Yara International ASA Fourth quarter results 2014

Transcription

1 1 Yara International ASA Fourth quarter results February 2015

2 2 Summary fourth quarter Strong result driven by higher margins Margins benefit from lower European gas prices and stronger US dollar Continued volume and margin growth in Brazil Further growth in Latin America with OFD and Galvani acquisitions Proposed dividend NOK 13 per share, 47% of net income

3 3 Earnings per share* EPS excluding currency and special items Annual NOK *Average number of shares for 4Q 2014: million (4Q 2013: million).

4 4 Strong returns through the cycle CROGI 1 (12 months rolling average) 22.8 % 20.9 % 14.1 % 14.4 % 14.1 % 16.1 % 17.4 % 17.3 % 12.6 % 13.3 % 8.5 % Ex special items Long-term target 1) Cash Return on Gross Investment= (EBITDA-tax)/Gross accumulated investments 2) Net interest bearing debt / book value of equity end of period

5 5 Proposed dividend NOK 13 per share Share of net income 64% 32% 7% 25% 48% 25% 23% 48% 30% 18% 26% 7% 19% 21% 5% 16% 41% 6% 34% 19% 1% 18% 23% 6% 17% 47% 12% 35% 16% 48% 53% 6% 47% Share buy backs Dividends Target range 40-45%

6 6 Market development Continued strong fertilizer demand Stable urea prices; continued curtailments in China, Ukraine and Egypt Western Europe nitrogen fertilizer industry deliveries 3% lower; season-todate slightly ahead Higher phosphate prices and upgrading margins than last year Strong demand for value-added fertilizer products Industrial: continued demand growth for environmental solutions but weaker TAN market

7 Price incentives needed to keep up with consumption growth 7 mill. tonnes Grain consumption and production FAO price index ( =100) 3, ,700 2, % 2,100 1,800 1, % , Production Consumption Source: USDA Source: FAO

8 Production curtailments in Ukraine and Egypt impact Black sea urea price 8 Jan Sep urea exports, kt Price (USD/t) Urea price Premium (USD/t) ,663 1,469-49% , , Jul- 13 Oct- 13 Jan- 14 Apr- 14 Jul- 14 Oct- 14 Jan Egypt Ukraine FOB Black Sea FOB China Black Sea vs China Source: IFA

9 9 Brazil - the fastest growing fertilizer market Brazil fertilizer industry deliveries Yield evolution ( tons / hectare) mill. tonnes 90 s 00 s 10 s Best practice CAGR ( ) 5,9% Soybean Corn 1st Wheat Further 40% upside in fertilizer consumption if US fertilizer standards are applied on current land area Sources: FAO, Conab/ Market Intelligence Brazil, ANDA

10 Growth in Latin-America strengthens Yara s competitive edge 10 Scale in logistics Scale in raw material sourcing Cash crop market - untapped potential for Yara s differentiated products and crop nutrition programs Operational excellence Potential Further potential Brazil also complements Yara s fertilizer season exposure enhancing the flexibility in our business model

11 Brazil performing well; significant Bunge synergies realized 11 Realized synergies Yara Brazil performance USD million 44 45% 10% 45% Business case 2014 Sourcing 55 50% 20% 30% Realized 2014 Logistics Fixed costs NOK million mill. tonnes 7.9 1, , EBITDA Deliveries 1,

12 12 Increased end-user interaction in Brazil 45% 25% Cooperatives 20% Agroindustry GROWERS 10% Retailer Knowledge Crop focus Product portfolio Application competence

13 Galvani expansions further improve scale and cost position AS-IS Future operations (~2018 ) 13 Angico Santa Quiteria 1 Angico (Irecé) L.E.M. L.E.M. Lagamar Salitre Fertilizer plants Phosphate mines mt Angico Lagamar 0.5 Paulínia Self-sufficiency on phosphate rock 1.0 Paulinia L.E.M. mt Santa Q. Angico Salitre 2.0 Phosphate rock surplus Paulínia 2.2 Santa Q. L.E.M. Paulinia Salitre Phoshate rock End-products (mainly SSP) Phosphate rock End-products (mainly SSP) Salitre project and Angico expansion will triple phosphate rock production and reduce opex level signficantly Salitre project investment decision during H with start-up ~2 years later Yara s share of indicated capex for the projects ~USD 550 mill.

14 14 Yara value chain presence in Brazil Raw material/end-product production outside Brazil Rio Grande port Domestic raw material production Rock upgrade, SSP production Blending and bagging Sales & marketing Share of contribution p-rock, sulphur ~0.8mt SSP N, P, K for blends ~5 mt blends ~50% ~3mt ~1 mt Premium products ~20% ~2mt bulk straights ~2 mt bagged straights ~20% ~0.4mt <1% Galvani 1 : ~0.5mt p-rock ~1mt SSP ~10% 2 1) On 100%-basis. 2) Adjusted for Yara s 60%-ownership Third party Yara s presence

15 Yara serves rest of Latin America with an extensive product range and geographical reach , mill. tonnes Volume per geography 2014, mill. tonnes Volume per product group Colombia Mexico Peru Argentina Costa Rica Other Combined Yara OFD Combined OFD Yara Other Blends Nitrates NPK

16 Earnings before interest, tax, depreciation and amortization (EBITDA) 16 NOK millions 4,281 3,455 5,444 4,982 4,966 4,310 4,103 3,591 4,184 4,039 3,318 EBITDA excluding special items 3,591 4,227 3,964 4,625 1,858 Annual NOK millions ,163 16,970 13,399 16,407

17 17 EBITDA development NOK millions , , EBITDA 4Q13 Volume & mix Price/margin Gas & oil costs in Europe Special items Other Currency EBITDA 4Q14

18 18 Improved Downstream and Upstream earnings EBITDA (NOK millions) EBITDA excluding special items 3, ,211 1, Downstream Industrial Upstream 4Q13 4Q14

19 Improved European margins; stable nitrate premium 19 USD/t 700 Nitrogen upgrading margins 1 (monthly publication prices) 180 European nitrate premium 2 (quarterly Yara realized) Nitrate premium above urea Value above ammonia Value above gas Yara EU gas cost * Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 0 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 Urea CFR CAN (46% N) NH3 CFR (46% N) 1) All prices in urea equivalents 2) Yara European realized nitrate prices compared with urea publication prices with one month time lag. All numbers in USD per ton of CAN equivalents.

20 Higher commodity phosphate margins and solid NPK premiums 20 USD/t Phosphate upgrading margins USD/t NPK premium over blend Value above raw material 400 Weighted average global premium above blend cost 300 NH3, fob Black Sea * Nitrate premium Urea, fob Black sea 100 Rock, fob NA * MOP, cfr NWE 0 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 DAP, fob USG DAP, fob Morocco 0 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1) Export NPK plants, average grade , net of transport and handling cost.

21 21 Lower natural gas cost in Europe Yara European gas & oil cost Change in European energy cost USD/ MMBtu NOK millions (200) (36) 10.0 (400) (600) (800) (1,000) (660) (891) (726) (700) 5.0 (1,200) 4.0 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 (1,400) (1,300) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Zeebrugge (1-month lag) Yara Europe Actual for quarter February 2015 estimate* *Dotted lines denote forward prices as of 3 February 2015 Source: Yara, World Bank, Platts

22 22 Net interest-bearing debt development NOK millions 11,808 1, ,584 4,963 1,595 2,909 3,957 1, Ned debt Sep 14 Cash earnings* Dividends from equityaccounted investees Net operating capital change OFD Galvani Investments net Share buy backs & redemption FX loss Other Net debt Dec 14 * Operating income plus depreciation and amortization, minus tax paid, net gain/loss on disposals, net interest expense and bank charges

23 Price sensitivities linked to capacities 23 Operating income EBITDA EPS Parameter (MUSD) (MUSD) (USD) 1 Urea + USD 10/t... of which pure urea of which UAN CAN price + USD 10/t of which pure nitrates of which NPK Compound NPK premium + USD 10/t Hub gas Europe + USD 0.1/MMbtu Ammonia + USD 10/t Phosphate rock + USD 10/t

24 24 Yara benefits from a stronger USD Revenues and raw material costs are both USD-driven Fixed cost base in EUR (~40%), NOK (~20%), BRL (~15%) and USD/other (~25%) Fixed costs (NOK bn) Impact of 10% appreciation vs. NOK 1 Translation impact on gross profit (NOK bn) EBITDA (NOK bn) EBIT (NOK bn) EPS (NOK) 3 Run-rate vs average 2 NOK vs. FX Feb avg % appreciation in FX vs NOK Impact on EPS (NOK) USD % 14.7 EUR % -0.8 BRL % -0.6 Combined Note: Currency gain/loss on USD debt reported in P&L statement will vary 1) Compared with 2014 average FX-rates. Assumed long-term effects (approx. one year +) 2) Run-rate=market as of 3 Feb ) 25% tax rate

25 Price and currency assumptions for runrate earnings scenario 25 Parameter 2014 average Current market (3 Feb 2015) Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN CIF Germany, USD/t Phos rock fob North Africa (USD/t) DAP fob USG (USD/t) Zeebrugge natural gas (USD/MMBtu) Henry hub natural gas (USD/MMBtu) Yara s European energy price (USD/MMBtu) NOK/USD EUR/USD BRL/USD

26 Increase in run-rate earnings driven by currency and energy 26 NOK per share Primarily lower EU gas price (USD1.5/mmbtu) Primarily lower ammonia price (USD86/t) 13 Primarily lower CAN price (USD18/t) EPS (NOK) excl. special items Currency Energy cost OFD & Galvani Price Other Annual run-rate EPS (NOK) 1 1) Based on market prices as of 3 Feb Excludes TAN Pilbara (start-up in 2H 2015)

27 CAPEX guidance 27 Capex plan Production growth NOK bn mt Committed growth (NOKbn) 1 Uusikapunki TAN Pilbara Köping Porsgrunn Total Ammonia vessels Committed growth Cost&capacity improvements M&A Maintenance (FX change impact) 2015 Maintenance (average 2014 FX) Normalized maintenance capex Production Committed growth 3 M&A 4 Production ) Finished fertilizer and industrial products, excl. bulk blends 3) Committed projects only. TAN Pilbara: 160 kt (net 90kt), Porsgrunn: 250kt, Glomfjord: 185kt, Uusikapunki: 250kt, Köping: 90kt 4) Full-year impact vs of Galvani (60% of ~1 mill.- tonnes) and OFD: ~400kt higher than ) Yara s share of capex

28 28 Prospects Incentives for fertilizer application remain supportive. Continued grain production growth required to keep up with consumption growth Strong US dollar improves competitiveness of European farmers and nitrogen producers Strong European order book at start of first quarter China to remain swing producer anthracite coal prices and RMB/USD exchange rate are key for global nitrogen commodity prices Expected further gas cost reduction of NOK 1.3 billion in Europe in first quarter and NOK 0.7 billion in second quarter 2015

29 29 Additional information

30 30 Debt/equity ratio 0.75 Net interest-bearing debt / equity ratio (end of period)

31 31 Fertilizer deliveries Kilotons 7,000 6,000 5,000 6,104 5,256 5,179 4,763 6,284 6,017 4,742 4,882 5,210 5,216 4,791 5,474 5,129 4,914 4,759 5,296 4,970 4,834 5,437 5,253 5,013 5,044 6,342 6,146 5,884 5,297 6,389 6,496 6,848 6,585 4,239 4,000 3,496 3,000 2,000 1, Europe Outside Europe Total

32 32 Yara 4Q fertilizer sales by market and product Kilotons 2,398 2,267 2,152 2,667 4Q13 4Q Europe Latin America Asia North America Africa 1,133 1,224 1,210 1,184 1,389 1,464 1,429 1, NPK compounds NPK blends Nitrate Urea Other products UAN CN

33 33 Industrial deliveries Kilotons Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Industrial N-chemicals Environmental products Other

34 34 Air1 deliveries Kilotons % % % % % 0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 0% Europe North America ROW % of total Industrial deliveries

35 35 NPK and nitrate deliveries Yara-produced compound NPK deliveries Yara-produced nitrate deliveries Kilotons 1,400 1,300 1,200 1,100 1, Kilotons 1,700 1,500 1,300 1, Q10 4Q11 4Q12 4Q13 4Q Q10 4Q11 4Q12 4Q13 4Q14

36 36 Yara production volume* Kilotons 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Finished fertilizer and industrial products Kilotons 2,500 2,000 1,500 1, Ammonia Urea Nitrates NPK CN UAN SSP - based fertilizer * Including share of equity-accounted investees

37 37 Yara stocks Kilotons Finished fertilizer 7,000 Bunge Fertilizer included from 3Q ,000 5,000 4,000 3,000 2,000 1,000 - Urea Nitrates Compound NPK Other

38 38 Energy cost Yearly averages , quarterly averages for with forward prices* for 4Q14 and 1Q15 USD per MMBtu Q14 2Q14 3Q14 4Q14 1Q15 2Q15 US gas price (Henry Hub) Yara Global Zeebrugge day ahead Yara Europe *Dotted lines denote forward prices as of 3 February 2015 Source: Yara, World Bank, Platts

39 39 Net income from equity-accounted investees NOK millions 210 4Q13 4Q Qafco GrowHow UK Lifeco Other Tringen is from 2014 classified as Joint operations in line with IFRS 11, and is not any longer included as equity-accounted investee has been restated accordingly.

40 40 Currency exposure affecting P&L At the beginning of the first quarter The US dollar debt generating p&l exposure was USD 1,500 million Kept as hedge of future earnings and to finance inventories in emerging markets Around 50% towards BRL with the rest mainly towards other emerging market currencies and EUR The debt level in emerging markets will fluctuate with fertilizer seasons 2. Additional p&l exposure from internal currency positions vs. NOK Payables mainly CAD (250 million) Receivables mainly EUR (575 million)

41 41 Stable nitrogen deliveries so far this season Million tons N USA Million tons N Western Europe H10 2H11 2H12 2H13 2H14 2H10 2H11 2H12 2H13 2H14 Production Net imports Production Net imports % +2% 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

42 42 European producers nitrate stocks Index June 2007= Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 14/15 10/11 11/12 12/13 13/14 Source: Fertilizers Europe

43 Projected nitrogen capacity additions outside China 43 Year Driving regions Excluding China Indonesia 20% Egypt 14% Algeria 18% Saudi Arabia 16% USA 30% Algeria 14% Nigeria 32% USA 24% Nigeria 52% Russia 16% Urea capacity growth relative to nitrogen capacity Excluding China 1.1% (1.5%) 2.6% (2.1%) 3.1% (2.3%) 2.2% (2.2%) 1.3% (1.3%) Gross annual addition ~2.1% Assumed annual closures ~0.5% Net annual addition ~1.6% Trend consumption growth from % Source: CRU urea update December 2014 (September 2014 in brackets). Consumption data source is IFA.

44 Production Export Domestic Domestic Export Production 44 Production stable, increased exports Chinese urea production Domestic urea balance Million tons /15 12/13 13/14 Million tons % Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 0 Source: BOABC, CFMW Jul-Dec 13/14 Jul-Dec 14/15

45 45 Non-commercials net long position in corn Thousand contracts Jan-07Jul-07Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14Jul-14Jan-15 Source: US Commodity Futures Trading Commission

46 46 Key value drivers quarterly averages Zeebrugge day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (dotted line, USD/t) CAN cif Germany (USD/t) Q13 1Q14 2Q14 3Q14 4Q14 4Q13 1Q14 2Q14 3Q14 4Q14 4Q13 1Q14 2Q14 3Q14 4Q14 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate Q13 1Q14 2Q14 3Q14 4Q14 4Q13 1Q14 2Q14 3Q14 4Q14 4Q13 1Q14 2Q14 3Q14 4Q14 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank

47 47 10-year fertilizer prices monthly averages USD/t 1,000 Ammonia fob Black Sea USD/t 500 CAN cif Germany USD/t 800 Urea prilled fob Black Sea/Urea granular fob Egypt USD/t 1,200 DAP fob US Gulf/MOP granular fob Vancouver 600 1, Source: Average of international publications Average prices