Yara International ASA 2017 fourth quarter results. 8 February 2018

Transcription

1 Yara International ASA 217 fourth quarter results 8 February 218

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

3 Summary fourth quarter Improvement program ahead of schedule Improved results reflecting higher margins Strong full-year Industrial performance Proposed dividend NOK 6.5 per share, 45% of net income 3

4 Earnings per share* EPS excluding currency and special items Annual NOK *Average number of shares for 4Q 217: million (4Q 216: million). 4

5 Yara Improvement Program 217 status Program progress Financial benefits Start: Today 217 EBITDA benefits ahead of target (in 215 terms): Production volume improvement according to plan Energy consumption improvement ahead of plan Variable cost improvement ahead of plan Fixed cost improvement behind plan One-off program costs higher than original estimate End: 22 Annual impact, USD million, vs. 215 baseline, at 215 margins Sustained EBITDA improvement 1 One-off benefits One-off cost Production volume Consumption factor 189 One-off investments Variable unit cost 3 Fixed cost 5+ ~35% ~1% ~3% ~25% target 219 target 22 target 1. Additional details in the backup section; 2. Adjusted for corrected full-year procurement savings (e.g., full-year bonuses) 3. Includes improvements to direct and indirect categories, as well as value of additional steam and reduced cost of emissions 5

6 Earnings before interest, tax, depreciation and amortization (EBITDA) EBITDA excluding special items NOK millions 7,884 4,614 3,83 3,591 4,227 4,185 4,625 4,2 4,528 3,964 5,742 4,794 5,179 5,55 3,58 3,54 5,55 5,5 5,489 3,958 3,4 2,968 2,474 2,15 3,335 3,216 2,992 2,873 2,728 2,845 2,386 2,526 Annual NOK millions ,47 21,361 15,563 11,12 6

7 EBITDA: Stronger margins offsets higher energy cost and weaker US dollar NOK millions 531 1, ,526 2,15 74 EBITDA 4Q16 Volume Price/Margin Energy costs Currency Special Other translation items EBITDA 4Q17 7

8 Higher margins in Production segment EBITDA (NOK millions) EBITDA excluding special items , ,915 1,829 Crop Nutrition Industrial Production 4Q16 4Q17 8

9 Higher natural gas cost expected for the next two quarters USD/ MMBtu 8. Yara European natural gas cost NOK millions 8 Change in global natural gas cost (2) (251) 2. 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 TTF (1-month lag) Yara Europe *Dotted lines denote forward prices as of 3 January 218 Source: Yara, World Bank, Argus/ICIS Heren (4) 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 EU/US actual EU/US estimate* Pilbara actual 9

10 Lower realized European nitrate premiums USD/t 6 Nitrogen upgrading margins 1 (monthly publication prices) USD/t 9 European nitrate premium 2 (quarterly Yara realized) Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 CAN (46% N) NH3 CFR (46% N) Urea Egypt CFR proxy Nitrate premium above urea Value above ammonia Value above gas 1) All prices in urea equivalents Yara EU gas cost *2 Source: Fertilizer Market Publications Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 2) Yara European realized nitrate prices (excl. sulphur grades) compared with urea publication prices (Egypt CFR proxy) with 1 month time lag. All numbers in USD per tonne of CAN equivalents. 1

11 Solid commodity phosphate margins and compound NPK premiums USD/t 6 Phosphate upgrading margins USD/t 7 NPK premium over blend Value above raw material Weighted average global premium above blend cost Nitrate premium, CIF inland Germany 2 NH3, fob Black Sea *.22 2 Urea, CIF inland Germany 1 Rock, fob North Africa *1.4 1 DAP, CIF inland Germany 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 DAP, fob USG Source: Fertilizer Market Publications MOP, CIF inland Germany 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 4Q17 1) Export NPK plants, average grade , net of transport and handling cost. 11

12 Higher net interest-bearing debt as investments and net operating capital change more than offset cash earnings NOK millions 19, ,476 2,98 1,736 1,116 Net debt Sep 17 Cash earnings* Net operating capital change Investments (net) Foreign currency translation loss Other Net debt Dec 17 * Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges 12

13 The surge of new capacity is past its peak Global capacity additions ex China (Urea, Million tons) Nigeria Iran USA Production 6.6 Russia Algeria Others % demand growth Source: CRU December

14 .but higher domestic price and lower exports from China are offsetting oversupply elsewhere Increasing urea pricing (USD/ton) Chinese export is falling (1 tons) 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, Urea fob Black Sea Urea granular fob Egypt Source: BOABC, CFMW Urea prilled fob China Urea inland proxy China 14

15 Additional information

16 High on-going Yara growth investment activity Capex plan 1 Production growth NOK bn Cost&capacity improvements 2) M&A Committed growth Maintenance Mill.tons Finished products Ammonia T/R 6 Regularity Babrala & Cubatão Other growth 7 GrowHow UK (divested mid-215) Est T/R 6 Regularity Yara share of Qafco & Lifeco Pilbara 8 Freeport, Est. 22 Babrala & Cubatão Yara-operated 1) Yara s share of capex. Fully consolidated entities presented at 1% basis. 2) Includes Yara Improvement program Capex and other improvements 3) Rio Grande expansion also adds 1 million tonnes NPK blends by 22 4) Finished fertilizer and industrial products, excl. bulk blends 5) Including Yara share of production in non-consolidated investees 6) Adjustment to normalized / 216 turnaround level 7) Committed projects only. TAN Pilbara: 16 kt, Porsgrunn: 25kt, Glomfjord: 15kt, Uusikapunki: 25kt, Köping: 9kt, Sluiskil: net 16kt, Galvani (Salitre ~.8 mill.tonnes, reaching 1.1 mill.tonnes in 222), Rio Grande: 5kt 8) Including 1% ownership in Pilbara NH 3 plant 16

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

18 Improvement and growth investments; earnings and sensitivities 1 EBITDA improvement 2 (MUSD) 1,1 Improvement program: Impact 3 of +1 USD/t price change (NOK/share) Ammonia Urea Earnings improvement 2 (NOK per share) Growth: Impact 3 of +1 USD/t price change (NOK/share) Ammonia Urea DAP Currencies for all amounts from 217: USD/NOK 7.7, EUR/NOK: 9.55, USD/BRL: Measured at 215 conditions. Main average market prices: Ammonia fob Yuzhny 39 USD/t, Urea fob Yuzhny 275 USD/t, DAP fob Morocco 495 USD/t. 3 Improvement: 22 numbers. Growth: At full capacity (219 for urea and ammonia, 22 for DAP). 4 Phosphate-driven price change, equivalent to 138 USD/t phosphate rock (72 bpl) 18

19 Higher finished fertilizer and ammonia production Kilotons 2,5 Ammonia 1 Kilotons 6, Finished fertilizer & industrial products 1 2, +5% 5, +1% 1,5 4, 3, 1, 2, 5 1, Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accounted investees 19

20 Fertilizer deliveries Kilotons 7, 6,5 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, Europe Outside Europe 2

21 Yara 4Q fertilizer deliveries by market and product Kilotons 2,293 2,448 2,243 2,297 4Q16 4Q Europe Brazil Latin America North America Asia Africa 1,467 1,514 1,33 1,477 1,165 1,513 1,264 1, Compound NPK 1 Blend NPK Nitrate Urea Other products UAN CN 1) Yara-produced compound NPK and third party sourced (Total NPK minus blend NPK) 21

22 Fertilizer deliveries by product and source Kilotons 1,477 1,513 1,467 1,514 1,33 1,165 1,264 1,15 1,33 1, Q16 4Q17 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 4Q16 4Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced 22

23 Strong premium product deliveries Value-added fertilizer deliveries 1 Value-added fertilizer deliveries 1 4, 3, , 2,5 2, 1,5 CAGR 13% , Q13 4Q14 4Q15 4Q16 4Q17 Outside Europe Europe 1) YaraBela, YaraMila and YaraLiva deliveries Asia Brazil Latin America excl. Brazil 4Q15 4Q16 Africa 4Q17 North America 23

24 Brazil: focus on premium products and solutions drives growth Brazil 217 fertilizer deliveries Brazil 217 premium product deliveries Kilotons 4, +1% Kilotons 2,5 3, +17% 2, 2, 1, Kilotons 1, 8, % 1,5 1, 6, 4, 5 2, Industry (ANDA) Yara Brazil 24

25 AdBlue deliveries Kilotons Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 25

26 Industrial volume development 816 Kilotons Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Industrial N-chemicals Environmental products Other 26

27 Energy cost Yearly averages , quarterly averages for with forward prices* for 1Q18 and 2Q Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge ) Yara Europe *Dotted lines denote forward prices as of 3 January 218 Source: Yara, World Bank, Argus/ICIS Heren 27

28 Yara stocks Kilotons Finished fertilizer 8, Bunge Fertilizer included from 3Q 213 7, 6, 5, 4, 3, 2, 1, - Urea Nitrates Compound NPK Other 28

29 Steady growth in grain consumption, while production growth is more volatile due to weather variations Grain consumption and production Million tons 2,65 2,6 2,55 2,5 2,45 2,4 2,35 2,3 2,25 2,2 2,15 2,1 2,5 2, 1, E 18F Days Days of consumption in stocks E 18F Consumption Production Source: USDA January

30 Relatively weak grain economics Index 3 FAO price index /26 1/27 1/28 1/29 1/21 1/211 1/212 1/213 1/214 1/215 1/216 1/217 Source: FAO Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg. 3

31 Non-commercials net long position in corn Thousand contracts Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Source: US Commodity Futures Trading Commission 31

32 Production Export Domestic Domestic Export Production Unclear if supply is sufficient to cover Chinese urea demand this season Chinese urea production down vs last year (million tons) Export reduction so far kept supply stable (million tons) / % / Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Source: CFMW, covering close to 1% of production Jul-Dec 16/17 Jul-Dec 17/18 32

33 Increased coal prices drove nitrogen prices higher Coal price in China (fob Qinhuangdao 55, RMB/mt) China anthracite and urea prices (RMB/mt) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IHS, CFMW 33

34 Import catch-up need in India Calendar year Season-to-date (Apr Dec) +2.7% +1.5% Million tonnes Million tonnes % + 4% Production Sales 34

35 Strong deliveries in Europe, slow in USA Million tons N USA Million tons N West Europe % %. 2H13 2H14 2H15 2H16 2H17. 2H13 2H14 2H15 2H16 2H17 Production Net imports Domestic Imports Source: Yara estimate for fertilizer deliveries to selected West European countries. Total nitrogen deliveries based on TFI, US Trade Commission, Blue-Johnson and Yara estimates 35

36 European producers nitrate stocks Index June 27 = Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Source: Fertilizers Europe 17/18 12/13 13/14 14/15 15/16 16/17 36

37 Key value drivers quarterly averages TTF day ahead (USD/MMBtu) Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (dotted line, USD/t) CAN cif Germany (USD/t) Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 4Q16 1Q17 2Q17 3Q17 4Q17 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank 37

38 1-year fertilizer prices monthly averages USD/t Ammonia fob Black Sea 1, USD/t CAN cif Germany USD/t Urea prilled fob Black Sea/Urea granular fob Egypt Source: Fertilizer Market Publications USD/t DAP fob US Gulf/MOP granular fob Vancouver 1,2 1, Average prices

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