9 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 0.2 3.7 Russia 0.4 Iran 0.9 USA 1.4 2.4 Iran 0.8 Turkmenistan 0.9 Indonesia 0.3 Azerbaijan 0.2 Uzbekistan 0.2 1.2 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 -1.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: CRU, June 2017. Numbers include both additions and closures of capacity. CRU year-over-year production change 8
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) 1 000 500 Rio Gr. 400 Nordic 250 160 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) 500 1 200 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) 1 000 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
Yara Improvement Program targets sustained improvement of minimum $500MM EBITDA, plus cash benefits USD$MM, vs. 2015 baseline and 2015 prices Sustained EBITDA improvement 64 1 ~150 ~300 ~450 500 ~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) 2016 2017 2018 2019 2020 * Effects calculated on 2015 prices. If actual prices in 2016 are applied, the total is $25M; Only confirmed 2016 benefits included 10
Improvement and growth investments drive major earnings improvement by 2020 Improvement and growth capex 1 (BNOK) 11.8 1.4 Improvement program Committed expansions + M&A EBITDA improvement 2 (MUSD) 1,150 1,000 500 650 450 7.9 0.6 Improvement program: + 350 MUSD cost improvement +150 MUSD volume improvement: -> 0.4 mill. tonnes ammonia -> 0.7 mill. tonnes fertilizer 250 104 150 40 100 2016 2017 300 350 2018 550 2019 650 2020 7.3 10.4 4.5 1.4 Committed expansions + M&A: + 1.2 mill. tonnes ammonia + 3.7 mill. tonnes fertilizer Earnings improvement 2 (NOK per share) 14 17 8 9 10 2016 2017 3.1 2018 1.2 0.7 0.5 2019 2020 1 1 2016 3 3 2017 6 2 2018 5 2019 7 2020 1 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
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
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
Yara Brazil: Focus on premium products and solutions drives growth Brazil season-to-date (1H) fertilizer deliveries Kilotons 15 000 +0% 10 000 5 000 0 Kilotons 1H13 1H14 1H15 1H16 1H17 4 000 3 000 +6% 2 000 1 000 Season-to-date premium product deliveries Kilotons 900 +23% 800 700 600 500 400 300 200 100 0 1H13 1H14 1H15 1H16 1H17 0 1H08 1H09 1H10 1H11 1H12 1H13 1H14 1H15 1H16 1H17 Industry (ANDA) Yara Brazil Galvani Trade 14
CVI Crop Value Index a key guide to our approach High value, Low volume Double price premium for high quality 2% yield increase= +1200 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 +1200 USD/ha = 50% yield increase 15
Digital Farming: Yara stepping up its investment in digital farming solutions 16
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
Track record of strong returns and stable rating 0 0 0 0 0 0 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 160 140 120 100 80 10% target 60 40 20 0 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 2016 18
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