REPORT. Fourth quarter 2009

Transcription

1 REPORT Fourth quarter 2009 Yara International ASA quarterly results Improving but non-satisfactory underlying results NPK sales still hampered by high potash prices Inventory volumes normalized, 43% lower than last year Strong demand and price improvement at end of quarter Proposed dividend NOK 4.50 per share Fertilizer markets improved strongly towards the end of the fourth quarter, as global nitrogen and phosphate markets turned demand-driven. EARNINGS PER SHARE NOK 4.93 EBITDA (NOK millions) Earnings per share (NOK) Debt/equity ratio Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09

2 2 YARA FOURTH QUARTER 2009 Fourth quarter 2009 FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 4Q Q Revenue and other income 13,791 18,957 61,418 88,775 Operating income ,271 12,281 Share net income equity-accounted investees ,412 2,760 EBITDA 1,394 1,626 5,549 17,917 EBITDA excl. special items 1,107 1,730 5,492 17,723 Net income after non-controlling interests 1,424 (2,109) 3,782 8,228 Earnings per share 1) 4.93 (7.27) Earnings per share excl.currency and special items 1) 4.35 (0.10) Average number of shares outstanding (millions) CROGI (12-month rolling average) 8.5% 22.9% ROCE (12-month rolling average) 7.4% 29.0% 1) NOK per share. Yara currently has no share-based compensation programs that result in a dilutive effect on earnings per share. KEY STATISTICS Thousand tons 4Q Q Sales Fertilizer 4,791 3,496 20,099 20,540 Industrial products (excl. industrial gases) 1, ,756 3,898 Total 5,837 4,401 23,855 24,438 Production 1) Ammonia 1,813 1,429 6,736 6,377 Finished fertilizer and industrial products, excl. bulk blends 4,192 4,002 15,457 16,695 Total 6,004 5,432 22,193 23,072 1) Including Yara share of production in associated companies and joint ventures. Yara s fourth-quarter net income after non-controlling interests was NOK 1,424 million, compared with negative NOK 2,109 million last year. Excluding net foreign exchange gains/losses and special items, the result was NOK 1,256 million, compared with a negative NOK 29 million in fourth quarter The result for the quarter includes NOK 1,009 million tax income due to a combination of internal group restructuring and improved utilization of tax losses. Our underlying fourth-quarter results were non-satisfactory. Global NPK sales continued to be hampered by high potash prices, and until November European nitrate prices were held back by European distributors still unwilling to take positions for the spring application, said Jørgen Ole Haslestad, President and Chief Executive Officer of Yara. We saw a major improvement in fertilizer markets towards the end of the fourth quarter, as global nitrogen and phosphate markets turned demanddriven. Increased global nitrogen prices stimulated demand from European distributors, enabling Yara to increase nitrate prices substantially with effect for January sales. Improved phosphate demand and falling potash prices have seen NPK sales pick up, and Yara s NPK capacity has been fully utilized since the beginning of January, said Jørgen Ole Haslestad. FERTILIZER MARKET CONDITIONS Global fertilizer markets improved during the fourth quarter, as demand for nitrogen and phosphates increased. Potash demand was still low, due to high prices and expectations of a continued decline. Despite the economic turmoil, food demand growth has remained strong. Food production in 2009 exceeded demand slightly due to favorable weather conditions, but with significant depletion of soil nutrients as a result. However, crop prices developed positively during the fourth quarter, and are currently at the same level as at the start of the fourth quarter, even after the significant drop mid January. Global urea prices were stable during the first two months of the quarter, and increased during December. Global import demand increased, partly covered by stronger Chinese exports, as the Chinese export tax was only 10%. But despite higher urea prices in December, Chinese exports did not increase further, due to a stronger domestic market and a more difficult feedstock supply situation. Exports from Ukraine increased, as urea prices increased and production margins turned positive. At the end of the quarter, urea production outside China was running at close to full capacity. The ammonia market also improved during the quarter, with increased demand both from the phosphate and industrial sectors. However,

3 YARA FOURTH QUARTER FERTILIZER AND ENERGY MARKET PRICES Average prices 4Q Q Urea prilled (fob Black Sea) USD/ton Ammonia (fob Black Sea) USD/ton AN (cif France) USD/ton CAN (cif Germany) USD/ton Phosphate rock (fob Morocco) USD/ton Oil Brent blend spot USD/bbl Low-sulphur fuel oil (LSFO) USD/ton US gas (Henry Hub) USD/MMBtu European gas (Zeebrugge) USD/MMBtu Source: The Market, Fertilizer Week, World Bank and Platts. prices were stable around Ukraine production costs, as some Ukrainian ammonia capacity was needed in the market. Activity in the phosphate fertilizer sector was slow during the first half of the quarter, but improved sharply thereafter, triggered by strong Chinese buying. The DAP price fob North Africa increased from below USD 300 per ton mid November to around USD 350 per ton end December, increasing further through January. China exported a net 0.4 million tons of DAP during the quarter, compared with 0.1 million tons in the same period last year. Phosphate rock and phosphoric acid prices were stable during the quarter. As prices did not follow the higher DAP prices, margins for non integrated phosphate producers improved. Potash demand remained low in the fourth quarter, as buyers anticipated a further decline in prices. These expectations were confirmed in late December when the China contract for 2010 deliveries was settled at USD 350 per ton cfr. REGIONAL MARKET DEVELOPMENTS Fourth-quarter nitrogen fertilizer sales in Western Europe were up 9% from last year, with imports down 10%. Sales were 8% down on fourth quarter Season to date, sales were 2% up on last season, with imports down 12%. Sales were 12% down on the season before last. The European producers sold 11% more nitrogen season to date, with nitrate sales 17% ahead. Compound/NPK sales were 31% lower than last season. Demand and prices got a strong boost from the tightening global urea balance during the quarter. Fourth-quarter US nitrogen deliveries were down by an estimated 7% on last year, as imports dropped. Season to date deliveries were down by an estimated 6%, also due to lower imports. This data includes nitrogen for industrial applications. Fourth-quarter urea sales in India were up 4% on last year, following lower sales earlier in 2009 due to a poor monsoon. Domestic production was up 12%, mainly due to revamping of plants and higher regularity in natural gas supply. End December stocks were reported at only 0.4 million tons. China exported 1.3 million tons of urea during the quarter, compared with only 0.1 million tons in the same period last year, due to a combination of lower export tax and higher export prices. Despite the increase in global prices, Chinese exports did not increase from November to December, due to a tighter domestic balance. Coal prices increased as priority was given to power and heating, and coal and gas supply to industry was curtailed. Brazil imported 0.8 million tons urea during the fourth quarter, up from 0.3 million tons last year, as less was imported earlier in the year. Full-year 2009 imports were 1.9 million tons, down from 2.2 million tons in 2008.

4 4 YARA FOURTH QUARTER 2009 VARIANCE ANALYSIS FOURTH QUARTER NOK millions 4Q 2009 EBITDA ,394 EBITDA ,626 Variance EBITDA (233) Volume & mix 506 Price/Margin (2,549) Oil & gas costs in Europe 1,153 Special items 391 Other 464 Conversion (NOK vs. USD) 1) (197) Total variance explained (233) 1) Based on average NOK/USD for the quarter 2009: 5.69 (2008: 6.48) Fourth-quarter EBITDA excluding special items improved slightly compared with the third quarter as overall sales of own-produced fertilizer were stable while margins improved. Global Yara fertilizer deliveries were up 37% on fourth quarter European fertilizer sales increased for all main product groups except NPK. European NPK sales continued to be hampered by high potash prices but increased in December as nitrogen and phosphate demand improved. Volumes outside Europe were up 53%, primarily reflecting improved NPK sales in Asia and Latin America. Industrial volumes increased 15% from fourth quarter 2008 and 8% from third quarter Prices for all main products were down compared with last year, with average realized nitrate prices more than 60% below last year. However, fourth quarter 2008 saw a severe drop in fertilizer prices, resulting in substantial position losses. Yara continued to exercise tight inventory management in the fourth quarter, maintaining low stock levels in line with previous quarters and 43% below fourth quarter last year. Industrial margins were close to normal in fourth quarter 2009, while margins suffered in the same period last year from a combination of falling sales prices and high ammonia cost. European oil and gas costs decreased in line with Yara s third-quarter guidance, reflecting both lower oil-linked and hub gas prices and Yara s decision to continue maximizing spot exposure in its energy contracts. However, European oil and gas costs increased 8% compared with third quarter 2009, reflecting an increase in prices for both natural gas and oil products. Total special items were a positive NOK 287 million, including a NOK 244 million property damage insurance claim related to Yara s Tertre plant and a NOK 118 million gain on the sale of Yara s remaining shares in China BlueChemical Ltd. Fourth-quarter 2008 net special items were a negative NOK 104 million. For further details on special items see page 16. Fourth-quarter fixed costs were lower than last year, reflecting a combination of Kemira GrowHow synergies, other cost reductions and onetime effects last year. The US dollar was approximately 12% weaker versus the Norwegian krone compared with fourth quarter 2008, resulting in a negative translation effect in Yara s results.

5 YARA FOURTH QUARTER VARIANCE ANALYSIS FULL YEAR NET INCOME FROM EQUITY-ACCOUNTED INVESTEES NOK millions 2009 EBITDA ,549 EBITDA ,917 Variance EBITDA (12,369) Volume & mix (491) Price/Margin (20,671) Oil & gas costs in Europe 4,656 Special items (138) Other 852 Conversion (NOK vs. USD) 1) 3,422 Total variance explained (12,369) 1) Based on quarterly average NOK/USD rates as detailed in Yara 2009 reports. Full-year EBITDA was down 69% compared with last year, primarily reflecting significantly lower prices and margins. Fertilizer deliveries were down 2% on 2008, with NPKs down 18% while nitrate sales increased 9%. European volumes declined 11%, while volumes outside Europe were up 8% from last year. Industrial volumes declined 4%. Average realized US dollar prices for nitrates were approximately 50% lower than last year, while realized urea prices declined approximately 40%. Full-year 2009 special items were a net positive NOK 57 million, while 2008 special items were a net positive NOK 195 million. For further details see page 16. NOK millions 4Q Q Qafco ,446 Tringen Rossosh Burrup 26 (216) 311 (193) GrowHow UK Ltd Other 61 (126) Total ,412 2,760 Fourth-quarter net income from equity-accounted investees increased 40% from a year earlier, despite lower underlying results for most companies due to lower prices and margins. The Burrup plant was not operating in fourth quarter 2008 and also incurred a NOK 146 million currency loss in the same period. The Lifeco joint venture became active from first quarter 2009, explaning a further part of the improvement in net income from equity-accounted investees compared with fourth quarter Qafco, Burrup and Tringen results are strongly exposed to international ammonia and urea prices, which were down approximately 20% and 17% respectively compared with fourth quarter 2008 (fob Black Sea). GrowHow UK Ltd. results are primarily exposed to nitrate and NPK margins and sales volumes. Rossosh results primarily reflect lower NPK sales and lower margins for both ammonia and NPKs. OTHER AND ELIMINATIONS Fourth quarter EBITDA was a negative NOK 81 million, compared with a positive NOK 1,390 million last year (see Note 3, page 24). The negative variance mainly reflects the reversal of write-downs of Yara-sourced products last year. Full-year EBITDA was a negative NOK 676 million, compared with a positive NOK 268 million last year. The negative variance reflects reversal of write-down for Yara-sourced products and elimination of internal profit in inventories.

6 6 YARA FOURTH QUARTER 2009 FINANCIAL ITEMS NOK millions 4Q Q Interest income from customers Interest income, other Dividends and net gain/(loss) on securities Interest income and other financial income Interest expense (231) (825) (728) (1,347) Return on pension plan assets Interest expense re. pension liabilities (119) (157) (504) (490) Foreign exchange gain/(loss) (96) (2,482) 1,364 (3,313) Other 5 (37) (89) (86) Interest expense and foreign exchange gain/(loss) (396) (3,395) 419 (4,813) Net financial income/(expense) (231) (3,277) 794 (4,136) Fourth-quarter net financial expense was NOK 231 million compared with NOK 3,277 million last year. The positive variance primarily reflects a NOK 96 million foreign exchange loss this quarter compared with a NOK 2,482 million loss in the same quarter last year. Interest expense this quarter was NOK 594 million lower than in the same quarter last year. Last year s figure included an unrealized loss of NOK 450 million on interest rate derivatives held at that time to retain a portion of the interest-bearing debt at fixed rates. The remaining decrease is mainly explained by the average gross debt level being approximately NOK 10.8 billion lower than last year. Yara s US dollar debt generating currency exposure totaled approximately USD 1.4 billion during the quarter, of which approximately USD 0.4 billion was emerging markets inventory financing and the remainder was held to hedge future earnings. The net foreign exchange loss this quarter was NOK 96 million as the US dollar appreciated 2% against the euro and remained stable against Yara s other main currencies. interest rate derivatives during the first half of 2009, compared with a NOK 557 million loss in The last of these contracts were terminated in June TAX Fourth-quarter current and deferred taxes amounted to an income of NOK 1,009 million. A normal tax rate would imply a charge of approximately zero as fourth-quarter income before tax consists mainly of net income from equity-accounted investees. The positive effect of approximately NOK 1 billion is primarily generated by internal group restructuring, utilization of tax losses in Brazil following a court ruling during the quarter and lower valuation allowances in Belgium. Improved prospective earnings in certain tax areas where Yara had tax loss carryforwards with valuation allowances have contributed to the tax credit for the quarter. The NOK 118 million net gain on securities stems from the sale of Yara s remaining shares in China BlueChemical Ltd. Fourth-quarter net financial expense includes a positive NOK 78 million recorded in the Other line, for the reversal of accrued interest expense following the conclusion of a tax case in Brazil. Full-year net financial income was NOK 794 million, compared with a net financial expense of NOK 4,136 million last year. The difference was mainly due to a net foreign exchange gain this year versus a net loss last year. Interest expense was NOK 619 million lower than in 2008, reflecting both a NOK 4.5 billion lower average gross debt level and positive interest rate derivative effects. Yara recorded a NOK 323 million gain on

7 YARA FOURTH QUARTER NET INTEREST-BEARING DEBT NOK millions 4Q Net interest-bearing debt at beginning of period (15,901) (24,794) Cash earnings 1) Dividends received from equity-accounted investees Net operating capital change 1,532 13,207 Lifeco (Libya) - (1,559) Other investments (net) (1,082) (3,908) Yara dividend - (1,544) Foreign exchange gain/(loss) (96) 1,364 Other (1,182) 40 Net interest-bearing debt at end of period (16,227) (16,227) 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 consolidated statement of cash flows (page 22), this table highlights the key factors behind the development in net interest-bearing debt. Net interest-bearing debt increased by NOK 326 million during fourth quarter 2009, ending at NOK 16,227 million. DIVIDEND POLICY Yara s objective is to pay out minimum 30% of net income as an average over the business cycle. Yara believes it will be beneficial for shareholders that the Company strives for a gradual increase and predictability in the absolute dividend level over time, independently of the business cycle. Consequently, Yara expects to pay out somewhat more than 30% of net income in years with weaker than average cash flow from operations and less than 30% in years with stronger than average cash flow from operations. Yara s Board will propose to the Annual General Meeting a dividend payment of NOK 4.50 per share for 2009, which represents 34% of net income. Cash payments to shareholders from dividends and share buy-back programs combined are expected to be an average 40-45% of net income over the business cycle. The Board intends to propose to the Annual General Meeting a new buy-back program along the lines of the previous one. Cash earnings increased compared with previous quarters in 2009, primarily reflecting higher operating income and lower tax payments. A further NOK 1.5 billion of net operating capital was released during the fourth quarter, primarily reflecting a significant stock reduction in Brazil. Growth investment activity was high during the quarter, especially in Sluiskil, Netherlands where a EUR 400 million urea expansion program is in its main phase, for completion in The consideration from the sale of Yara s remaining shares in China BlueChemical Ltd contributed a positive NOK 254 million. Other reflects a combination of items where operating income and cash flows during the quarter differ. NOK 392 million relates to Tertre insurance payments not yet received, with the remainder primarily due to prepaid expenses and payment of provisions taken in prior periods. The debt/equity ratio at the end of 2009, calculated as net interest-bearing debt divided by shareholders equity plus non-controlling interests, was 0.56 compared with 0.84 at the end of In January 2010 Yara agreed with Vale to sell its shares in Fosfertil for USD 785 million. The theoretical end 2009 debt/equity ratio adjusted for a completed Fosfertil sale is 0.43, with tax payable included in debt. The sale is expected to close in second quarter 2010.

8 8 YARA FOURTH QUARTER 2009 Downstream FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 4Q Q Revenue and other income 9,305 13,514 45,569 64,905 Operating income (96) (3,049) 262 3,412 EBITDA 90 (2,840) 963 4,648 EBITDA excl. special items 182 (2,859) 1,187 4,238 CROGI (12-month rolling average) 4.1% 14.9% ROCE (12-month rolling average) 2.2% 15.4% KEY STATISTICS Thousand tons 4Q Q Sales by region Fertilizer Europe 2,436 1,956 10,031 11,230 Fertilizer outside Europe 2,355 1,540 10,068 9,309 Total 4,791 3,496 20,099 20,540 Sales by product group Nitrate 1,449 1,153 6,089 5,608 NPK 1,515 1,139 6,211 7,561 of which own-produced ,092 3,794 of which own blends ,149 2,482 Urea 1, ,247 3,772 of which own-produced , of which joint venture sourced ,798 1,898 CN UAN , Other products ,862 1,860 Total 4,791 3,496 20,099 20,540 VARIANCE ANALYSIS FOURTH QUARTER Weak results, higher ammonia price impacts nitrate margins Volumes 8% lower than third quarter, European distributors unwilling to take positions early in the quarter Restructuring in Brazil NOK millions 4Q 2009 EBITDA EBITDA 2008 (2,840) Variance EBITDA 2,930 Volume & mix 174 Price/Margin 2,064 Special items (111) Other 292 Conversion (NOK vs. USD) 1) 511 Total variance explained 2,930 1) Based on average NOK/USD for the quarter 2009: 5.69 (2008: 6.48)

9 YARA FOURTH QUARTER Downstream delivered a weak fourth-quarter result mainly due to low margins. EBITDA nevertheless improved compared with fourth quarter 2008 when substantial position losses impacted the Downstream result. Global Yara deliveries were up 37% on last year with increase in all main product groups. Volumes outside Europe were up 53%, primarily due to increased NPK sales. Fertilizer demand in Asia, especially for ownproduced NPK, was strong throughout the quarter and total deliveries more than doubled compared with last year. European deliveries were 25% above last year, with the main growth in nitrates and urea, increasing Yara s market share. Prices for all main products were down compared with last year, with average realized nitrate prices more than 60% below last year. However, fourth quarter 2008 saw a severe drop in fertilizer prices, resulting in substantial position losses. The decrease in the results compared with third quarter 2009 was mainly due to lower volumes and lower Downstream nitrate margins. The end of the Southern hemisphere season combined with a quiet market in Europe saw fourth-quarter sales get off to a slow start. However, urea and nitrate demand and prices increased strongly towards the end of the quarter. Prices for all main products except potash increased compared with the third quarter, but Downstream nitrate margins declined due to higher ammonia costs. However, nitrate margins improved in December. Total special items for the quarter impacting EBITDA were a negative NOK 92 million, while fourth-quarter 2008 special items were a net positive NOK 19 million. During the fourth quarter Yara started the restructuring of its Brazilian operations to improve long-term profitability. The process includes product portfolio simplification with more emphasis on own produced products, closure of blending units and a manning reduction of 170 employees. The restructuring had a negative EBITDA impact of NOK 28 million, while the equivalent operating income effect was NOK 67 million including asset impairment. VARIANCE ANALYSIS FULL YEAR NOK millions 2009 EBITDA EBITDA ,648 Variance EBITDA (3,685) Volume & mix (1,302) Price/Margin (4,353) Special items (634) Other 364 Conversion (NOK vs. USD) 1) 2,239 Total variance explained (3,685) 1) Based on quarterly average NOK/USD rates as detailed in Yara 2009 reports Downstream earnings were impacted by reduced volumes, lower market prices and position losses from declining prices. Volumes were down 2%, mainly reflecting NPK deliveries 18% below last year. Nitrate deliveries increased by 9%. Margins were substantially lower than last year, reflecting lower average prices for most main products. Average realized prices for nitrates and NPK, measured in US dollars, were approximately 50% and 30% below last year special items impacting EBITDA were a negative NOK 224 million, while last year s net special items were a positive NOK 410 million, primarily reflecting the sale of shares in SQM. Position losses are not classified as special items. The Other variance mainly reflects fixed cost improvements, partly offset by last year s NOK 215 million dividend from Fosfertil in Brazil. No Fosfertil dividend was paid in Adjustments to tax case provisions in Brazil, mainly related to sales taxes, impacted EBITDA negatively by NOK 30 million. These provisions were more than offset by a NOK 78 million gain from a concluded tax case, recorded in financial income/expense. Fourth-quarter EBITDA includes a NOK 34 million provision for restructuring costs in France, primarily related to the closure of a subsidiary which sells ammonia for direct field application. The operating income impact was NOK 42 million. Stocks were kept stable during the second half of 2009 and ended 46% below fourth quarter 2008.

10 10 YARA FOURTH QUARTER 2009 Industrial FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 4Q Q Revenue and other income 2,223 3,122 8,615 10,995 Operating income 194 (28) EBITDA , EBITDA excl. special items , CROGI (12-month rolling average) 19.5% 10.4% ROCE (12-month rolling average) 23.4% 10.2% KEY STATISTICS Thousand tons 4Q Q Sales by product group (excl. industrial gases) Environmental products ,088 1,219 Industrial N-chemicals (incl. TAN) ,668 2,678 Total 1, ,756 3,898 VARIANCE ANALYSIS FOURTH QUARTER Strong results for quarter and full year Margins normalizing as contract benefits roll over Continued recovery in N-chemical and environmental product sales TAN sales improvement towards end 2009 NOK millions 4Q 2009 EBITDA EBITDA Variance EBITDA 212 Volume & mix 22 Price/Margin 149 Special items (21) Non-recurring items - Contract derivatives (21) Other 66 Conversion (NOK vs. USD) 1) (4) Total variance explained 212 1) Based on average NOK/USD for the quarter 2009: 5.69 (2008: 6.48)

11 YARA FOURTH QUARTER Fourth-quarter EBITDA was NOK 244 million compared with NOK 33 million last year, as both volumes and margins improved significantly. Margins are approaching a normal level, as contracts entered into at higher prices have mostly rolled over. Technical ammonium nitrate (TAN) volumes were down 7% from last year, but improved in the last months of the year compared with previous quarters in The high margins (following contractual time lag effects) seen in the beginning of the year have normalized and are now at the same level as last year. Fourth-quarter sales of ammonia, urea and nitric acid to the European process industry increased 38% compared with last year, continuing a positive trend through the second half of Margins were stable during the quarter. Adjusted for divested activities, environmental product sales were slightly up from fourth quarter Sales of sulphide abatement products were down 4% from fourth quarter 2008, mainly related to activities in the US, while NOX abatement products were up 4%. Margins were higher for both product groups. Liquid CO 2 sales to European end users increased 29% compared with fourth quarter Margins also improved significantly during the quarter, primarily due to lower energy cost. The positive Other variance primarily reflects fixed cost improvements including currency effects. VARIANCE ANALYSIS FULL YEAR NOK millions 2009 EBITDA ,248 EBITDA Variance EBITDA 619 Volume & mix (87) Price/Margin 686 Special items (137) Non-recurring items (126) Contract derivatives (11) Other 22 Conversion (NOK vs. USD) 1) 136 Total variance explained 619 1) Based on quarterly average NOK/USD rates as detailed in Yara 2009 reports. Adjusting for special items, 2009 Industrial EBITDA was up 142% from last year, despite a volume drop of 4%. The TAN business was affected by the economic slowdown, with a 16% drop in sales volumes. Margins were robust due to contractual time lag effects. Adjusted for divested activities, environmental sales were in line with last year, while margins benefited from strong commercial management. Sales of ammonia, urea and nitric acid to the European process industry rebounded from a 21% drop in the first half, to end in line with Margins were stable throughout the period. Liquid CO 2 sales to European end users were stable compared with 2008, while margins improved primarily due to energy savings special items primarily reflect Pardies closure cost of NOK 42 million, while last year s result included a NOK 90 million gain from the sale of chemical marketing activities to Brenntag.

12 12 YARA FOURTH QUARTER 2009 Upstream FINANCIAL HIGHLIGHTS NOK millions, except where indicated otherwise 4Q Q Revenue and other income 6,675 11,874 25,899 45,826 Operating income 288 2, ,342 Share net income equity-accounted investees ,308 2,482 EBITDA 1,141 3,044 4,013 12,372 EBITDA excl. special items 761 3,188 3,690 12, 665 CROGI (12-month rolling average) 7.8% 27.9% ROCE (12-month rolling average) 6.4% 40.5% Oil & gas cost (weighted average) 1) USD/MMBtu Oil & gas cost Europe (weighted average) 1) USD/MMBtu ) Including Yara share of associated companies and joint ventures. KEY STATISTICS Thousand tons 4Q Q Production by category Ammonia 1,801 1,386 6,639 6,167 Finished fertilizer 2,930 2,694 10,642 10,905 Total 4,731 4,080 17,281 17,072 VARIANCE ANALYSIS FOURTH QUARTER Sequential result improvement from third quarter 2009 NPK curtailed in fourth quarter, now running at full capacity Substantial energy cost improvement compared to last year Tertre reconstruction on schedule, insurance claim NOK 244 million NOK millions 4Q 2009 EBITDA ,141 EBITDA ,044 Variance EBITDA (1,904) Volume & mix 483 Price/Margin (3,677) Oil & gas costs in Europe 1,153 Special items 523 Non-recurring items 721 Contract derivatives (197) Other 76 Conversion (NOK vs. USD) 1) (462) Total variance explained (1,904) 1) Based on average NOK/USD for the quarter 2009: 5.69 (2008: 6.48)

13 YARA FOURTH QUARTER Upstream fourth-quarter results improved compared with third quarter 2009, but were still impacted by low NPK volumes and low margins for all finished fertilizer products. Ammonia production increased 30% from fourth quarter 2008, mainly as a result of lower production curtailments, but also the inclusion of Lifeco volumes and the return of Burrup production following disruption last year. During the fourth quarter, Yara s production system ran at approximately 91% of capacity for ammonia, 95% for urea and nitrates and 77% for NPKs. The lower utilization mainly reflects curtailments (NPK and ammonia) and the Tertre accident (ammonia and nitrates). Finished fertilizer production increased 9% from fourth quarter The increase reflects new volumes from Lifeco and lower production curtailments, partly offset by lower Tertre production. The reconstruction of the Tertre ammonia plant is on schedule and budget, with start-up expected in second quarter The property damage insurance claim of NOK 244 million was included in the fourth quarter results as a special item. A further NOK 118 million special items gain was recorded related to the sale of Yara s remaining shares in China BlueChemical Ltd. Fourth-quarter 2008 special items included a negative inventory fair value adjustment in connection with the Belle Plaine acquisition of NOK 359 million and a positive contract derivative effect of NOK 215 million. Yara s average European oil and gas cost was down 44% from last year, while Yara s global average gas cost decreased 45%, on a USD per MMBtu basis. Compared with third quarter 2009, costs increased 8% in Europe and 10% globally. Fourth-quarter energy cost for plants with oil-linked contracts was USD 9.51 per MMBtu, while the remaining European plants average energy cost was USD 4.16 per MMBtu. VARIANCE ANALYSIS FULL YEAR NOK millions 2009 EBITDA ,013 EBITDA ,372 Variance EBITDA (8,359) Volume & mix (296) Price/Margin (14,865) Oil & gas costs in Europe 4,656 Special items 615 Non-recurring items 751 Contract derivatives (135) Other 64 Conversion (NOK vs. USD) 1) 1,468 Total variance explained (8,359) 1) Based on quarterly average NOK/USD rates as detailed in Yara 2009 reports. All product prices were significantly down from last year, impacting Upstream results. Ammonia production increased 8% compared with 2008, reflecting the inclusion of Belle Plaine and Lifeco volumes, partly offset by production curtailments and the Tertre accident impact. Finished fertilizer production decreased 2% from last year, mainly due to NPK curtailments, Belle Plaine turnaround/expansion and Tertre. Oil and gas costs in Europe decreased 45%, while Yara s global average gas cost was down 50% from last year. The full-year special items variance primarily reflects the non-recurring fourth-quarter 2009 gains and 2008 losses described above.

14 14 YARA FOURTH QUARTER 2009 Outlook The long-term fundamentals for fertilizer demand are strong as global grain consumption growth remains robust, requiring continued improvements in agricultural productivity. Consumption growth is driven by economic development in emerging markets with on-going diet changes, as well as further biofuel growth based on historically strong oil prices. Grain production in 2009 exceeded demand slightly due to favorable weather conditions. Despite a fall in soft commodity prices during January 2010, prices remain at historically high levels reflecting the need for production increases to match further expected demand growth. Global fertilizer demand has picked up from last season when financial stress and risk aversion by distributers and farmers led to de-stocking in addition to lower application. Until mid fourth quarter 2009 demand was still subdued in Europe and North America where distributors were reluctant to take positions. With the increase in North-American and European deliveries in late fourth quarter, global nitrogen and phosphate markets have turned demand-driven with only minor high-cost nitrogen capacity outside China currently curtailed. Season-to-date nitrogen sales in Western Europe were up 2% from last year, but deliveries still lag the 07/08 season by an estimated 12%, indicating upside potential. North American nitrogen deliveries this season are expected to be strong, due to de-stocking last season, stable to increasing corn acreage and improving industrial demand. With deliveries lagging season to date, demand for the remainder of the season is expected to be supportive. The tightening of global nitrogen markets and the pick-up in European demand contributed to higher nitrate prices in Europe from late fourth quarter into January Non-competitive potash pricing, making buyers hold back in expectation of further prices declines, continued to hamper Yara s NPK sales in fourth quarter. However, the latter part of the quarter saw an increase in NPK demand as the phosphate market strengthened and improved sharply into January. The Chinese potash contract settlement in late December at USD 350 per ton for 2010 deliveries is bringing more NPK buyers back into the market as they now see a lower downside risk on potash prices. However, it remains to be seen if this price level is low enough to achieve normal NPK deliveries for the remainder of the season. Yara has since early January been running its NPK plants at full capacity without any indication of stock build-up. During the fourth quarter global urea price increases were dampened by Chinese exports. In the short term this ceiling is lifted substantially as a 110% export tax was implemented 1 February and is expected to remain in place until end June, a period during which India may need to contract substantial new import volumes. The development during fourth quarter also demonstrates that the ceiling after June 2010 will be soft, as export prices continued to increase even with only a 7-10% export tax, due to tight domestic energy supply and strong domestic fertilizer demand. During over-supplied periods in 2009 global urea prices have been set by a floor reflecting Ukraine gas costs. The price for Russian gas supplies to Ukraine has been significantly increased from the beginning of It appears that Ukrainian fertilizer producers are not yet paying a gas price reflecting the new Russian border price. Longer term it is likely that the increased gas cost will be passed on to fertilizer producers, increasing the Black Sea urea floor price significantly Sales of nitrogen chemicals to the European industry continue to increase due to restocking and return of industrial activity. Yara s European energy cost for first quarter 2010 is expected to be approximately NOK 250 million lower than last year. Based on the current forward market for oil products and natural gas (9 February) Yara s European energy cost for second quarter 2010 is expected to be NOK 200 million higher than last year. The estimates may change considerably depending on future energy prices. The Board of Directors and Chief Executive Officer Yara International ASA Oslo, 12 February 2010 Øivind Lund Chairperson Elisabeth Harstad Board member Leiv L. Nergaard Board member Lone Fønss Schrøder Board member Bernt Reitan Board member Frank Andersen Board member Svein Flatebø Board member Karl-Edvard Juul Board member Jørgen Ole Haslestad President and CEO

15 YARA FOURTH QUARTER 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 income statement, and are referenced in the variance analysis (see below) as Contract derivatives. 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 income statement 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, writedowns 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, there is for some of Yara s associated companies and joint ventures a lag of 1-3 months for the numbers included in Yara results.

16 16 YARA FOURTH QUARTER 2009 Special items EBITDA EFFECT NOK millions 4Q Q Bad debt Africa - - (105) - Restructuring France (34) - (60) - Restructuring Brazil (28) - (28) - Sales tax Brazil (30) - (30) - Restructuring Kemira GrowHow (49) Sale of shares SQM Closure Kedainiai - (29) - (29) Part divestment of Baltic joint ventures Total Downstream (92) 19 (224) 410 Pardies closure - - (42) - Restructuring Kemira GrowHow (6) Sale of business to Brenntag Contract derivatives Total Industrial - 21 (42) 95 Sale of shares China BlueChemical Property damage insurance Tertre Sale of gas Tertre (52) Restructuring Kemira GrowHow (86) Retroactive effect gas contract negotiation Inventory fair value adjustment Saskferco - (359) - (359) Contract derivatives (39) 97 Total Upstream 379 (144) 323 (293) Restructuring Kemira GrowHow (18) Other and eliminations (18) Total EBITDA effect 287 (104) ADDITIONAL OPERATING INCOME EFFECT NOK millions 4Q Q Bad debt Africa - - (30) - Restructuring France (8) - (31) - Restructuring Brazil (39) - (39) - Closure Kedainiai - (26) - (26) Total Downstream (47) (26) (100) (26) Restructuring France - - (58) - Total Industrial - - (58) - NET INCOME EFFECT ONLY NOK millions 4Q Q Interest rate derivatives gain / (loss) - (450) 323 (557)

17 YARA FOURTH QUARTER Production data 1) Thousand tons 4Q Q Upstream Ammonia 1,801 1,386 6,639 6,167 Nitrates ,951 3,227 NPK ,787 3,688 CN Urea ,627 2,684 UAN Downstream Ammonia Nitrates ,847 2,693 NPK ,194 2,125 CN UAN Industrial Ammonia Nitrates (TAN) ) Including production in associated companies and joint ventures.

18 18 YARA FOURTH QUARTER 2009 Condensed consolidated interim statement of income NOK millions, except share information Notes 4Q Q Revenue 13,401 18,756 60,867 87,926 Other income Commodity based derivatives gain/(loss) Revenue and other income 3 13,791 18,957 61,418 88,775 Raw materials, energy costs and freight expenses 5 (11,157) (17,544) (47,366) (70,636) Change in inventories of own production (39) 1,966 (3,710) 3,682 Payroll and related costs 7 (1,149) (1,297) (4,602) (4,830) Depreciation and amortization 7 (568) (783) (2,425) (2,095) Other operating expenses 7 (599) (891) (2,044) (2,615) Operating costs and expenses (13,513) (18,549) (60,147) (76,494) Operating income ,271 12,281 Share of net income in equity-accounted investees ,412 2,760 Interest income and other financial income Earnings before interest expense and tax (EBIT) ,058 15,717 Foreign exchange gain/(loss) (96) (2,482) 1,364 (3,313) Interest expense and other financial items (300) (912) (945) (1,500) Income before tax (2,609) 3,477 10,905 Income tax expense 1, (2,664) Net income 1,422 (2,159) 3,814 8,241 Net income attributable to Shareholders of the parent 1,424 (2,109) 3,782 8,228 Non-controlling interests (2) (50) Net income 1,422 (2,159) 3,814 8,241 Earnings per share 1) 4.93 (7.27) Weighted average number of shares outstanding 2) 288,823, ,146, ,167, ,075,663 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 FOURTH QUARTER Condensed consolidated interim statement of comprehensive income NOK millions 4Q Q Net income 1,422 (2,159) 3,814 8,241 Exchange differences on translation of foreign operations (66) 3,914 (3,751) 5,143 Actuarial gain/(loss) on defined benefit pension plans (112) (1,303) (112) (1,310) Available for sale investments - change in fair value (231) (582) 809 (1,440) Cash flow hedges 41 (202) 140 (191) Hedge of net investments 130 (236) 47 (360) Transfer from equity (172) 50 (166) 52 Total other comprehensive income, net of tax (411) 1,641 (3,033) 1,894 Total comprehensive income 1,011 (518) ,136 Total comprehensive income attributable to Shareholders of the parent 1,016 (502) ,085 Non-controlling interests (4) (16) 5 51 Total 1,011 (518) ,136 Condensed consolidated interim statement of changes in equity NOK millions Share capital 1) Premium paid-in capital Translation of foreign operations Availablefor-sale financial assets Cash flow hedges Hedge of net investments Actuarial gain/loss Total other reserves Retained earnings Attributable to the shareholders of the parent Noncontrolling interests Total equity Balance at 31 December ,092 (1,578) 2,029 (109) ,751 20, ,141 Total comprehensive income - - 5,109 (1,440) (142) (360) (1,310) 1,857 8,228 10, ,136 Company purchased/sold (35) (4) Treasury shares (3) (420) (423) (423) Dividend's distributed (1,166) (1,166) (45) (1,211) Balance at 31 December ,092 3, (249) (173) (1,231) 2,466 25,423 29, ,638 Total comprehensive income - - (3,724) (112) (3,006) 3, Companies purchased/sold 2) (2) (2) 4 2 Treasury shares Redeemed treasury shares 3) (419) Redeemed shares, Norwegian State 3) (2) (238) (240) (240) Dividend's distributed (1,304) (1,304) (15) (1,319) Balance at 31 December (193) 1,278 (155) (126) (1,343) (539) 28,319 28, ,863 1) Par value ) Related to purchase of Yara Industrial China (JV) and purchase of non-controlling interests in Yara Vietnam Ltd. 3) As approved by General Meeting 7 May 2009.

20 20 YARA FOURTH QUARTER 2009 Condensed consolidated interim statement of financial position NOK millions Notes Assets Non-current assets Deferred tax assets 1 1,920 3,234 Intangible assets 1,7,9,11 3,591 3,907 Property, plant and equipment 1,7 22,121 22,524 Equity-accounted investees 4,11 10,083 8,827 Other non-current assets 5,577 4,669 Total non-current assets 43,292 43,162 Current assets Inventories 1,5 7,853 20,195 Trade receivables 5,934 10,062 Prepaid expenses and other current assets 3,611 3,203 Cash and cash equivalents 974 3,195 Total current assets 18,372 36,655 Total assets 3 61,665 79,817

21 YARA FOURTH QUARTER Condensed consolidated interim statement of financial position NOK millions, except for number of shares Notes Equity and liabilities Equity Share capital reduced for treasury stock Premium paid-in capital ,092 Total paid-in capital 926 1,585 Other reserves 11 (539) 2,467 Retained earnings 8,11 28,319 25,423 Total equity attributable to shareholders of the parent 28,705 29,474 Non-controlling interests Total equity 28,863 29,638 Non-current liabilities Employee benefits 1 2,358 3,009 Deferred tax liabilities 1,9,11 4,062 5,367 Other long-term liabilities Long-term provisions 1, Long-term interest-bearing debt 6 13,936 22,037 Total non-current liabilities 20,966 31,322 Current liabilities Trade and other payables 6,883 9,277 Current tax liabilities 551 1,592 Short-term provisions Other short-term liabilities 774 1,542 Bank loans and other interest-bearing short-term debt 6 3,185 5,937 Current portion of long-term debt Total current liabilities 11,836 18,857 Total equity and liabilities 61,665 79,817 Number of shares outstanding 2 288,831, ,817,911 The Board of Directors and Chief Executive Officer Yara International ASA Oslo, 12 February 2010 Øivind Lund Chairperson Elisabeth Harstad Board member Leiv L. Nergaard Board member Lone Fønss Schrøder Board member Bernt Reitan Board member Frank Andersen Board member Svein Flatebø Board member Karl-Edvard Juul Board member Jørgen Ole Haslestad President and CEO