Growing on challenges

Transcription

1 Growing on challenges Oslo Stock Exchange Capital Markets Day New York, 11 May 26 Tor Holba, SVP Downstream

2 2 Who we are and what we do We are a chemical company with fertilizer application as our biggest market Nitric Acid Fertilizer Energy Ammonia Urea Industrial We convert energy and nitrogen from the air into useful products for farmers and industrial customers

3 Our rationale for being Increasing population and reduced land available for food production per capita Almost no increase in farmable land is possible Hectares/person Popula tion (billion) Increased standard of living leads to growing protein consumption per person, requiring more grain for animal feed E 22E Hectares/person Population The only solution is to increase agricultural productivity Source: IFA, Worldmarkets.com

4 Our rationale for being 4 Our Mission We strive for better yield

5 Our rationale for being Mineral fertilizers boost agricultural productivity 5 Yield Tonnes per hectare More than 3.5 times higher yield! No fertilizer With fertilizer Source: Winter wheat, long term trial, Broadbalk, Rothamsted

6 Our rationale for being To increase productivity is only possible with full nutrient replacement 6 Production without plant nutrition is mining the soil Fertilizer increases yield by 3-4 times Photo: Dr. Paul Seward, maize in Kenya No nutrient replacement Nutrient replacement with fertilizers

7 Business model integrated to gain most strength 7 Yara has a unique business model Downstream / Industrial Added-value market pull Concepts that exploit combined strength Upstream Low cost product push Scale advantage Balanced fertilization Unique market position Strong brand value Crop/application focus Dedicated ownership Change mgmt skills Arbitration opportunities Favorable gas cost Scale advantage Ammonia market share Timing discipline Capacity utilization New business opportunities based on Scale, Synergy and Timing

8 Business model scale and arbitration 8 Global optimization creates value 25 fertilizer and nitrogen chemicals volumes in million tonnes Product source* Yara production Europe Yara production outside Europe Purchased from JV companies Global optimization Sourcing Allocation Logistics 21.4 Business units & Front offices Marketing and Sales Fertilizer Europe 1.1 Latin America 2.9 Asia 2.1 North America 2.4 Purchased from third parties * Including bulk blends 3.7 Africa 1.8 Nitrogen chemicals 2.2

9 Business model built to be the industry shaper Yara creates value in three different ways 9 EBITDA, pro forma until 24 USD millions 1,2 1, Upstream Downstream Industrial Yara... The Knowledge Margin Local market knowledge Deep customer relations Agronomic competence Differentiation and branding The Logistics Leverage Scale in distribution Third party volumes Long-standing partnerships Global presence and optimization The Global Commodity Game Economies of scale Low-cost gas Simplification and productivity improvement

10 Upstream - Global Commodity Game Our production system creates economies of scale 1 Global no 1 in ammonia Global no 1 in nitrates Production capacity* (mill t) Global no 1 in NPK complex fertilizer Production capacity (mill t) Production capacity* (mill t) Yara Agrium Terra PCS Koch Yara Acron DSM Cherkassy Kemira Yara Kemira Acron GP BASF * Incl. companies shares of JVs Source: Fertecon Source: British Sulphur, EFMA Source: Nitrex-Complex

11 Upstream Increasing productivity and economy of scale 11 Solid production increase* since 1999 Thousand tonnes 6, 5, 4, 3, 2, 1, Thousand tonnes 16, 14, 12, 1, 8, 6, 4, 2, 4,26 Ammonia 4,927 4,768 4,98 4,991 5,25 5, Finished fertilizer (excl. blends) 11,939 12,187 11,937 12,63913,9613,43 1, Index 1 * Total Yara, including share of JV production, current plant portfolio Fixed costs per tonne (fully-owned plants)

12 Upstream - Global Commodity Game Increasing proportion of gas purchases* in low-cost regions 12 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Future capacity growth in lowcost regions Europe Australia Russia Middle East Caribbean * Equity share of joint ventures included

13 13 Downstream - Logistics leverage Unique global network Major plant 22 Sales office No. of plants/ terminals/ warehouses On the ground in ~5 countries, sales to more than 12 countries, more than 16 plants/terminals/warehouses

14 Downstream arbitrage and capacity utilization Third party volumes supplement own production to maximize capacity utilization 14 Million tonnes Yara-produced products is approximately 7% of total Key suppliers/ JV products Million tonnes Third party volumes significant for nearly all Yara products Third party and JV production Own production incl. bulk blends 1 5 Yara-produced products NPK Nitrate Urea CN UAN Other Source: Yara, IFA Yara 1-year volume CAGR = 3.6% Market 1-year volume CAGR = 2.4%

15 15 Downstream - The Knowledge Margin Shifting volumes into more advanced segments Crop segment value Low High Low Crop specific marketing High Value multiple per tonne N CN vs Urea (24) 3.6 Specialty CN 1.7 Maincrop CN

16 16 Downstream Partnerships, differentiation and branding Continued strong growth in specialties Yara specialty fertilizer sales Acquisition USD millions Global Sales & Marketing Agreement Downstream Integration initiated Global Sales & Marketing Agreement 1, Nov 21 Jan 22 May 25 Mar ~18% annual growth

17 17 Industrial Knowledge margin Supplier of raw materials Calcium nitrate Technical nitrate Nitric acid Technical urea Carbon dioxide wholesale Ammonia

18 18 Industrial Knowledge margin or industry participant? Odour control Blasted rock business Technical nitrate Calcium nitrate Urea Truck exhaust cleaning CO 2 Retail gases Fizzy beverages Airline food preservation Ammonia

19 Industrial New applications for standard products Environmental applications have grown 9% annually since 21, promising outlook 19 Waste water odor control Bionutrients Waste water NOx abatement Power plants NOx incinerators NOx abatement Trucks (AdBlue) Oilfield nitrates Calcium nitrate Urea NOx Ships and Ferries Industrial water treatment CO 2 Preservation of drinking water Thermo cooling Ammonia

20 2 Industrial New applications for standard products Rapid AdBlue market growth expected Thousand tonnes ACEA forecasts rapid market growth for AdBlue solution Urea equivalent Source: ACEA (European Automobile Manufacturers Association)

21 Yara business model delivers growth and stability Good balance between Upstream and Downstream/Industrial EBITDA, pro forma until 24 Downstream + Industrial USD millions Upstream USD millions USD millions Yara total 1,2 1, 99 1,

22 Yara business model delivers shareholder return Yara s 5-year average return on capital significantly above cost of capital CROGI = (EBITDA tax) / Gross Investment 22 Percent Cash Return On Gross Investment 14.1% 14.4% 1.6% 9.4% 9.2% Average = 11.5%

23 Yara business model delivers financial performance Strong peer group performance Yara stable Gross return on assets*, percent 23 Yara** BASF 21.7 Agrium Agrium 17.4 Yara** 21.4 BASF 23.9 BASF Air Products K+S Kemira Syngenta Agrium Air Products PCS Kemira GrowHow K+S PCS Yara Dow Air Products DuPont Dow 1.2 Dow 12.4 K+S 13.8 DuPont PCS IMC DuPont Syngenta Mosaic*** Syngenta Kemira GrowHow Mosaic*** * Gross return on assets defined as EBITDA (excluding non recurring items) divided by Total assets (book value) ** Yara pro forma numbers for years 23 and 24 *** Mosaic from June 1, 23 to May 31, 24, pro forma Source: Company reports

24 Current business environment Grain stocks-to-use at 3-year low supporting high demand for fertilizer Million tonnes 7 4% 6 35% Stocks Percent Source: US Department of Agriculture (USDA), April 26 26E 3% 25% 2% 15% 1% 5% %

25 Current business environment High energy prices increase the importance of biofuels going forward 25 Million gallons World production 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, In USA, 13% of corn crop is used for ethanol production this year Ethanol use is well-established in Brazil EU % of transport fuel in 21 from biofuels. Numerous countries are developing own biofuel goals Biofuels are: Ethanol, mainly from sugar or corn Biodiesel, mainly from oilseeds

26 Business environment mid-term Fertecon has reduced future capacity growth estimates due to plant delays * Average annual capacity growth in the period is 2.5% 26 Year Global urea capacity growth estimate* World Excluding China Driving regions World Ex. China % (2.7%) 5.7% (6.7%) 3.8% (2.8%) 4.8% (4.6%) 2.% (2.2%) 2.2% (2.1%) 3.6% (4.4%) 3.4% (2.5%) 1.8% (1.9%) 1.3% (2.4%) China 53% Oman 22% China 59% Oman 8% China 42% Iran 33% China 76% Oman 11% China 6% Egypt 14% Average urea consumption growth has been 3.5% last 1 years, 2.6% if excluding China Oman 47% Qatar 31% Oman 2% Egypt 17% Iran 58% Egypt 35% Oman 46% Iran 28% Egypt 36% Trinidad 33% * Excluding closures Source: Fertecon update March 26; ( ) = Fertecon update January 26, used at Yara s fourth quarter presentation

27 Our ambition Growth objective: 1% global market share within a business cycle 27 Simplicity Productivity Volume 1% market share Growth But: Financial discipline maintained ~6% Present Within a business cycle

28 Our ambition Strong balance sheet to achieve growth objectives Net interest-bearing debt to-equity ratio at end of first quarter Q 24 2Q 24 3Q 24 4Q 24 1Q 25 2Q 25 3Q 25 4Q 25 1Q 26

29 29 Our ambition Yara the Industry Shaper The global no. 1 fertilizer company Market and product leadership Strong platform for profitable growth Cyclicality management Profitability above peers Financial discipline

30 Additional information 3

31 31 The basis for mineral fertilizer: Energy, ammonia and natural minerals Nitrogen (N) from air Natural gas Ammonia Natural minerals: Phosphorus (P) Potassium (K) Finished products: Urea UAN Nitrates (CAN, AN) NPK Specialty fertilizers Industrial products

32 32 Yara consisting of three business segments with strong synergies 25 financials Downstream Sales: USD 5.1bn EBITDA: USD.3 bn Distribution and ammonia-based fertilizer production Unique global distribution network Global no. 1 in calcium nitrate and potassium nitrate specialty fertilizer Industrial Sales: USD.9 bn EBITDA: USD.1 bn Marketing of products for industrial purposes European no. 1 CO 2 supplier European no. 1 in industrial nitrogen chemicals and technical nitrates Upstream Sales: USD 3.2 bn EBITDA: USD.6 bn Natural gas-based fertilizer production and ammonia trade and shipping Global no. 1 in ammonia, nitrates and NPK Lowest cost producer of ammonia, nitrates and NPK in Europe

33 Yara s business model is unique in the industry 33 Global distribution and diversified raw material supply reduce risk Competitive production at strategic locations Diversified portfolio and global strength in key products JV and third party sourcing support high capacity utilization, capital productivity and economies of scale Downstream and Industrial businesses reduce Yara s exposure to the fertilizer cycle and provide attractive platforms for partnerships

34 34 Yara value drivers Drivers Effect on US gas price Supply-driven price for urea Grain inventories/prices Urea demand Revenue drivers New urea capacity vs. closures Global urea demand vs. supply Urea price Urea supply Urea price (above floor) Most other nitrogen fertilizer prices Market segmentation Value-added margins Cost drivers Oil product prices Manning and maintenance Productivity and economies of scale Gas cost in Europe Fixed cost Unit cost

35 35 Urea cash cost for US producers has provided a floor for urea prices Yearly averages 2 25, quarterly averages for 26 with forward prices 2Q 4Q 26* 3 28 USD/tonne Urea fob US Gulf (granular) Cash cost US Gulf* Q6 2Q6 3Q6 4Q6 * Future cash costs based on Henry Hub forward price for gas as of 5 April 26 Source: Average of international publications (urea), World Bank (Henry Hub gas price), Blue-Johnson

36 36 Both safety and productivity continue to show considerable improvement Safety at production sites (LTI*) Productivity 15 % of 2 performance * Lost Time Injuries

37 37 Yara is the global leader in ammonia Strong positions in all key regions: Europe, Americas, Asia Largest independent vessel operator in the ammonia segment Million tonnes Koch PCS Trammo Yara Trade (24) Agrium IBE Mitsui Diversified external customer base: Industrial and Agricultural cbm Nitrochem Shipping capacity (25) Mitsubishi Source: Fertecon Yara Nitrochem Trammo PCS Koch Mitsui Source: Steensland, L&S

38 38 Key value drivers quarterly averages Ammonia fob Caribbean (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) Q 5 2Q 5 3Q 5 4Q 5 1Q 6 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 US gas price Henry Hub (USD/MMBtu) Oil Brent blend spot (USD/bbl) NOK/USD exchange rate Q 5 2Q 5 3Q 5 4Q 5 1Q 6 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 1Q 5 2Q 5 3Q 5 4Q 5 1Q 6 Source: The Market, CERA, World Bank, Norges Bank

39 39 Key value drivers 1-year history Ammonia fob Caribbien (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) US gas price Henry Hub (USD/MMBtu) Oil Brent blend spot (USD/bbl) NOK/USD exchange rate ,3 4, 8,9 5,5 5,9 2,8 2,5 2,1 2,3 3, ,4 38,2 28,4 24,4 24,8 28,4 2,7 19,1 17,8 12, ,8 9, 7,5 7,8 8, 7,1 7,1 6,5 6,7 6, Average prices Source: The Market, CERA, Hydro, World Bank, Norges Bank

40 4 1-year grain/oilseed prices yearly averages Quarterly averages for 26 USD/tonne Wheat (HRW US Gulf) USD/tonne Rice (Thailand) Q Q1 USD/tonne Maize (US Gulf) Q1 Source: World Bank USD/tonne Soybeans (cif Rotterdam) Q1 Average prices

41 41 Income statement NOK millions Revenue and other income Operating income Share of net income in non-consolidated investees Interest income and other financial income Interest expense and other financial items Net foreign exchange gain (loss) Income before tax and minority interest Income tax expense Minority interest Net income after minority interest 1Q 26 11, (11) 89 1,135 (278) (4) 853 1Q 25 1,943 1, (116) (188) 1,224 (37) 917 Earnings per share* - NOK * Average number of shares for 1Q 26: 37.8 million

42 42 Consolidated balance sheets NOK millions Deferred tax assets Property, plant and equipment Other non-current assets Inventories Receivables Other current assets Cash and cash equivalents Total assets Total equity attributable to shareholders of the parent Minority interest Employee benefits Deferred tax liabilities Other long-term liabilities and provisions Long-term interest-bearing debt Short-term interest-bearing debt Other current liabilities Total equity and liabilities 31 Mar 26 1,368 7,35 4,82 6,534 6,67 1, ,724 13, ,131 1, , ,389 28, Mar 25 1,376 7,3 3,574 5,631 7,357 1,59 1,627 28,455 12, , , ,829 28,455

43 43 Net interest-bearing debt 26 NOK millions 8, 7,584 7, 6, 5, , 4, ,296 3, Net Interest- Bearing Debt Dec4 Net Interest- Bearing Debt Dec5 Cash earnings* Dividends received** Net operating capital Investments (Net) Yara dividend & share buybacks Foreign exchange gain/(loss) Other Net Interest- Bearing Debt Mar6 * Operating income plus depreciation and amortization, minus tax paid, net gain on disposals, net interest expense and bank charges ** Dividends received from non-consolidated investees

44 Industry Shaper the next phase in our development Turnaround & Cost cutting Consolidation & Demerger High performance & Profitable growth

45 45 Growth opportunities are many Organic growth Downstream fertilizer: E.g. Brazil and China Industrial: E.g. environmental products, nitrogen chemicals and CO 2 Market alliances and smaller acquisitions Step growth Bolt-on acquisitions and equity shares in existing production Restructuring/consolidation opportunities New production capacity in lower cost gas regions, e.g., Trinidad

46 46 Yara sensitivities updated EBITDA EBITDA EPS** USD million NOK million* NOK CAN + 1 USD/t Urea + 1 USD/t Ammonia + 1 USD/t Oil price + 1 USD/boe (cost effect) Currency +.1 NOK/USD at an EBITDA of USD 7 million of which Translation effect of which Net fixed cost in Euro/NOK Sensitivities do not take into account that some factors are correlated * Assuming NOK/USD = 6.5, EUR/USD = 1.2, and constant NOK/EUR ** Assuming marginal tax rate on underlying business and the new 5% share buy-back program completed with cancellation

47 Ambitious targets Hurdle rate updated to better reflect WACC 47 Solid profitability CROGI over the cycle > 1% as average New investment profitability Ambition: IRR real, after tax > 1% Hurdle rate: IRR real, after tax > 7% Relative competitiveness Gross Return (EBITDA/Total assets) Best quartile of peers Financial strength Long-term rating target Mid investment grade Expected cash return to shareholders HSE Sum of dividend and buy-backs 4-45% of net income Health, Safety and Environment Best quartile of the industry

48 Yara cash distribution policy: 4 45% cash return over the cycle 48 Yara s average profitability and return on capital is well above investors cost of capital Cash distribution must be balanced against opportunities for profitable growth Financial discipline will be the basis for the development of Yara s global leadership position Total cash return to shareholders expected at 4 45% of net income as an average over the business cycle Dividend minimum 3% of net income over the business cycle Ambition to increase absolute dividend independent of business cycle Share buy-backs expected in years with strong free cash flow Proposed dividend for 25: NOK 2.35 per share