REPORT. Second quarter Yara International ASA quarterly and half year report

Transcription

1 REPORT Second quarter 2010 Yara International ASA quarterly and half year report Strong results driven by improved margins Close to optimal capacity utilization NOK 2.6 billion after-tax gain on Fosfertil sale Strong volume growth for Industrial Promising start to new fertilizer season The new fertilizer season has had a promising start, and European nitrate prices have started substantially higher than at the beginning of the previous season. EARNINGS PER SHARE NOK EBITDA (NOK millions) Earnings per share (NOK) Debt/equity ratio 8, ,000 4,000 2, Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

2 2 YARA SECOND QUARTER AND HALF YEAR 2010 Second quarter 2010 FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 2Q Q H H 2009 Revenue and other income 15,679 16,129 31,316 33,248 Operating income 1,888 (85) 4,203 1,109 Share net income equity-accounted investees EBITDA 6,587 1,259 9,838 3,295 EBITDA excl. special items 2,719 1,229 5,067 3,326 Net income after non-controlling interests 3,716 1,122 5,238 2,009 Earnings per share 1) Earnings per share excl.currency and special items 1) Average number of shares outstanding (millions) CROGI (12-month rolling average) 2) 15.7% 12.7% ROCE (12-month rolling average) 18.0% 13.1% 1) NOK per share. Yara currently has no share-based compensation programs that result in a dilutive effect on earnings per share. 2) Second-quarter 2010 CROGI excl. special items annualized 13.5%. KEY STATISTICS Thousand tons 2Q Q H H 2009 Sales Fertilizer 4,759 5,210 9,888 10,092 Industrial products (excl. industrial gases) 1, ,043 1,740 Total 5,805 6,076 11,931 11,832 Production 1) Ammonia 1,801 1,812 3,621 3,211 Finished fertilizer and industrial products, excl. bulk blends 4,081 3,577 8,509 7,334 Total 5,882 5,389 12,130 10,545 1) Including Yara share of production in equity-accounted investees. Yara s second-quarter net income after non-controlling interests was NOK 3,716 million, compared with NOK 1,122 million last year. Excluding net foreign exchange gain/loss and special items, the result was NOK 1,509 million, compared with NOK 345 million in second quarter The corresponding earnings per share were NOK 5.22 compared with NOK 1.19 last year. Yara reports strong second-quarter results as fertilizer margins improved and production ran at close to optimal capacity utilization. The secondquarter result benefits further from the NOK 2.6 billion after-tax gain on the sale of Yara s shares in the Brazilian phosphate producer Fosfertil. said Jørgen Ole Haslestad, President and Chief Executive Officer of Yara. The new fertilizer season has had a promising start. Global nitrogen prices have increased as demand has picked up, and European nitrate prices have started substantially higher than at the beginning of the previous season, supported by low inventories. Fertilizer demand is backed by strong consumption growth for agricultural products and concerns that last years record yields following favorable weather may not be repeated. said Jørgen Ole Haslestad FERTILIZER MARKET CONDITIONS Global fertilizer consumption has returned, except for potash. According to the latest estimates from The Fertilizer Industry Association (IFA), global nitrogen fertilizer consumption during the 2009/10 season increased by 3.1%, and exceeded the 2007/08 level by 1.3%. Phosphate fertilizer consumption grew by 8.8%, while potash consumption dropped by another 1.2%. Demand growth for agricultural products has remained strong, and the current USDA estimate for global grain consumption growth is 2.0% for 2009/10, and 1.9% for 2010/11. Following a strong spring season on the northern hemisphere, global urea prices dropped during April and May, returning to a supply-driven situation. Production curtailments were initiated in several high-cost locations, including China, Ukraine and Romania. Prices stabilized in May and June in the USD 220s per ton fob Black Sea, well below supply cost from China, but have increased significantly recently. Considerable volumes of urea are stored at ports in China, for shipment when the export tax drops to 7% from July 1. These volumes are not expected to be offered below USD 260 per ton for granular product, supporting the recent price increase for Black Sea urea. Ammonia demand has improved sharply from last year, due to the return of industrial demand and a strong phosphate sector. Disregard-

3 YARA SECOND QUARTER AND HALF YEAR FERTILIZER AND ENERGY MARKET PRICES Average prices 2Q Q H H 2009 Urea prilled (fob Black Sea) USD per ton Ammonia (fob Black Sea) USD per ton AN (cif France) USD per ton CAN (cif Germany) USD per ton Phosphate rock (fob Morocco) USD per ton Oil Brent blend spot USD per bbl Low-sulphur fuel oil (LSFO) USD per ton US gas (Henry Hub) USD per MMBtu European gas (Zeebrugge) USD per MMBtu Source: The Market, Fertilizer Week, World Bank and Platts. ing short-term volatility, prices have mostly been close to Ukraine supply cost, with the average second-quarter price fob Black Sea at the same level as in the first quarter. While Ukrainian ammonia exports increased sharply compared with a year ago, they were still well below full capacity. Phosphate fertilizer prices were stable during the quarter, at USD 455 per ton fob Morocco, similar to the price agreed for large volumes sold to India for shipment through March The market is tight despite renewed Chinese exports, as the export tax for phosphates dropped to 7% from June 1, and current prices are higher than the second quarter average. Global phosphate demand has recovered well from the weak 2008/09 season. The new agricultural year in India has started strongly, with urea sales during April and May up 21% on the same period last year. However, as these two months are in between application seasons, it is too early to conclude on consumption development. Urea imports during April and May were 0.9 million tons, compared with only 0.4 million tons last year. China did not export large volumes of urea during the quarter due to a high export tax. Exports were 0.2 million tons higher than in the same quarter last year, when exports were close to zero. Brazil imported 0.3 million tons of urea during April and May, twice as much as a year ago, indicating a stronger Latin American market. Phosphoric acid prices have increased to USD 700 per ton, and phosphate rock prices to USD 125 per ton, both fob Morocco. This still leaves a healthy upgrading margin for non-integrated phosphate producers, and global trade of phosphate rock has also rebounded sharply year to date. REGIONAL MARKET DEVELOPMENTS For the season 2009/10, nitrogen fertilizer sales in Western Europe were up 4%, with imports down 8%. Sales were 5% down on the latest five-year average. Second-quarter nitrogen fertilizer sales in Western Europe were unchanged from last year, with imports up 9%. Deliveries from European nitrogen producers were lower than in second quarter last year, due to exceptionally strong June deliveries last year when producer stocks were high, and nitrate prices were reduced. Producer stocks have been low throughout the 2009/10 season, with stronger margin focus also towards the end of the season. US nitrogen deliveries remained strong through the second quarter, with deliveries up by and estimated 11% from last year. For the season, deliveries increased by an estimated 5%. This data includes nitrogen for industrial applications.

4 4 YARA SECOND QUARTER AND HALF YEAR 2010 VARIANCE ANALYSIS SECOND QUARTER NOK millions 2Q 2010 EBITDA ,587 EBITDA ,259 Variance EBITDA 5,328 Volume & mix (13) Price/margin 1,640 Oil & gas costs in Europe (186) Special items 3,838 Other 94 Conversion (NOK vs. USD) 1) (45) Total variance explained 5,328 1) Based on average NOK per USD for the quarter 2010: 6.22 (2009: 6.50) Yara delivered strong underlying results in second quarter 2010, primarily due to a healthy margin improvement as stocks were low and nitrate premiums increased significantly compared with a year earlier. Results also improved compared with first quarter 2010, as lower deliveries were more than offset by improved margins and a 6% appreciation of the US dollar versus the Norwegian krone. Average realized NPK prices were up 9% and average realized nitrate prices were up 7% compared with first quarter 2010, both measured in USD. Yara concluded the sale of its 15.5% ownership in the Brazilian phosphate producer Fosfertil during the second quarter, with a pre-tax gain of NOK 3,578 million. Global Yara fertilizer deliveries were down 9% on second quarter 2009, when margins were low as producers reduced stocks from high levels. Second quarter 2009 saw high nitrate deliveries, while this year stocks were significantly lower and price reductions for the new season were smaller. Industrial volumes increased 21%, with higher volumes for all main product groups. Total Yara stocks at the end of second quarter were in line with last year s low ending levels and with first quarter European oil and gas costs increased in line with Yara s first-quarter guidance, reflecting an increase in prices for both natural gas and oil products compared with last year. Total special items were a positive NOK 3,868 million, primarily reflecting the Fosfertil gain and a further NOK 122 million gain on the sale of Yara s share in the Anitapolis phosphate joint venture in Brazil. Secondquarter 2009 net special items were a positive NOK 30 million. For further details on special items see page 17. Second-quarter fixed costs were lower than a year ago, due to a combination of structural improvements made during 2009 and strict cost targets for The US dollar was on average approximately 4% weaker versus the Norwegian krone compared with second quarter 2009, resulting in a negative conversion effect in Yara s results. Compared with second quarter 2009, average realized prices in USD were up 13% for nitrates and 3% for urea, while NPK prices were down 8% primarily reflecting lower potash prices. Second quarter 2009 saw significant position losses as prices declined in local markets, and some sales carried low or even zero margins as inventories had been written down in previous periods. Industrial margins were strong in second quarter 2010, but lower than a year ago when contracts entered into at higher prices were still in force.

5 YARA SECOND QUARTER AND HALF YEAR VARIANCE ANALYSIS FIRST HALF NET INCOME FROM EQUITY-ACCOUNTED INVESTEES NOK millions 1H 2010 EBITDA ,838 EBITDA ,295 Variance EBITDA 6,542 Volume & mix 441 Price/margin 1,319 Oil & gas costs in Europe 128 Special items 4,801 Other 187 Conversion (NOK vs. USD) 1) (334) Total variance explained 6,542 1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports. First-half EBITDA excluding special items increased 52% primarily reflecting a significant improvement in margins and sales volumes compared with last year. Average realized prices in USD were in line with last year for nitrates and urea, while NPK prices were down 13% primarily reflecting lower potash prices. First half 2009 saw significant position losses as prices declined in local markets. NOK millions 2Q Q H H 2009 Qafco Tringen Rossosh Burrup (25) 311 (61) 268 GrowHow UK Ltd (1) Lifeco Other Total Second-quarter net income from equity-accounted investees decreased 43% from a year earlier, primarily reflecting a loss in Burrup compared with a substantial profit last year. Burrup results were impacted by a NOK 29 million currency loss on USD-denominated loans, while a year ago Burrup recorded a NOK 218 million insurance settlement and a NOK 54 million currency gain. GrowHow UK Ltd. results improved as nitrate and NPK margins increased compared with a year ago, while Tringen and Rossosh results improved mainly due to higher ammonia prices. Global Yara fertilizer deliveries were in line with first half 2009, while Industrial volumes increased 17%, with higher volumes for all main product groups. Total special items were a positive NOK 4,770 million, primarily reflecting the NOK 3,578 Fosfertil gain and a NOK 666 million gain generated by the break fee paid to Yara following the termination of the merger agreement with Terra Industries. First-half 2009 net special items were a negative NOK 30 million. For further details on special items see page 17. The US dollar was on average approximately 10% weaker versus the Norwegian krone compared with first half 2009, resulting in a negative conversion effect in Yara s results.

6 6 YARA SECOND QUARTER AND HALF YEAR 2010 FINANCIAL ITEMS NOK millions 2Q Q H H 2009 Interest income from customers Interest income, other Dividends and net gain/(loss) on securities 3,579-3,580 - Interest income and other financial income 3, , Interest expense (167) (28) (322) (237) Return on pension plan assets Interest expense re. pension liabilities (121) (128) (243) (259) Foreign exchange gain/(loss) (718) 881 (1,293) 936 Other (78) (25) (134) (58) Interest expense and foreign exchange gain/(loss) (981) 811 (1,785) 604 Net financial income/(expense) 2, , Second-quarter net financial income was NOK 2,653 million compared with NOK 864 million last year. The variance is mainly explained by a NOK 3,579 million net gain on securities this quarter and a NOK 718 million foreign exchange loss this quarter compared with a NOK 881 million gain in the same quarter last year. The net gain on securities this quarter reflects the sale of Yara s shares in Fosfertil. Interest expense this quarter was NOK 139 million higher than in the same quarter last year. Last year s figure included an unrealized gain of NOK 215 million on interest rate derivatives held at that time to retain a portion of the interest-bearing debt at fixed rates. The average gross debt level this quarter was approximately NOK 5.5 billion lower than last year. Yara s US dollar debt generating currency exposure totaled approximately USD 1.2 billion during the quarter, with around USD 1 billion of the exposure towards the euro. The net foreign exchange loss this quarter was NOK 718 million as the US dollar appreciated 9% against both the euro and the Norwegian krone. TAX Second-quarter current and deferred taxes were NOK 1,158 million, representing approximately 24% of income before tax. Yara has previously stated that a normal tax rate for the company is expected to be 19% in a supply-driven pricing scenario and 23% in a demand-driven scenario. Yara s tax rate for the Fosfertil transaction was 28%.

7 YARA SECOND QUARTER AND HALF YEAR NET INTEREST-BEARING DEBT NOK millions 2Q H 2010 Net interest-bearing debt at beginning of period (15,227) (16,227) Cash earnings 1) 1,781 4,140 Dividends received from equity-accounted investees Net operating capital change (963) (2,021) Balderton - (560) Fosfertil (after tax paid) 4,383 4,383 Other investments (net) (648) (1,097) Yara dividend (1,228) (1,228) Foreign exchange gain/(loss) (718) (1,293) Other (532) 567 Net interest-bearing debt at end of period (12,932) (12,932) 1) Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges. As a supplement to the condensed consolidated interim statement of cash flows (page 22), this table highlights the key factors behind the development in net interest-bearing debt. Net interest-bearing debt decreased by NOK 2,295 million during second quarter 2010, ending at NOK 12,932 million. The decrease primarily reflects the consideration for the sale of Fosfertil shares, partly offset by tax payments, Yara dividend payment and increased net operating capital. Second-quarter 2010 dividends from equity-accounted investees were NOK 220 million after tax, of which Qafco contributed NOK 203 million. Net operating capital increased during the second quarter, reflecting higher realized prices and lower prepayments from customers. Growth investment activity for the quarter mainly reflects the on-going urea capacity expansion in Sluiskil, Netherlands, in addition to the rebuilding of the Tertre ammonia plant and urea expansion in Brunsbüttel. Other primarily reflects an increase in net VAT and sales tax receivables and Tertre insurance payments accrued during the quarter but not yet received. The debt/equity ratio at the end of second quarter 2010, calculated as net interest-bearing debt divided by shareholders equity plus non-controlling interests, was 0.38 compared with 0.56 at the end of 2009.

8 8 YARA SECOND QUARTER AND HALF YEAR 2010 Downstream FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 2Q Q H H 2009 Revenue and other income 12,056 12,239 23,021 25,556 Operating income 802 (454) 1, EBITDA 4,649 (229) 5, EBITDA excl. special items 810 (229) 1, CROGI (12-month rolling average) 1) 24.9% 1.7% ROCE (12-month rolling average) 29.2% (0.5%) 1) Second-quarter 2010 CROGI excl. special items annualized 13.8%. KEY STATISTICS Thousand tons 2Q Q H H 2009 Sales by region Fertilizer Europe 2,347 2,551 5,330 5,144 Fertilizer outside Europe 2,412 2,658 4,558 4,948 Total 4,759 5,210 9,888 10,092 Sales by product group Nitrate 1,163 1,619 2,589 3,092 NPK 1,458 1,385 3,067 3,006 of which own-produced ,971 1,625 of which own blends Urea 1,075 1,102 2,336 2,140 of which own-produced of which equity-accounted investees sourced , CN UAN Other products Total 4,759 5,210 9,888 10,092 VARIANCE ANALYSIS SECOND QUARTER Strong results with improved margins Increased sales to premium NPK markets European stocks 19% below last year Fosfertil gain and several smaller divestments NOK millions 2Q 2010 EBITDA ,649 EBITDA 2009 (229) Variance EBITDA 4,878 Volume (69) Price/margin 1,043 Special items 3,839 Other 28 Conversion (NOK vs. USD) 1) 37 Total variance explained 4,878 1) Based on average NOK per USD for the quarter 2010: 6.22 (2009: 6.50).

9 YARA SECOND QUARTER AND HALF YEAR Downstream delivered strong results due to improved margins and positive one-time effects from the sale of shares in Fosfertil and other smaller divestments. Average realized nitrate prices were up 13% compared with last year. Nitrate stocks were low and prices were firm for most of the quarter, with new season prices announced in June. Last year s high stocks resulted in the early announcement of new season prices at significantly lower levels to kick-start the new season in Europe. The NPK market situation was also significantly better than a year ago, as more sales to core markets in Europe replaced lower-margin tender sales to Africa. Sales to premium Asian markets contributed further to the positive development. Second quarter 2009 saw substantial position losses as fertilizer prices fell in the local markets throughout the quarter. Furthermore, some sales carried low or zero margins as inventories had been written down in previous periods. Total deliveries decreased 9% from last year mainly due to lower nitrate sales. Global NPK sales were up 5%, with a 22% increase in European deliveries, but volumes were lower than two years ago as demand for potash-containing products remained subdued. Downstream had several positive non-recurring items in the second quarter, of which the largest was the NOK 3,578 million gain on the sale of shares in Fosfertil. Yara also concluded the sale of its 50% stake in the Anitapolis phosphate project and the sale of its Terni site in Italy, with gains of NOK 122 million and NOK 77 million respectively. The Terni plant was closed in 2008, with related writedowns and provisions taken in Total second-quarter special items were NOK 3,839 million, while there were no special items in the same period last year. VARIANCE ANALYSIS FIRST HALF NOK millions 1H 2010 EBITDA ,732 EBITDA Variance EBITDA 5,135 Volume 30 Price/margin 1,113 Special items 4,024 Other 49 Conversion (NOK vs. USD) 1) (82) Total variance explained 5,135 1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports. First-half earnings included several positive non-recurring items, but underlying results were strong as margins improved and sales to core markets increased. Realized sales prices were in line with last year for nitrates and urea, while NPK prices were down 13% primarily reflecting lower potash prices. However, the improved market situation with lower stocks enabled better margins, while last year saw substantial position losses as prices fell throughout the period. Volumes were in line with first half NPK sales increased by 2%, with Europe up 32% while sales to China were down compared with previous years. Urea deliveries increased by 9% from last year. There were several positive non-recurring items during the first half, amounting to NOK 4,024 million with the Fosfertil gain and the fair value adjustment of Balderton as the largest items. There were no special items in first half Total stocks ended in line with last year s low ending levels. European stocks were down 19% from a year ago, mainly due to lower NPK stocks. Net operating capital turnover, measured on a 12-month rolling basis, was 6.0 at the end of the quarter versus 4.4 at the end of 2009.

10 10 YARA SECOND QUARTER AND HALF YEAR 2010 Industrial FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 2Q Q H H 2009 Revenue and other income 2,331 2,058 4,453 4,291 Operating income EBITDA EBITDA excl. special items CROGI (12-month rolling average) 1) 19.3% 13.8% ROCE (12-month rolling average) 23.8% 15.4% 1) Second-quarter 2010 CROGI excl. special items annualized 18.5%. KEY STATISTICS Thousand tons 2Q Q H H 2009 Sales by product group (excl. industrial gases) Environmental products Industrial N-chemicals ,476 1,219 of which TAN Total 1, ,043 1,740 VARIANCE ANALYSIS SECOND QUARTER Continued strong results Volumes up 21%, mainly TAN and process chemicals Strong market development for NO X abatement NOK millions 2Q 2010 EBITDA EBITDA Variance EBITDA 22 Volume & mix 76 Price/margin (68) Special items - Other 36 Conversion (NOK vs. USD) 1) (22) Total variance explained 22 1) Based on average NOK per USD for the quarter 2010: 6.22 (2009: 6.50).

11 YARA SECOND QUARTER AND HALF YEAR Second-quarter EBITDA improved by 8% compared with last year, as sales volumes improved for all product groups. Lower urea prices led to lower margins for environmental and process chemicals products, while last year Industrial margins benefited from contractual lag effects as contracts entered into at higher prices were still in force. Technical ammonium nitrate (TAN) volumes rebounded strongly and were up 28% as mining industry activity picked up in the second quarter. Margins remained lower than last year, but improved from first quarter. Second-quarter sales of ammonia, urea and nitric acid to the European process industry increased 25% compared with last year, continuing the positive trend seen since the end of Environmental segment product sales were up 11% while margins were slightly down. Sales of water treatment products were in line with last year, while sales of NO X abatement products were up 16%. Air1 sales volumes continued to grow strongly in Europe. Liquid CO 2 sales to European end users increased 12% compared with second quarter 2009, mainly driven by warm weather in Continental Europe. Margins were in line with last year. VARIANCE ANALYSIS FIRST HALF NOK millions 1H 2010 EBITDA EBITDA Variance EBITDA (44) Volume & mix 131 Price/margin (197) Special items 31 Other 46 Conversion (NOK vs. USD) 1) (56) Total variance explained (44) 1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports. First-half EBITDA excluding special items was down 11% from first half Sales volumes increased 17% with improvements for all product groups, while margins normalized following the contractual lag effects seen in First-half 2010 special items reflect a NOK 31 million gain related to a settlement in connection with last year s Pardies plant closure. The positive Other variance primarily reflects fixed cost improvements.

12 12 YARA SECOND QUARTER AND HALF YEAR 2010 Upstream FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 2Q Q H H 2009 Revenue and other income 8,048 6,063 15,314 13,321 Operating income , Share net income equity-accounted investees EBITDA 1,707 1,190 3,045 2,363 EBITDA excl. special items 1,679 1,160 2,997 2,393 CROGI (12-month rolling average) 1) 8.5% 18.1% ROCE (12-month rolling average) 7.7% 22.0% Oil & gas cost (weighted average) 2) USD per MMBtu Oil & gas cost Europe (weighted average) 2) USD per MMBtu ) Second-quarter 2010 CROGI excl. special items annualized 11.2%. 2) Including Yara share of production in equity-accounted investees. KEY STATISTICS Thousand tons 2Q Q H H 2009 Production by category Ammonia 1,801 1,784 3,621 3,152 Finished fertilizer 2,946 2,511 6,106 5,080 Total 4,747 4,295 9,727 8,232 VARIANCE ANALYSIS SECOND QUARTER Strong results with increased production and improved margins Finished fertilizer production up 17% from last year, mainly NPK Tertre ammonia restarted end May NOK millions 2Q 2010 EBITDA ,707 EBITDA ,190 Variance EBITDA 517 Volume & mix 141 Price/margin 649 Oil & gas costs in Europe (186) Special items (2) Other (16) Conversion (NOK vs. USD) 1) (69) Total variance explained 517 1) Based on average NOK per USD for the quarter 2010: 6.22 (2009: 6.50).

13 YARA SECOND QUARTER AND HALF YEAR Upstream second-quarter results improved significantly compared with last year and first quarter 2010, reflecting higher production volumes and margins. Realized prices improved for all main product groups, including ammonia, phosphate rock and phosphoric acid, both compared with last year and compared with first quarter Yara s production system ran at close to optimal capacity utilization during the second quarter, with only smaller ammonia and NPK production curtailments and lower Tertre production. Ammonia production was in line with second quarter 2009, as increased capacity utilization elsewhere was offset by the stop in Tertre and turnaround in Brunsbüttel. Finished fertilizer production increased 17% from second quarter 2009, when significant NPK curtailments were made. The positive NPK development was partly offset by lower Tertre production and Brunsbüttel turnaround. The reconstruction of the Tertre ammonia plant primary reformer was completed during the quarter, with production re-starting end May. Yara s average European oil and gas cost was up 12% from second quarter last year, while Yara s global average oil and gas cost increased 18%, on a USD per MMBtu basis. Second-quarter 2010 energy cost for plants with oil-linked contracts was USD 9.4 per MMBtu, while the remaining European plants average energy cost was USD 5.3 per MMBtu. VARIANCE ANALYSIS FIRST HALF NOK millions 1H 2010 EBITDA ,045 EBITDA ,363 Variance EBITDA 682 Volume & mix 376 Price/margin 349 Oil & gas costs in Europe 128 Special items 79 Other (6) Conversion (NOK vs. USD) 1) (243) Total variance explained 682 1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports. Both production volumes and product prices increased compared with first half Ammonia production increased 15% as curtailments were lower than last year, partly offset by lower Tertre production and the Brunsbüttel turnaround. Finished fertilizer production increased 20% compared with first half 2009, as production ran at close to full capacity utilization. European oil and gas costs were stable at USD 6.9 per MMBtu, while Yara s global average gas cost increased 10%. Energy cost outside Europe was higher than a year ago primarily due to higher ammonia prices and higher natural gas prices in North America.

14 14 YARA SECOND QUARTER AND HALF YEAR 2010 Other and eliminations Second quarter EBITDA was a negative NOK 67 million, compared with a positive NOK 22 million last year (see note 3, page 24). First-half EBITDA was a positive NOK 418 million, compared with a negative NOK 351 million last year. The positive result primarily reflects the NOK 666 million gain related to the Terra break fee. Please see note 3, page 24 for further description of Other and eliminations. Outlook Global demand for agricultural products is strong. The US Department of Agriculture estimate for global grain consumption growth is 1.9% for 2010/11, ahead of historical growth trends. The strong consumption reflects population growth and continued diet improvements in emerging economies, and in addition increased biofuel production amid historically high energy prices relative to soft commodity prices. Biofuels could further boost grain demand if US authorities later this year approve a proposed increase in gasoline blending levels. Even though grain demand has remained strong through the last years economic slow-down, grain prices have weakened substantially as the global harvests in 2008/09 and 2009/10 exceeded demand due to favourable weather conditions. The current USDA 2010/11 global grain supply/demand estimate shows a decline in ending stocks relative to consumption. Ending stocks have recently been revised down due to lower estimated yields following less favourable weather in some regions. Grain markets have reacted to this news with significant price increases, demonstrating the tight supply/demand balance and low price elasticity for grains. The new fertilizer season in Europe has started with substantially higher nitrate prices than last year, and deliveries are running well. The nitrate balance has tightened as stocks are low at both producer, distributor and farmer level at the start of the new season. Global urea prices have increased significantly since late second quarter as demand picked up. Further price increase may be capped by the availability of Chinese exports at an expected export tax rate of 7% for most of the remainder of the year. Although considerable volumes of urea are stored at ports in China, the price level needed to motivate continued exports is expected to be increasing as coal prices have increased. An appreciation of the Chinese currency, a possibility following the recent announcement that China will no longer peg its currency to US dollars, may further increase the price required to attract Chinese urea exports. Yara has run its NPK plants at close to full capacity since early January without stock build-up, as phosphate demand has recovered, giving strongly improved upgrading margins, while potash deliveries remain subdued. The global NPK market has also benefitted from the change in the Indian fertilizer subsidy scheme, creating a new market for NPK imports to India. Sales of nitrogen chemicals to the European industry continue to increase due to higher industrial activity. European natural gas hub prices have been volatile during second quarter due to cold weather and supply interruptions including LNG maintenance stops in the Middle East, and have increased significantly over the last weeks. Based on current forward markets for oil products and natural gas (7 July) Yara s third-quarter energy costs are expected to be approximately NOK 500 million higher than last year, and fourthquarter energy costs are expected to be NOK 550 million higher than last year. The estimates may change considerably depending on future energy prices.

15 YARA SECOND QUARTER AND HALF YEAR Risk and uncertainty As described in Yara s Annual Report for 2009 Yara s total risk exposure is analyzed and evaluated at group level. Risk evaluations are integrated in all business activities both at group and business unit level, increasing Yara s ability to take advantage of business opportunities. Yara s most important market risk is related to the margin between nitrogen fertilizer prices and natural gas prices. Although there is a positive long-term correlation between these prices, margins are influenced by the supply/ demand balance for food relative to energy. Yara has in place a system for credit and currency risk management with defined limits for exposure both at country, customer and currency level. Yara s geographically diversified portfolio reduces the overall credit and currency risk of the Group. As the fertilizer business is essentially a US dollar business, with both revenues and raw material costs mainly priced in US dollars, Yara seeks to keep most of its debt in US dollars to reduce its overall US dollar currency exposure. There has not been any significant change in the risk exposures and the risks and uncertainties for the remaining six months of the year are described in Outlook. Related parties Note 31 in the annual report for 2009 provides details of related parties. During the first half of 2010 there has not been any changes or transactions that significantly impacts on the group s financial position or result for the period. The Board of Directors and Chief Executive Officer Yara International ASA Oslo, 15 July 2010 Øivind Lund Chairperson Elisabeth Harstad Leiv L. Nergaard Hilde Merete Aasheim Bernt Reitan Frank Andersen Svein Flatebø Geir O. Sundbø Jørgen Ole Haslestad President and CEO

16 16 YARA SECOND QUARTER AND HALF YEAR 2010 Definitions and variance analysis The fertilizer season in Western Europe referred to in this discussion starts 1 July and ends 30 June. Several of Yara s purchase and sales contracts for commodities are, or have embedded terms and conditions which under IFRS are, accounted for as derivatives. The derivative elements of these contracts are presented under Commodity-based derivatives gain/(loss) in the condensed consolidated interim statement of income, and are referenced in the variance analysis (see below) as Special items. Other and eliminations consists mainly of cross-segment eliminations, in addition to Yara headquarters cost. Profits on sales from Upstream to Downstream and Industrial are not recognized in the consolidated Yara condensed consolidated interim statement of income before the products are sold to external customers. These internal profits are eliminated in the Other and eliminations segment. Changes in Other and eliminations EBITDA therefore usually reflect changes in Upstream-sourced stock (volumes) held by Downstream and Industrial, but can also be affected by changes in Upstream margins on products sold to Downstream and Industrial, as transfer prices move in line with arms-length market prices. With all other variables held constant, higher stocks would result in a higher (negative) elimination effect in Yara s results, as would higher Upstream margins. Over time these effects tend to even out, to the extent that stock levels and margins normalize. In the discussion of operating results, Yara refers to certain non-gaap financial measures including EBITDA and CROGI. Yara s management makes regular use of these measures to evaluate the performance, both in absolute terms and comparatively from period to period. These measures are viewed by management as providing a better understanding - both for management and for investors of the underlying operating results of the business segments for the period under evaluation. Yara manages long-term debt and taxes on a group basis. Therefore, net income is discussed only for the Group as a whole. Yara s management model, referred to as Value Based Management, reflects management s focus on cash flow-based performance indicators. EBITDA, which Yara defines as income/(loss) before tax, interest expense, foreign exchange gains/losses, depreciation, amortization and write-downs, is an approximation of cash flow from operating activities before tax and net operating capital changes. EBITDA is a measure that in addition to operating income, also includes interest income, other financial income, and results from equity-accounted investees. It excludes depreciation, write-downs and amortization, as well as amortization of excess values in equity-accounted investees. Yara s definition of EBITDA may differ from that of other companies. EBITDA should not be considered as an alternative to operating income and income before tax as an indicator of the company s operations in accordance with generally accepted accounting principles. Nor is EBITDA an alternative to cash flow from operating activities in accordance with generally accepted accounting principles. Yara management uses CROGI (Cash Return On Gross Investment) to measure performance. CROGI is defined as gross cash flow, divided by average gross investment and is calculated on a 12-month rolling basis. Gross cash flow is defined as EBITDA less total tax expense, excluding tax on net foreign exchange gains/ losses. Gross Investment is defined as total assets (exclusive of deferred tax assets, cash and cash equivalents, other liquid assets and fair value adjustment recognized in equity) plus accumulated depreciation and amortization, less all shortterm interest-free liabilities, except deferred tax liabilities. ROCE (Return on capital employed) has been included as an additional performance measure to CROGI to simplify benchmarking with other companies. ROCE is defined as EBIT minus tax divided by average capital employed and is calculated on a 12-month rolling average basis. Capital employed is defined as total assets adjusted for deferred tax assets minus other current liabilities. In order to track underlying business developments from period to period, Yara s management also uses a variance analysis methodology, developed within the Company ( Variance Analysis ), that involves the extraction of financial information from the accounting system, as well as statistical and other data from internal management information systems. Management considers the estimates produced by the Variance Analysis, and the identification of trends based on such analysis, sufficiently precise to provide useful data to monitor our business. However, these estimates should be understood to be less than an exact quantification of the changes and trends indicated by such analysis. Due to it being impractical to obtain financial reports at the same reporting dates as Yara uses, the results for some of Yara s equity-accounted investees are included in Yara results with a one-month time lag.

17 YARA SECOND QUARTER AND HALF YEAR Special items EBITDA effect Operating income effect NOK millions 2Q Q H H Q Q H H 2009 Balderton fair value adjustment Fosfertil sale 3,578-3, Anitapolis sale Terni sale Insurance settlement Brazil Peremartoni sale Demolition provision Brazil (28) - (28) - Contract derivatives (2) - (2) - (2) - (2) - Total Downstream 3,839-4, Compensation Pardies closure Total Industrial Sale of shares Carbonor Sluiskil asset decommissioning (39) - (39) - Contract derivatives (20) (30) (11) (16) Total Upstream (30) (20) (16) Terra break fee Total Other and eliminations Total Yara 3, ,770 (30) ,135 (16) Production data Thousand tons 2Q Q H H 2009 WHOLLY-OWNED OPERATIONS Upstream Ammonia 1,192 1,209 2,435 2,185 Nitrates ,235 1,233 NPK , CN Urea ,344 1,282 UAN Downstream Nitrates ,341 1,363 NPK CN UAN Industrial Ammonia Nitrates (TAN) EQUITY-ACCOUNTED INVESTEES 1) Ammonia , Nitrates NPK Urea ) Yara share of production in equity-accounted investees.

18 18 YARA SECOND QUARTER AND HALF YEAR 2010 Condensed consolidated interim statement of income NOK millions, except share information Notes 2Q Q H H Revenue 15,355 16,089 30,048 33,185 60,867 Other income 4, , Commodity based derivatives gain/(loss) (26) 16 (70) (16) 151 Revenue and other income 3 15,679 16,129 31,316 33,248 61,418 Raw materials, energy costs and freight expenses 5 (11,557) (13,916) (22,841) (27,578) (51,076) Payroll and related costs (1,132) (1,206) (2,228) (2,334) (4,602) Depreciation and amortization (658) (613) (1,216) (1,215) (2,425) Other operating expenses (444) (479) (829) (1,012) (2,044) Operating costs and expenses (13,791) (16,214) (27,114) (32,139) (60,147) Operating income 3 1,888 (85) 4,203 1,109 1,271 Share of net income in equity-accounted investees ,412 Interest income and other financial income 4 3, , Earnings before interest expense and tax (EBIT) 5, ,573 2,045 3,058 Foreign exchange gain/(loss) (718) 881 (1,293) 936 1,364 Interest expense and other financial items (263) (71) (492) (332) (945) Income before tax 3 4,911 1,434 6,788 2,649 3,477 Income tax expense (1,158) (296) (1,502) (610) 337 Net income 3,753 1,137 5,287 2,039 3,814 Net income attributable to Shareholders of the parent 3,716 1,122 5,238 2,009 3,782 Non-controlling interests Net income 3,753 1,137 5,287 2,039 3,814 Earnings per share 1) Weighted average number of shares outstanding 2) 288,831, ,217, ,831, ,516, ,167,113 1) Yara currently has no share-based compensation that results in a dilutive effect on earnings per share. 2) Weighted average number of shares outstanding was reduced in third and fourth quarter 2008 and second and fourth quarter 2009, due to the share buy-back program.

19 YARA SECOND QUARTER AND HALF YEAR Condensed consolidated interim statement of comprehensive income NOK millions Note 2Q Q H H Net income 3,753 1,137 5,287 2,039 3,814 Exchange differences on translation of foreign operations 1, ,628 (1,820) (3,979) Actuarial gain/(loss) on defined benefit pension plans - (80) Available-for-sale investments - change in fair value (113) 225 (43) Hedge of net investments (181) 74 (232) Share of other comprehensive income of equity-accounted investees (37) Reclassification adjustments related to: - cash flow hedges (44) - exchange differences on foreign operations disposed of in the year (95) - (115) available-for-sale investments disposed of in the year 4 (1,244) - (1,244) - (121) Total other comprehensive income, net of tax (933) (3,033) Total comprehensive income 3,948 1,989 6,249 1, Total comprehensive income attributable to Shareholders of the parent 3,906 1,973 6,195 1, Non-controlling interests Total 3,948 1,989 6,249 1, Condensed consolidated interim statement of changes in equity NOK millions Share capital Premium paid-in capital Translation of foreign operations Availablefor-sale financial assets Cash flow hedges Hedge of net investments Total other reserves Retained earnings Attributable to the shareholders of the parent Noncontrolling interests Total equity Balance at 31 December ,092 3, (249) (173) 3,697 24,192 29, ,638 Net income ,009 2, ,039 Other comprehensive income, net of tax - - (1,807) (1,052) - (1,052) (13) (1,065) Share of other comprehensive income of equityaccounted investees Total other comprehensive income, net of tax - - (1,806) (920) - (920) (13) (933) Companies purchased/sold Redeemed treasury shares - (419) Redeemed shares, Norwegian State (2) (238) (240) - (240) Dividends distributed (1,304) (1,304) (13) (1,317) Balance at 30 June ,725 1,208 (112) (43) 2,777 25,316 29, ,191 Net income ,773 1, ,775 Other comprehensive income, net of tax - - (2,149) 70 (49) 146 (1,982) 1 (1,981) (14) (1,995) Share of other comprehensive income of equityaccounted investees (113) (106) - (106) Total other comprehensive income, net of tax - - (2,148) 70 (43) 146 (1,975) (112) (2,087) (14) (2,101) Companies purchased/sold (2) (2) - (2) Treasury shares Dividends distributed (2) (2) Balance at 31 December (423) 1,278 (155) ,976 28, ,863 Net income ,238 5, ,287 Other comprehensive income, net of tax - - 2,509 (1,287) 5 (232) Share of other comprehensive income of equityaccounted investees - - (1) - (36) - (37) - (37) - (37) Total other comprehensive income, net of tax - - 2,508 (1,287) (31) (232) Dividends distributed (1,300) (1,300) (71) (1,370) Balance at 30 June ,085 (9) (186) (130) 1,761 30,914 33, ,741

20 20 YARA SECOND QUARTER AND HALF YEAR 2010 Condensed consolidated interim statement of financial position NOK millions Notes 30 Jun Jun Dec 2009 Assets Non-current assets Deferred tax assets 1 1,810 2,923 1,920 Intangible assets 1,8 5,264 3,771 3,591 Property, plant and equipment 1,8 23,456 21,863 22,121 Equity-accounted investees 4,8 10,558 10,616 10,083 Other non-current assets 4,8 1,861 5,323 5,577 Total non-current assets 42,950 44,496 43,292 Current assets Inventories 1,5 8,559 10,528 7,853 Trade receivables 8 6,698 7,635 5,934 Prepaid expenses and other current assets 8 3,592 2,111 3,611 Cash and cash equivalents 8 2,512 2, Non-current assets classified as held-for-sale Total current assets 21,903 22,324 18,372 Total assets 3 64,853 66,819 61,665

21 YARA SECOND QUARTER AND HALF YEAR Condensed consolidated interim statement of financial position NOK millions, except for number of shares Notes 30 Jun Jun Dec 2009 Equity and liabilities Equity Share capital reduced for treasury stock Premium paid-in capital Total paid-in capital Other reserves 1,753 2, Retained earnings 30,914 25,316 26,976 Reversals of disposal group classified as held-for-sale Total equity attributable to shareholders of the parent 33,601 29,019 28,705 Non-controlling interests Total equity 33,741 29,191 28,863 Non-current liabilities Employee benefits 1 2,233 2,330 2,358 Deferred tax liabilities 1,8 3,514 5,232 4,062 Other long-term liabilities Long-term provisions Long-term interest-bearing debt 6 13,545 15,903 13,936 Total non-current liabilities 20,008 24,320 20,966 Current liabilities Trade and other payables 8 6,775 6,949 6,883 Current tax liabilities Short-term provisions Other short-term liabilities , Bank loans and other interest-bearing short-term debt 2,171 4,593 3,185 Current portion of long-term debt Liab. associated with non-current assets classified as held-for-sale Total current liabilities 11,104 13,308 11,836 Total equity and liabilities 64,853 66,819 61,665 Number of shares outstanding 2 288,831, ,824, ,831,251 The Board of Directors and Chief Executive Officer Yara International ASA Oslo, 15 July 2010 Øivind Lund Chairperson Elisabeth Harstad Leiv L. Nergaard Hilde Merete Aasheim Bernt Reitan Frank Andersen Svein Flatebø Geir O. Sundbø Jørgen Ole Haslestad President and CEO

22 22 YARA SECOND QUARTER AND HALF YEAR 2010 Condensed consolidated interim statement of cash flows NOK millions Notes 1H H Operating activities Operating income 3 4,203 1,109 1,271 Adjustments to reconcile operating income to net cash provided by operating activities Depreciation and amortization 3 1,216 1,215 2,425 Write downs and reversals, net (134) (1,138) (1,603) Tax paid (304) (1,881) (2,178) Dividend from equity-accounted investees Change in net operating capital 1) (1,887) 9,901 14,810 Other (422) (938) (3,210) Net cash from operating activities 4 3,075 8,511 11,925 Investing activities Purchases of property, plant and equipment 3 (1,541) (1,799) (4,260) Purchases of other long-term investments 3,4,8 (656) (1,740) (1,824) Net sales/(purchases) of short-term investments (350) - - Proceeds from sales of property, plant and equipment Proceeds from sales of other long-term investments 2) 4 4, Net cash from/(used in) investing activities 2,376 (3,212) (5,467) Financing activities Loan proceeds/(repayments), net (2,831) (5,320) (7,188) Purchase of treasury shares (240) Dividend 2,9 (1,228) (1,235) (1,304) Net cash transfers (to)/from non-controlling interests (71) (13) (15) Net cash from/(used in) financing activities (4,131) (6,567) (8,747) Foreign currency effects on cash flows Net increase (decrease) in cash and cash equivalents 1,538 (1,146) (2,221) Cash and cash equivalents at beginning of period 974 3,195 3,195 Cash and cash equivalents at end of period 2,512 2, Bank deposits not available for the use of other group companies ) Operating capital consists of trade receivable, inventories and trade payable. 2) Tax paid related to the sale of the Fosfertil shares of NOK 639 million has been presented as as part of the underlaying transaction and deducted from cash flow from investing activities.

23 YARA SECOND QUARTER AND HALF YEAR Notes to the condensed consolidated interim financial statements GENERAL AND ACCOUNTING POLICIES Yara (the Group) consists of Yara International ASA (the Company) and its subsidiaries. Yara International ASA is a limited company incorporated in Norway. The condensed consolidated interim financial statements consist of the Group and the Group s interests in equity-accounted investees. The consolidated financial statements of the Group as at and for the year ended 31 December 2009 are available upon request from the Company s registered office at Bygdøy Allé 2, Oslo, Norway or at com. These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as approved by EU and additional requirements in the Norwegian Securities Trading Act. They do not include all of the information required for full annual consolidated financial statements, and should be read in conjunction with consolidated financial statements of the Group as at and for the year ended 31 December These condensed consolidated interim financial statements are unaudited. The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2009, except as follows: IFRS 3 has been revised and IAS 27 amended with effect for the Group from 1 January IFRS 3 (revised) introduces significant changes in the accounting for business combinations occurring after 1 January Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognized, the reported results in the period that an acquisition occurs and future reported results. IAS 27 (amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. As a result of rounding differences numbers or percentages may not add up to the total. Note 1 Judgements, estimates and assumptions The preparation of condensed consolidated interim financial statements in accordance with IFRS and applying the chosen accounting policies requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the period ended 31 December Note 2 Shares Ordinary shares Own shares 1) Balance at 31 December ,575,357 (1,757,446) Redeemed shares Norwegian State 2) (993,439) Shares cancelled 2) (1,750,000) 1,750,000 Treasury shares - 6,779 Balance at 31 December ,831,918 (667) Redeemed/cancelled/purchased own shares - - Balance at 30 June ,831,918 (667) 1) Including employee trust. 2) As approved by General Meeting 7 May 2009.

24 24 YARA SECOND QUARTER AND HALF YEAR 2010 Note 3 Operating segment information NOK millions 2Q Q H H External revenue and other income Downstream 11,193 12,144 22,012 25,268 45,061 Industrial 2,284 2,004 4,392 4,224 8,465 Upstream 2,179 1,952 4,198 3,706 7,884 Other and eliminations Total 15,679 16,129 31,316 33,248 61,418 Internal revenue and other income Downstream , Industrial Upstream 5,870 4,111 11,116 9,615 18,015 Other and eliminations (6,780) (4,260) (12,187) (9,969) (18,673) Total Revenue and other income Downstream 12,056 12,239 23,021 25,556 45,569 Industrial 2,331 2,058 4,453 4,291 8,615 Upstream 8,048 6,063 15,314 13,321 25,899 Other and eliminations (6,757) (4,231) (11,472) (9,919) (18,665) Total 15,679 16,129 31,316 33,248 61,418 Operating income Downstream 802 (454) 1, Industrial Upstream , Other and eliminations (89) (409) (787) Total 1,888 (85) 4,203 1,109 1,271 EBITDA Downstream 4,649 (229) 5, Industrial ,248 Upstream 1,707 1,190 3,045 2,363 4,013 Other and eliminations (67) (351) (676) Total 6,587 1,259 9,838 3,295 5,549 Investments Downstream Industrial Upstream 1, ,616 2,891 4,812 Other and eliminations Total 1,383 1,275 2,546 3,595 6,192 Total Assets 1) Downstream 19,038 22,691 19,038 22,691 19,157 Industrial 3,919 4,061 3,919 4,061 3,734 Upstream 38,645 35,502 38,645 35,502 35,178 Other and eliminations 3,251 4,565 3,251 4,565 3,595 Total 64,853 66,819 64,853 66,819 61,665 1) Assets exclude internal cash accounts and accounts receivables related to group relief

25 YARA SECOND QUARTER AND HALF YEAR NOK millions, except percentages 2Q Q H H CROGI (12-month rolling average) Yara % 12.7% 8.5% Downstream % 1.7% 4.1% Industrial % 13.8% 19.5% Upstream % 18.1% 7.8% ROCE (12-month rolling average) Yara % 13.1% 7.4% Downstream % (0.5%) 2.2% Industrial % 15.4% 23.4% Upstream % 22.0% 6.4% Reconciliation of EBITDA to Income before tax EBITDA 6,587 1,259 9,838 3,295 5,549 Depreciation and amortization 1) (695) (636) (1,265) (1,250) (2,490) Foreign exchange gain/(loss) (718) 881 (1,293) 936 1,364 Interest expense and other financial items (263) (71) (492) (332) (945) Income before tax 4,911 1,434 6,788 2,649 3,477 1) Including amortization of excess value in equity-accounted investees RECONCILIATION OF OPERATING INCOME TO EBITDA NOK millions Operating income Equity-accounted investees Interest income 1) EBIT Depreciation and amortization 2) EBITDA 2Q 2010 Downstream ,626 4, ,649 Industrial Upstream , ,707 Other and eliminations (89) - 7 (82) 15 (67) Total 1, ,634 5, ,587 2Q 2009 Downstream (454) (348) 119 (229) Industrial Upstream (1) ,190 Other and eliminations Total (85) ,259 1H 2010 Downstream 1, ,653 5, ,732 Industrial Upstream 1, , ,045 Other and eliminations Total 4, ,674 8,573 1,265 9,838 1H 2009 Downstream Industrial Upstream (1) 1, ,363 Other and eliminations (409) - 44 (365) 14 (351) Total 1, ,045 1,250 3, Downstream Industrial , ,248 Upstream 856 1, ,287 1,726 4,013 Other and eliminations (787) - 75 (711) 36 (676) Total 1,271 1, ,058 2,490 5,549 1) Including selected financial items. 2) Including amortization of excess value in equity-accounted investees.

26 26 YARA SECOND QUARTER AND HALF YEAR 2010 Note 4 Business initiatives ACQUISITIONS AND OTHER RELATED INITIATIVES In January 2010, Yara acquired the remaining 51% ownership in the Geneva-based Balderton Fertilisers SA. See Note 8 for further information. Yara signed a cash merger agreement with Terra Industries Inc. (Terra) in February Terra terminated this agreement in March 2010 after receiving a superior bid from CF Industries Inc. In accordance with the cash merger agreement, Yara International ASA received a break fee of NOK 717 million. Directly related transaction costs amounted to NOK 51 million. The net break fee of NOK 666 million after transaction costs was recognized in first quarter and is presented as part of other income in the condensed consolidated interim statement of income and as part of operating activities in the condensed consolidated interim statement of cash flows. DISPOSALS AND OTHER RELATED INITIATIVES In January 2010, Yara sold its shares in Carbonor, a joint venture company. The investment was recognized based on the equity method until the date of derecognition. The sale gave Yara a gain of NOK 69 million, presented as part of other income in the first quarter condensed consolidated interim statement of income. The cash consideration received was NOK 99 million and is presented as part of investing activities in the condensed consolidated interim statement of cash flows. In May 2010, Yara sold its shares in the Brazilian phosphate producer Fosfertil. Yara s direct and indirect ownership in Fosfertil was 15.5%. At the same time, Yara also sold its 50% stake in the Anitapolis phosphate rock project. The gain from the Fosfertil sale of NOK 3,578 million before tax is presented as part of interest income and other financial income in the second quarter condensed consolidated statement of income. The gain from the sale of Yara s stake in Anitapolis of NOK 122 million before tax is presented as part of other income. The available-for-sale shares in Fosfertil have been recognized at estimated fair value in prior reported periods, with changes in fair value recognized directly in equity as other comprehensive income. The cumulative gain previously recognized directly in equity was reclassified to profit or loss when the shares were sold. The cash inflows after tax paid from the sales of Fosfertil of NOK 4,383 million and Anitapolis of NOK 164 million are presented as part of investing activities in the condensed consolidated interim statement of cash flows. During second quarter 2010, Yara sold two subsidiaries, Nuova Terni Industrie Chimiche S.p.A (Italy) and Peremartoni Fertilizers Kft (Hungary). The total gain of NOK 109 million (before tax) is presented as part of other income in the second quarter condensed consolidated statement of income, including cumulative exchange gains of NOK 12 million reclassified from equity. The total assets of subsidiaries sold were NOK 8 million and total liabilities NOK 61 million, mainly related to short-term provisions. The net cash inflows on disposals was NOK 44 million and are presented as part of investing activities in the condensed consolidated interim statement of cash flows. In May, Yara announced an agreement to sell its fertilizer retail assets in South Africa and its 50% ownership in the South African retail company Sidi Parani. The transfer of assets and liabilities is expected to take place during third or fourth quarter See note 7 for more information. Note 5 Inventory NOK millions 30 Jun Jun Dec 2009 Finished goods 4,753 6,414 4,933 Work in progress Raw materials 3,451 3,708 2,660 Total 8,559 10,528 7,853 Write-down Balance at 1 January (291) (2,336) (2,336) Reversal/(write-down), net 143 1,185 1,761 Foreign currency translation (5) Closing Balance (153) (965) (291)

27 YARA SECOND QUARTER AND HALF YEAR Note 6 Long-term debt In May 2010, the Finnish subsidiary Yara Suomi Oy signed a new loan agreement of EUR 50 million with maturity in At the end of the second quarter, this facility remained fully unutilized. Drawings on Yara s other committed bank facilities were reduced during the quarter upon receipt of proceeds from the Fosfertil divestment. An updated overview of the contractual payments on long-term debt is provided in the table below. NOK millions Debentures Bank Loans Capital lease and other long term loans Total , , , , , ,376 Thereafter 4,202 1,162-5,364 Total 8,400 4, ,545 Note 7 Assets classified as held-for-sale NOK millions 30 Jun 2010 Equity-accounted investee (i) 69 Asset group related to the fertilizer retail operations in South Africa (ii) 472 Total assets classified as held-for-sale 541 Liabilities associated with assets held-for-sale (ii) 115 (i) Yara has classified the equity-accounted investee Agrico Canada Ltd. as an asset held-for-sale at the end of second quarter The transfer of shares is expected to take place during third quarter The expected sales price is below the carrying value and Yara has therefore recognized an impairment write down of NOK 18 million. The sale transaction is estimated to have a minor impact on the condensed consolidated interim statement of income and any gain or loss will be included in the Downstream segment. (ii) On 18 May 2010, Yara announced the agreement to sell its fertilizer retail assets in South Africa and its 50% ownership in the South African retail company Sidi Parani. Fertilizer retail operations are typically combined with trade of other agriculture input and produce, and are not defined as core business for Yara. No impairment was recognized on or after the reclassification. The transfer is expected to take place during third or fourth quarter 2010 and is estimated to have a minor impact on the condensed consolidated interim statement of income. Any gain or loss will be included in the Downstream segment. The South African fertilizer retail activity is not classified as a discontinued operation in the condensed consolidated interim statement of income and condensed consolidated interim statement of cash flows as it is not a major line of business or geographical area of operation. Yara will continue to sell fertilizer delivered to harbor in South Africa after the divestment.

28 28 YARA SECOND QUARTER AND HALF YEAR 2010 The major classes of assets and liabilities of the fertilizer retail operations in South Africa at the end of the reporting period are as follows: NOK millions 30 Jun 2010 Deferred tax asset 3 Property, plant and equipment 16 Inventories 287 Trade receivables 160 Other current assets 5 Assets of fertilizer retail operations in South Africa 472 Non-current liabilities (1) Trade and other payables (59) Bank loans and other interest bearing short-term debt (38) Other current liabilities (17) Liabilities of fertilizer retail operations in South Africa (115) Net asset of fertilizer retail operations in South Africa classified as held-for-sale 356 Note 8 Business combination On 27 January 2010, Yara acquired the remaining 51% ownership interest of the holding company to Balderton Fertilisers SA (Balderton). Balderton is an unlisted ammonia and fertilizer trading company based in Geneva, Switzerland. The holding company, Yara Swiss Investment BV, is based in the Netherlands. After the transaction, Yara owns and controls all shares of Balderton. Yara Swiss Investment BV holds no other assets or liabilities. The primary reason for the business combination is that full ownership will simplify and increase the integration and optimization of Balderton in Yara, and support further growth through improved sourcing capabilities and position taking. The acquisition has been accounted for using the purchase method of accounting. The purchase price allocation of the tangible and intangible assets is preliminary and may be adjusted as a result of obtaining additional information regarding the preliminary estimates of fair values made at the date of purchase. The interim condensed consolidated financial statements include the results of Balderton for the period from the acquisition date. Balderton was an associated entity to Yara before the acquisition in January The ownership was incorporated using the equity method. According to IFRS 3 (revised), the previously held equity interest in the acquiree at acquisition date shall be remeasured at its fair value with resulting gain or loss in statement of income. The fair value of the previously held 49% equity interest has been derived from the consideration paid per share for the 51% ownership interest, reduced with a 30% discount for lack of control. NOK millions Opening balance 27 Jan 2010 Fair value adjustment Adjusted balance 27 Jan 2010 Assets Customer relationships, part of intangible assets Property, plant and equipment 4-4 Trade receivables Prepaid expenses and other current assets Cash and cash equivalents Total assets 1, ,639 Liabilities Deferred tax liabilities Trade and other payables Current tax liabilities Other short-term liabilities Total liabilities Total identifiable net assets at fair value 1,066 Goodwill arising on acquisition 813 Fair value of previously held 49% equity interest in Balderton (760) Purchase consideration transferred for 51% ownership interest 1,119

29 YARA SECOND QUARTER AND HALF YEAR The goodwill comprises the value of synergies arising from the acquisition, in addition to assembled workforce and relations with suppliers which does not meet the criteria for recognition as intangible assets under IAS 38 Intangible assets. None of the goodwill recognized is expected to be deductible for income tax purposes. The gross amount of receivables is equal to carrying value. None of the trade receivables have been impaired and it is expected that the full contractual amount can be collected. NOK millions 1H 2010 Analysis of cash flows on acquisition Cash consideration for 51% ownership interest (included in cash flows from investing activities) (1,119) Net cash acquired with the subsidiary (included in cash flows from investing activities) 560 Transaction costs of the acquisition (included in cash flows from operating activities) - Net cash flow on acquisition (560) Gain recognized on previously held 49% ownership interest Estimated fair value 760 Carrying value (597) Currency translation gain of foreign operation, previously recognized as other comprehensive income 22 Gain, recognized as other income in first quarter 185 From the date of acquisition, Balderton has contributed NOK 830 million of revenue and NOK 16.1 million to the income before tax of the Group. If the business combination had taken place at the beginning of the year, Yara s revenue and income before tax would have been NOK 30,144 million and NOK 6,789 million, respectively. Note 9 Dividend and share buy-back program A dividend of NOK 1,300 million (NOK 4.50 per share) was approved by the Annual General Meeting of Yara International ASA in May and NOK 1,228 million is paid out during second quarter. The General Meeting also approved a new share buy-back program, authorizing the Board to acquire up to 5% of Yara s shares within the next 12 months. Shares may either be used for cancellation or as payment in business transactions. Yara has renewed the agreement with the Norwegian State according to which the State s shares will be redeemed on a pro-rata basis to ensure that the State s ownership is unchanged in the event repurchased shares are cancelled.

30 30 YARA SECOND QUARTER AND HALF YEAR 2010 Responsibility statement We confirm to the best of our knowledge that the condensed set of interim consolidated financial statements as at 30 June 2010 and for the six month period 1 January to 30 June 2010 has been prepared in accordance with IAS 34 Interim Financial Reporting and gives a true and fair view of the Group s assets, liabilities, financial position and the result for the period viewed in their entirety, and that the interim management report in accordance with the Norwegian Securities Trading Act section 5-6 fourth paragraph includes a fair review of any of significant events that arose during the six-month period and their effect on the half-yearly financial report, and any significant related parties transactions, and a description of the principal risks and uncertainties for the remaining six months of the year. The Board of Directors and Chief Executive Officer Yara International ASA Oslo, 15 July 2010 Øivind Lund Chairperson Elisabeth Harstad Leiv L. Nergaard Hilde Merete Aasheim Bernt Reitan Frank Andersen Svein Flatebø Geir O. Sundbø Jørgen Ole Haslestad President and CEO