4Q 06. Yara International. Earnings per share

Transcription

1 4Q 2006 quarterly report FOURTH quarter And Preliminary results 2006 Yara International Strong financial results Increased sales in Latin America and Asia, delayed season in Europe and North America Strong Industrial performance, volumes up 10 % 100 % ownership and de-listing of Fertibras achieved Strong demand fundamentals and improved short-term energy outlook Proposed dividend NOK 2.50 per share Strong demand, together with limited new capacity, suggests a healthy fertilizer supply-demand balance in the coming years. 4Q 2006 Earnings per share NOK 3.01 EBITDA (NOK millions) Earnings per share (NOK) Debt/equity ratio 2,500 2,000 1,500 1,379 1,492 1,682 1,947 1, , Q 05 1Q 06 2Q 06 3Q 06 4Q Q 05 1Q 06 2Q 06 3Q 06 4Q Q 05 1Q 06 2Q 06 3Q 06 4Q 06

2 page/2 FOURTH quarter 2006 Financial highlights Millions, except per share information and CROGI 4Q Q Revenue and other income NOK 12,428 12,431 48,261 46,550 Operating income NOK ,352 3,821 EBITDA NOK 1,351 1,379 6,472 6,618 EBITDA USD 1) ,014 1,033 Net income after minority interest NOK ,188 3,198 Earnings per share 2) NOK Earnings per share excl. net foreign exchange gains/losses NOK Average number of shares outstanding (millions) CROGI (12-month rolling average) 14.1 % 14.4 % 1) Based on average NOK/USD rate 2006: 6.38 (2005: 6.41) and for the quarter 2006: 6.37 (2005: 6.61). 2) Yara currently has no share-based compensation programs that result in a dilutive effect on earnings per share. Key Statistics 4Q Q Sales Fertilizer kt 5,018 4,711 19,248 19,235 Industrial products kt ,379 2,182 Total kt 5,653 5,286 21,627 21,417 Production 1) Ammonia kt 1,300 1,410 5,296 5,493 Finished fertilizer and industrial products, excl. bulk blends kt 3,298 3,343 13,183 13,403 1) Including share of Tringen, Qafco, Rossosh and Burrup. Yara s fourth-quarter net income after minority interest was NOK 891 million (NOK 3.01 per share), compared with NOK 588 million (NOK 1.90 per share) last year. Excluding net foreign exchange gains/losses, the result was approximately NOK 773 million (NOK 2.61 per share), compared with NOK 674 million (NOK 2.18 per share) in fourth quarter Fourth-quarter operating income was NOK 521 million, compared with NOK 651 million last year. EBITDA was NOK 1,351 million, compared with NOK 1,379 million in the fourth quarter last year. Special items in the quarter improved the result by NOK 0.26 per share. (See page 4 for details of non-recurring items and contract derivative effects.) We continued to deliver strong results, with return on capital well above our 10 % CROGI target. Increased sales in Latin America and Asia more than compensated for delayed fertilizer deliveries in Europe and North America. Production improvements and continued growth in industrial applications contributed further to the positive performance, said Thorleif Enger, President and Chief Executive Officer of Yara. The steep increase in grain prices since September 2006, with US corn prices up more than 50 %, will boost fertilizer demand. This strong demand, together with limited new fertilizer capacity, suggests a healthy supply-demand balance in the coming years, said Thorleif Enger. Full-year net income after minority interest was NOK 4,188 million (NOK per share), compared with NOK 3,198 million (NOK per share) last year. Excluding net foreign exchange gains/losses, the result was approximately NOK per share, compared with NOK per share in Full-year operating income was NOK 3,352 million, compared with NOK 3,821 million last year. EBITDA was NOK 6,472 million, compared with NOK 6,618 million last year. FERTILIZER MARKET CONDITIONS The global urea market tightened considerably through the fourth quarter, and prices improved. Increased imports to India throughout the third and fourth quarters reduced availability for other importing regions, despite added capacity in Egypt and Saudi-Arabia. The dramatic increase in grain prices through October and November improved the economic prospects for agriculture in general and demand for fertilizer in particular.

3 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/ FERTILIZER Volume developments Fourth-quarter total industry nitrogen fertilizer sales in Western Europe were down an estimated 12 % compared with last year. Season to date, total industry fertilizer sales were down 10 % compared with last season. Imported volumes were stable, and hence gained market share. A large proportion of the imported urea was purchased in advance of the strong price increase. North American nitrogen import was down on last year. Low natural gas prices compared with last year allowed the domestic industry to run at full capacity, but the production increase was not sufficient to offset the reduction in imports. This supply deficit, combined with strong demand prospects for the spring, led to a surge in import demand towards the end of the quarter. India continued to import large volumes of urea in the fourth quarter. Estimated full-year urea import is at least 4 million tonnes, compared with 2.3 million tonnes in 2005 and 0.8 million tonnes in China s fourth-quarter urea export was 0.7 million tonnes, compared with 0.5 million tonnes last year. In 2006, the export tax was 15 % throughout the quarter, while in 2005 it was reduced from 30 % to 15 % only for the last two months. In December, higher global urea prices led to an increase in urea export from China. Increasing grain and soybean prices through October and November also boosted urea imports to Brazil. Total imports for 2006 ended up at the same level as 2005, with total fertilizer deliveries estimated 2-3 % up on last year. Fertilizer price developments The average fourth-quarter prilled urea price (fob Black Sea) was USD 232 per tonne, up from USD 227 per tonne last year. Robust demand led to a strong price increase through the quarter. Urea prices were demand-driven, with higher upgrading margins from ammonia than in the same quarter last year. The average fourth-quarter CAN price in Germany was USD 223 per tonne, compared with USD 188 per tonne in The nitrate premium during the fourth quarter was higher than last year but decreased towards the end of the period as urea prices strengthened. Energy price developments The average US natural gas price at Henry Hub was USD 6.7 per MMBtu in fourth quarter 2006, compared with USD 12.3 per MMBtu last year. The average price for Brent crude oil was USD 60 per barrel for the quarter, compared with USD 57 per barrel last year. The average low-sulphur fuel oil (LSFO) price in Rotterdam was USD 251 per tonne, down from USD 289 per tonne last year. Gasoil prices were at the same level as last year. The average European gas price at Zeebrugge was USD 5.9 per MMBtu in fourth quarter 2006, down from USD 11.2 per MMBtu last year. INDUSTRIAL MARKET DEVELOPMENTS Global economic growth driven mainly by China has resulted in high activity in the mining and construction sectors. Coal mining was strongly influenced by rapid growth in thermal power generation, which had a positive effect on technical ammonium nitrate consumption. Mining majors expect growth in the sector to exceed 5 % worldwide in New European environmental regulation effective 1 October 2006 continues to increase demand for NOx abatement products for the European power generation, cement and road haulage sectors. The average ammonia price (fob Caribbean) for the quarter was USD 278 per tonne, compared with USD 363 per tonne last year. The ammonia market did not show the same strength as markets for upgraded products, and Caribbean prices in particular were strongly influenced last year by natural gas price peaks in the US. Black Sea prices declined less, from USD 290 per tonne in fourth quarter 2005 to USD 259 per tonne in fourth quarter Ammonia prices increased towards the end of the quarter, driven by higher urea prices.

4 page/ VARIANCE ANALYSIS Fourth QUARTER NOK USD 1) millions millions EBITDA , EBITDA , Variance EBITDA in NOK (28) Conversion (NOK vs. USD) 51 Variance EBITDA 23 4 Volume & mix Price/Margin Energy arbitrage (90) (14) Energy cost in Europe (230) (36) Oil & gas products (162) (25) Electricity (68) (11) Currency effect on net fixed cost 2) (45) (7) Special items Non-recurring items Contract derivatives (27) (4) Other (57) (9) Total variance explained ) Based on average NOK/USD rate for the quarter 2006: 6.37 (2005: 6.61). 2) Net fixed cost is derived from fixed cost in NOK and euro less NOK and euro related margins. Fourth-quarter EBITDA was NOK 1,351 million, compared with NOK 1,379 million last year. The Norwegian krone was stronger versus the US dollar, resulting in a NOK 51 million negative conversion effect on EBITDA. Converted EBITDA was USD 212 million, up USD 4 million from last year. Total fertilizer sales increased 7 % compared with last year, primarily reflecting a significant market recovery in Brazil and the Fertibras acquisition. The business in Southeast Asia also contributed to a 26 % increase in sales outside Europe. Yara maintained a strong market position in Western Europe although fertilizer deliveries were down 10 % from last year. Industrial products delivered solid growth compared with last year, with a 10 % volume increase. Nitrate and NPK prices in Europe were higher than last year, and improved demand in Asia also had a positive impact on margins. These positive effects were partly offset by lower ammonia prices and lower margins in the US. Energy arbitrage effects were USD 14 million lower than last year. The valuation of Yara s oil-linked natural gas contracts was negatively affected as European forward prices for natural gas declined more than forward prices for oil-linked products. Last year saw a large gain on the sale of natural gas from the Le Havre plant. The USD 25 million increase in oil and gas costs in Europe was in line with previous estimates, primarily reflecting higher lowsulphur fuel oil (LSFO) and gasoil prices. Several of Yara s European natural gas contracts are linked to LSFO and gasoil prices with a time lag. As a result, Yara s fourth quarter European oil and gas costs mainly reflect LSFO and gasoil prices from second and third quarter. Electricity cost increased by USD 11 million, as higher market prices for electricity impacted European plants. Fourth-quarter EBITDA included non-recurring gains of USD 22 million. A gain of USD 27 million resulted from a change of pension scheme for Norwegian employees, from a defined benefit plan to a defined contribution plan. Yara also restructured its ownership in SQM, leaving overall ownership unchanged but recording a USD 10 million gain on the sale of shares. A USD 12 million charge was taken for the closure of a UAN plant in France. Last year s result included non-recurring costs of USD 26 million. The negative Other variance reflects a small increase in fixed costs, along with several minor divestments last year. Underlying fixed costs were lower than last year, but were offset by an increase in share-based compensation costs.

5 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/ VARIANCE ANALYSIS full year NOK USD 1) millions millions EBITDA ,472 1,014 EBITDA ,618 1,033 Variance EBITDA in NOK (146) Conversion (NOK vs. USD) 4 Variance EBITDA (142) (19) Volume & mix 23 4 Price/Margin Energy arbitrage Energy cost in Europe (2,061) (322) Oil & gas products (1,837) (287) Electricity (223) (35) Currency effect on net fixed cost 2) (31) (5) Special items 1, Non-recurring items 1, Contract derivatives (41) (6) Other 20 3 Total variance explained (142) (19) 1) Based on quarterly average NOK/USD rates as detailed in Yara 2006 reports. 2) Net fixed cost is derived from fixed cost in NOK and euro less NOK and euro related margins. Full-year EBITDA was NOK 6,472 million, compared with NOK 6,618 million last year. The Norwegian krone was stronger versus the US dollar this year, resulting in a NOK 4 million negative conversion effect on EBITDA. Converted EBITDA was USD 1,014 million, down USD 19 million from last year. Total fertilizer sales were in line with last year. Volumes outside Europe increased 2 %, reflecting the Fertibras acquisition and improved sales in Southeast Asia. Yara s deliveries in Europe were down 2 %, while total market sales were down 9 %. Fertilizer prices were higher than last year, mainly for nitrates and NPK, improving 2006 EBITDA by USD 85 million. Energy costs in Europe increased and had a USD 322 million negative effect on EBITDA. The major part of the energy arbitrage gain related to one specific contract where Yara used its right to sell gas forward. Full-year EBITDA included net positive non-recurring items of USD 160 million, mainly representing the ammonia fleet divestment in the third quarter. The positive Other variance mainly reflects lower fixed costs.

6 page/6 FINANCIAL ITEMS Fourth QUARTER NOK millions 4Q Q 2005 Interest income from customers Interest income, other Dividends and net gain/(loss) on securities 1 4 Interest income and other financial income Interest expense (106) (105) Return on pension plan assets Interest expense re. pension liabilities (98) (95) Foreign exchange gain/(loss) 171 (124) Other (16) (12) Interest expense and foreign exchange gain/(loss) 53 (232) Net financial income/(expense) 140 (154) FINANCIAL ITEMS Full year NOK millions Interest income from customers Interest income, other Dividends and net gain/(loss) on securities 3 5 Interest income and other financial income Interest expense (381) (381) Return on pension plan assets Interest expense re. pension liabilities (331) (319) Foreign exchange gain/(loss) 422 (525) Other (56) (67) Interest expense and foreign exchange gain/(loss) (49) (1,008) Net financial income/(expense) 229 (742) Fourth-quarter net financial income was NOK 140 million, compared with net financial expense of NOK 154 million last year. Interest expense during the quarter was NOK 106 million, similar to last year. The effect of a somewhat lower average debt level was offset by a general increase in interest rates. The net foreign exchange gain for the quarter was NOK 171 million, compared with a loss of NOK 124 million last year. The gain was due to the depreciation of the US dollar against both the euro and the Norwegian krone and also against Yara s main emerging market currencies. During the last 12 months, the part of Yara s US dollar debt established to hedge future earnings was kept in the range of USD million. Interest income on ordinary customer credits, mainly in markets outside Europe, amounted to NOK 61 million, up from NOK 52 million last year. Most of the increase was due to higher sales volumes in Brazil following the acquisition of Fertibras. Full-year net financial income was NOK 229 million, compared with net financial expense of NOK 742 million last year. The difference was explained by net foreign exchange gains this year due to a depreciation of the US dollar, compared with an appreciation last year. Interest expense was NOK 381 million, equal to last year. Interest income on ordinary customer credits was NOK 166 million, down from NOK 183 million last year, primarily reflecting improved credit collection in Brazil. Tax Fourth-quarter income tax expense was NOK 141 million, approximately 14 % of income before tax. The low effective tax rate for the quarter was primarily due to an increased share of earnings from non-consolidated investees and a change of tax rate in the Netherlands. The tax rate in 2006 was approximately 17 %. In addition to fourth-quarter items, the low rate for the year was due to tax-free divestment gains from the sale of Yara s ammonia shipping fleet. Qafco units 1-3 are in a tax position as of 1 January The net effect for Yara is a 15 % tax on earnings from Qafco. The EBITDA impact (non-consolidated net income from Qafco) is approximately 23 %, but part of the Qatar tax will be offset against taxation of Qafco dividends.

7 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/ Cash flow Strong earnings and net operating capital in line with the third quarter contributed to a fourth-quarter net cash flow from operating activities of NOK 624 million (for definition see consolidated statements of cash flow page 20). Full-year net cash from operating activities was NOK 3,854 million. Continued strong earnings, a NOK 349 million reduction in net operating capital and dividend payments from non-consolidated investees of NOK 1,019 million, of which Qafco and Tringen represented NOK 458 million and NOK 186 million respectively, were the main contributors. At the end of fourth quarter 2006, net operating capital including Fertibras was NOK 8,859 million, in line with 31 December The underlying decrease mainly reflected a change of business model in Asia and Africa in addition to improved credit collection in Brazil. Net operating capital turnover showed a stable development from the end of Net cash used in investing activities during 2006 was NOK 1,759 million. This included the acquisitions of Fertibras, Balderton and a minority stake in China BlueChemical and proceeds from the sale of the ammonia fleet. Net cash used in investing activities was NOK 2,044 million in During fourth quarter 2006, NOK 689 million was used for share buy-backs, primarily shares from the Norwegian State, bringing the full-year total to NOK 1,252 million. Net interest-bearing debt NOK millions 4Q Net interest-bearing debt at beginning of period (4,249) (5,232) Cash earnings 1) 391 2,823 Dividends received from non-consolidated investees 2) Net operating capital (30) 349 Divestment ammonia fleet - 1,375 Investment Fertibras (with subsidiaries) 3) - (1,312) Other investments (net) (1,219) (2,038) Yara dividend and share buy-backs (689) (1,974) Foreign exchange gain/(loss) Other 226 (503) Net interest-bearing debt at end of period (5,350) (5,350) 1) Operating income plus depreciation and amortization, minus tax paid, net gain on disposals, net interest expense and bank charges. 2) In 2006 excluding NOK 279 million related to the ammonia fleet divestment. 3) Investment includes net interest-bearing debt in Fertibras of NOK 495 million at time of acquisition. As a supplement to the formal consolidated statements of cash flow (page 20), this table highlights the key factors behind the development in net interest-bearing debt. The debt/equity ratio at the end of fourth quarter 2006, calculated as net interest-bearing debt divided by shareholders equity plus minority interest, was 0.33 compared with 0.39 at the end of Net interest-bearing debt at the end of fourth quarter 2006 was NOK 5,350 million compared with NOK 4,249 million at the end of the third quarter and NOK 5,232 million at the end of The NOK 1,101 million increase in net interest-bearing debt during the quarter was mainly due to the acquisition of Balderton and a minority stake in China BlueChemical, in addition to share buy-backs. From 31 December 2005 to 31 December 2006 net interestbearing debt increased by NOK 118 million, as major investments and cash distribution to shareholders slightly exceeded cash inflows from strong earnings, the ammonia fleet sale and dividends received from non-consolidated investees. Net interest-bearing debt increased by approximately NOK 530 million in January 2007 due to the purchase of non-voting shares in Fertibras. DIVIDEND POLICY Yara s objective is to pay a minimum 30 % of net income in dividends as an average over the business cycle. Cash payments to shareholders from dividends and share buy-back programs combined are expected to be an average % of net income over the business cycle. The company s ambition is also to deliver steady growth in absolute dividend payments. Yara s Board will propose to the Annual General Meeting a dividend payment of NOK 2.50 per share for 2006, which represents 17 % of net income. Half of the cash proceeds from the ammonia fleet sale were paid to shareholders in the form of additional share buy-backs in The proposed 2006 dividend represents 22 % of net income excluding the NOK 832 million ammonia fleet gain. Total cash payments to shareholders during 2006 amounted to 62 % of 2005 net income. Excluding share buy-backs related to the ammonia fleet sale, cash payment to shareholders in 2006 amounted to 40 % of 2005 net income. The Board intends to propose to the Annual General Meeting a new buy-back program along the lines of the previous one.

8 page/ Downstream segment 4Q Q Financial highlights Revenue and other income NOK millions 9,044 8,402 34,289 32,930 Operating income NOK millions ,107 1,249 EBITDA NOK millions ,960 1,984 EBITDA USD 1) millions CROGI (12-month rolling average) 10.1 % 10.9 % Net operating capital turnover 2) Sales by region Fertilizer Europe kt 2,307 2,558 9,851 10,009 Fertilizer outside Europe kt 2,683 2,130 9,327 9,107 Total kt 4,990 4,688 19,177 19,117 Sales by source Own production, incl. bulk blends kt 3,178 3,070 12,934 12,978 Joint ventures kt ,780 2,748 Third parties kt 1, ,464 3,391 Total kt 4,990 4,688 19,177 19,117 Sales by product group Nitrate kt 1,032 1,225 4,462 4,758 NPK kt 2,108 1,695 7,284 6,675 CN kt Urea kt 1, ,890 3,692 UAN kt ,084 1,098 Other products kt ,597 2,009 Total kt 4,990 4,688 19,177 19,117 1) Based on average NOK/USD rate 2006: 6.38 (2005: 6.41) and for the quarter 2006: 6.37 (2005: 6.61). 2) Total external operating revenues last 12 months divided by average net external operating capital for the same period. VARIANCE ANALYSIS Fourth QUARTER NOK USD 1) USD/ millions millions tonne 2) EBITDA EBITDA Variance EBITDA in NOK 192 Conversion (NOK vs. USD) 7 Variance EBITDA Volume & mix Produced in Europe (21) (3) (1) Other Margin Margin excl. ammonia effect Ammonia effect on margin Special items Other Total variance explained ) Based on average NOK/USD rate for the quarter 2006: 6.37 (2005: 6.61). 2) Divided by 2006 fertilizer sales volume. Fourth-quarter operating income was NOK 252 million, compared with NOK 144 million last year. EBITDA was NOK 511 million compared with NOK 319 million last year. Converted EBITDA was USD 80 million, up USD 31 million compared with last year. EBITDA per tonne was USD 16, up USD 6 per tonne from last year. The strong improvement from last year reflects a significant market recovery in Brazil and the Fertibras acquisition. After a slow start to the season, deliveries increased significantly in the autumn both for Yara and the overall market, with total deliveries ending 2-3 % up from The public offer to acquire all non-voting shares in Fertibras was successfully completed early January Fertibras is now de-listed from the Brazilian stock exchange and the company is 100 % owned by Yara. The process to merge the business into

9 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/ Yara Brazil has started, and restructuring to realize synergies will be carried out during the first half of The business in Southeast Asia also contributed to the improved sales, recovering from difficult market conditions last year. In total, sales outside Europe were up 26 % compared with the fourth quarter last year, explaining all of the positive volume variance. Yara s fertilizer deliveries in Europe were down 10 % compared with the fourth quarter last year. The decline was primarily in Germany, the UK and Ireland, as customers postponed purchases. Yara maintained a strong market share, as total market sales of nitrogen fertilizer in Western Europe were down an estimated 12 %. NPK and nitrate prices were up % measured in US dollars, and 5-8 % up measured in euros. In addition, lower ammonia prices reduced production costs for Downstream in Europe by USD 10 million. Outside Europe, improved demand in Asia had a positive impact on margins, partly offset by lower margins in the US. Last year saw a strong increase in US nitrogen prices through the quarter, with fundamentals favoring import, while prices this year were fairly flat until December. In the fourth quarter, Yara took a USD 12 million charge for the closure of a UAN plant in France (owned together with Grande Paroisse). The closure is scheduled for mid Yara also restructured its ownership in SQM during the quarter, leaving overall ownership unchanged, but recording a USD 10 million gain on the sale of shares. The fourth quarter last year was charged with restructuring costs in South Africa. Net operating capital turnover, measured on a 12-month rolling basis, was 4.4 at the end of fourth quarter 2006, unchanged from end There has been an improvement in capital efficiency in Latin America and Asia in 2006, offset by higher inventory levels in Europe due to a slow start to the fertilizer season. VARIANCE ANALYSIS full year NOK USD 1) USD/ millions millions tonne 2) EBITDA , EBITDA , Variance EBITDA in NOK (24) Conversion (NOK vs. USD) (16) Variance EBITDA (41) (6) - Volume & mix (56) (9) - Produced in Europe (118) (19) (1) Other Margin (123) (18) (1) Margin excl. ammonia effect Ammonia effect on margin (265) (41) (2) Special items Other Total variance explained (41) (6) - 1) Based on quarterly average NOK/USD rates as detailed in Yara 2006 reports. 2) Divided by 2006 fertilizer sales volume. Full-year operating income was NOK 1,107 million, compared with NOK 1,249 million last year. EBITDA was NOK 1,960 million compared with NOK 1,984 million last year. Converted EBITDA was USD 305 million, down USD 6 million from last year. In Europe, Yara fertilizer sales were down 2 % compared with 2005, despite an estimated 9 % decline in total market sales in Western Europe. Sales outside Europe were up 2 % compared with last year, driven by the Fertibras acquisition in Brazil and improved sales in Southeast Asia, while changed import fundamentals reduced sales in North America. Increased margins from higher fertilizer prices were more than offset by higher ammonia cost. Full-year special items reflect the third-quarter sale of a UK nitric acid plant, in addition to fourth-quarter items described earlier.

10 page/10 Industrial segment 4Q Q Financial highlights Revenue and other income NOK millions 1,578 1,502 6,118 5,616 Operating income NOK millions EBITDA NOK millions EBITDA USD 1) millions CROGI (12-month rolling average) 15.0 % 14.7 % Sales by product group Environmental products kt Industrial N-chemicals kt ,745 1,655 1) Based on average NOK/USD rate 2006: 6.38 (2005: 6.41) and for the quarter 2006: 6.37 (2005: 6.61). VARIANCE ANALYSIS Fourth QUARTER NOK USD 1) millions millions EBITDA EBITDA Variance EBITDA in NOK 7 Conversion (NOK vs. USD) 3 Variance EBITDA 10 2 Volume & mix 26 4 Industrial gases 8 1 Industrial N-chemicals 18 3 Margin 48 8 Margin excl ammonia effect 28 4 Ammonia effect on margin 20 3 Special items (49) (8) Non-recurring items - - Contract derivatives (49) (8) Other (15) (2) Total variance explained ) Based on average NOK/USD rate for the quarter 2006: 6.37 (2005: 6.61). The Industrial segment delivered solid growth in the fourth quarter compared with last year. N-chemical sales increased by 6 %, with margins positively affected by the renegotiation of several contracts. Environmental product sales increased 17 % with margins also up compared with last year. Sales of technical ammonium nitrate saw strong growth, as new customers were contracted both in Europe and elsewhere. Liquid CO2 sales to end-users continued to grow, while the Scandinavian Gas business delivered results in line with last year. Contract derivatives represent effects from industrial urea and ammonia sales contracts with price links to LSFO. Urea and ammonia prices increased relative to LSFO during the quarter, resulting in a USD 5 million loss on contract derivatives. Fourth-quarter operating income was NOK 95 million, compared with NOK 98 million last year. EBITDA was NOK 153 million compared with NOK 146 million last year. Converted EBITDA was USD 24 million, up USD 2 million from last year.

11 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/11 VARIANCE ANALYSIS Full year NOK USD 1) millions millions EBITDA EBITDA Variance EBITDA in NOK 16 Conversion (NOK vs. USD) (3) Variance EBITDA 13 2 Volume & mix Industrial gases 27 4 Industrial N-chemicals 60 9 Margin 29 5 Margin excl ammonia effect Ammonia effect on margin (46) (7) Special items (51) (8) Non-recurring items (3) (1) Contract derivatives (48) (7) Other (52) (8) Total variance explained ) Based on quarterly average NOK/USD rates as detailed in Yara 2006 reports. Full-year operating income was NOK 537 million, compared with NOK 515 million last year. EBITDA was NOK 736 million, compared with NOK 720 million last year. Stronger margins and volume growth for industrial N-Chemicals and environmental products were the main drivers behind the improved result. Despite a difficult sourcing situation in Europe during the summer months, liquid CO2 to end-users grew significantly compared with last year. The Scandinavian Gas business continued its positive volume development during Divestments during 2006 included the sale of Yara Formates. Fixed costs were up as commercial activity increased during the year.

12 page/12 Upstream segment 4Q Q Financial highlights Revenue and other income NOK millions 5,389 5,723 22,124 20,445 Operating income NOK millions ,552 2,113 EBITDA NOK millions ,563 3,922 EBITDA USD 1) millions CROGI (12-month rolling average) 14.3 % 16.0 % Oil & gas cost (weighted average) USD/MMBtu Production 2) Ammonia kt 1,262 1,356 5,091 5,256 Finished fertilizer kt 1,994 1,889 7,900 7,710 Total kt 3,256 3,246 12,991 12,966 1) Based on average NOK/USD rate 2006: 6.38 (2005: 6.41) and for the quarter 2006: 6.37 (2005: 6.61). 2) Including share of Tringen, Qafco, Rossosh and Burrup. Variance analysis Fourth QUARTER NOK USD 1) USD/ millions millions tonne 2) EBITDA EBITDA Variance EBITDA in NOK (271) Conversion (NOK vs. USD) 40 Variance EBITDA (231) (36) (11) Volume & mix Price/Margin (36) (6) (2) Energy arbitrage (90) (14) (4) Energy cost in Europe (230) (36) (11) Oil & gas products (162) (25) (8) Electricity (68) (11) (3) Special items Non-recurring items Contract derivatives Other Total variance explained (231) (36) (11) 1) Based on average NOK/USD rate for the quarter 2006: 6.37 (2005: 6.61). 2) Divided by 2006 ammonia and finished fertilizer production. Fourth-quarter operating income was NOK 164 million, compared with NOK 449 million last year. EBITDA was NOK 673 million compared with NOK 944 million in the same quarter last year. Converted EBITDA was USD 106 million, down USD 36 million from last year. EBITDA per tonne was USD 33, down USD 11 from last year. Finished fertilizer production increased 6 % from fourth quarter Strong nitrate and NPK production more than offset reduced urea output, with the Le Havre plant down for the whole quarter and a maintenance stop in Ferrara. The same stops affected ammonia production, down 7 % despite a positive contribution from the Burrup plant. Lower product prices impacted EBITDA by USD 2 per tonne, as higher nitrate prices only partly offset the decline in ammonia prices compared with last year. Energy costs in European plants increased by USD 36 million from last year, reducing EBITDA by USD 11 per tonne. The price increase for oil and gas products was primarily driven by higher LSFO and gasoil prices. Lower costs outside Europe kept Yara s global average oil and gas product cost stable at USD 5.2 per MMBtu. Electricity cost increased by USD 11 million, as higher market prices for electricity impacted European plants. Energy arbitrage effects were USD 14 million lower than last year. The valuation of Yara s oil-linked natural gas contracts was negatively affected as European forward prices for natural gas declined more than forward prices for oil-linked products. Last year saw a large gain on the sale of natural gas from the Le Havre plant. A provision of USD 3 million was booked relating to an electric grid environmental fee for the years at the Porsgrunn plant in Norway. The energy distributor disputes the fee as it is intended for domestic households and not for large industrial consumers. Yara has decided to restart ammonia and urea production at the Le Havre plant in early March. The restart is related to strong market demand and a new gas contract.

13 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/13 Variance analysis Full year NOK USD 1) USD/ millions millions tonne 2) EBITDA , EBITDA , Variance EBITDA in NOK (359) Conversion (NOK vs. USD) 22 Variance EBITDA (337) (51) (4) Volume & mix Price/Margin (159) (27) (2) Energy arbitrage Energy cost in Europe (1,233) (191) (15) Oil & gas products (956) (147) (11) Electricity (277) (44) (3) Special items Non-recurring items Contract derivatives Other Total variance explained (337) (51) (4) 1) Based on quarterly average NOK/USD rates as detailed in Yara 2006 reports. 2) Divided by 2006 ammonia and finished fertilizer production. Full-year operating income was NOK 1,552 million, compared with NOK 2,113 million last year. EBITDA was NOK 3,563 million compared with NOK 3,922 million last year. Converted EBITDA was USD 560 million, down USD 51 million from last year. EBITDA per tonne was USD 43, down USD 4 from last year. Finished fertilizer production was strong in 2006 with several production records, resulting in a 2 % increase compared with Ammonia production in 2006 was 3 % below The stop in Le Havre for three quarters along with energy arbitrage related stops more than offset the positive contribution from the new Burrup plant. Oil and gas related costs in European plants increased by USD 147 million from last year, reducing EBITDA per tonne by USD 11. The increase was driven by higher prices for all oil derivative products, primarily LSFO and gasoil. The average cost of purchased oil and gas was USD 5.6 per MMBtu, compared with USD 4.4 per MMBtu in Non-recurring items primarily represent the ammonia fleet sale, partly offset by costs related to the Le Havre plant in the first quarter.

14 page/14 OTHER AND ELIMINATIONS Other and eliminations consists mainly of Yara headquarters costs and cross-segment eliminations. Profits on sales from Upstream to Downstream and Industrial are not recognized in the consolidated Yara income statement before the goods are sold to external customers. These internal profits are eliminated in the Other and Eliminations segment. Fourth-quarter EBITDA was a positive NOK 14 million compared with a negative NOK 30 million last year (see page 28-39). The 2006 result reflects positive effects from the change of pension scheme in Norway, partly offset by higher sales eliminations included provisions for mutual insurance related to hurricane damage in the US Gulf. Full-year EBITDA was a positive NOK 212 million compared with a negative NOK 9 million last year. The variance reflects lower fixed cost, lower insurance cost and the change of pension scheme in Norway. OUTLOOK High grain prices point to an increase in planted acreage and fertilizer application rates in the current fertilizer season. Increased political ambitions for renewable energy may prolong growth in biofuels. The global urea market tightened considerably through the fourth quarter due to continued Indian import. Further growth in Indian imports is expected over the next years. Season-to-date market deliveries in Europe and North America are down from last year. However, strong grain prices create a positive sentiment for fertilizer deliveries in the remainder of the season. Yara s European infrastructure has historically coped well with a late-season surge in deliveries. The last months urea price increases have reduced nitrate margins over urea, reducing the risk of urea substitution and European imports. More stringent environmental standards and a growing mining industry will continue to increase demand for Yara s industrial products. Strong global demand has substantially reduced the risk of over-supply from new capacity coming on-stream this year. The modest level of new fertilizer capacity in the pipeline improves prospects for a prolonged healthy supply-demand balance in the nitrogen fertilizer market. Yara s expected first-quarter energy costs in Europe are NOK 100 million lower than previously estimated, representing a NOK 50 million decrease from last year. Based on the current forward market for oil products (January 24th), Yara s energy costs for second quarter 2007 are expected to be approximately NOK 200 million lower than last year. The estimate for the second quarter may change considerably depending on future energy prices. Strong grain and soybean prices have provided a boost for Brazilian agriculture. With the recent Fertibras acquisition, Yara is well positioned to benefit from the market recovery. The Board of Directors of Yara International ASA Oslo, 8 February 2007

15 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/15 BUSINESS AND FINANCIAL INFORMATION The fertilizer season in Western Europe referred to in this discussion starts 1 July and ends 30 June. Yara s business is strongly linked to the US dollar, both with regard to the purchase of energy and raw materials and prices of finished products. The discussion and analysis of financial performance is therefore developed and presented in US dollars, as management considers this to provide a better understanding of underlying business performance. 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. In the management discussion and analysis these effects are divided into energy arbitrage and contract derivatives. The former represents effects from Yara s major energy-related contracts and energy arbitrage activities, while the latter comprises effects related to commercial sales and purchase contracts.

16 page/16 condensed Consolidated interim Income Statement NOK millions, except share information Notes 4Q Q Revenue 12,345 12,251 46,969 46,171 Other income 4, , Commodity based derivatives gain/(loss) 1,8 (52) Revenue and other income 3 12,428 12,431 48,261 46,550 Raw materials, energy costs and freight expenses (10,343) (10,480) (38,749) (36,843) Change in inventories of own production Payroll and related costs 5,7 (904) (1,022) (3,389) (3,541) Depreciation and amortization 3,6 (351) (353) (1,373) (1,348) Other operating expenses 7 (406) (308) (1,546) (1,444) Operating costs and expenses (11,907) (11,780) (44,909) (42,728) Operating income ,352 3,821 Share of net income in non-consolidated investees ,463 1,144 Interest income and other financial income Earnings before interest expense and tax (EBIT) 996 1,023 5,092 5,231 Foreign exchange gain/(loss) 171 (124) 422 (525) Interest expense and other financial items (118) (108) (471) (483) Income before tax and minority interest 1, ,043 4,224 Income tax expense (141) (196) (833) (1,014) Net income ,210 3,210 Minority interest (17) (6) (22) (11) Net income after minority interest ,188 3,198 Earnings per share 1) Weighted average number of shares outstanding 2) 296,321, ,261, ,071, ,393,652 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 second, third and fourth quarter 2005, and first, second, third and fourth quarter 2006, due to the share buy-back program.

17 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/17 condensed Consolidated interim STATEMENT OF RECOGNISED INCOME AND EXPENSE NOK millions 4Q Q Exchange differences on translation of foreign operations (230) 267 (137) 650 Actuarial gain/(loss) on defined benefit pension plans 58 (239) 58 (249) Available for sale investments - change in fair value Hedge of net investments 34 - (2) - Tax on items taken directly to equity (42) 99 (35) 102 Net income/(loss) recognised directly to equity (32) Transfers: Cash flow hedges (2) 8 (2) 12 Tax on items transferred from equity 1 (2) 1 (3) Net income ,210 3,210 Total recognised income and expense for the period ,244 3,722 Attributable to: Shareholders of the parent ,216 3,700 Minority interest Total ,244 3,722

18 page/18 condensed Consolidated interim Balance Sheet NOK millions Notes Assets Non-current assets Deferred tax assets 1 1,175 1,359 Intangible assets Property, plant and equipment 1,6 7,600 7,536 Non-consolidated investees 4,10 6,390 4,400 Other non-current assets 1, Total non-current assets 16,765 14,040 Current assets Inventories 6 6,689 7,033 Trade receivables 6,834 6,868 Prepaid expenses and other current assets 1,974 1,552 Other liquid assets - 16 Cash and cash equivalents 1,003 1,108 Total current assets 16,499 16,576 Total assets 33,263 30,617

19 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/19 NOK millions, except for number of shares Notes Equity and liabilities Equity Share capital reduced for treasury stock Premium paid-in capital 2,183 3,389 Total paid-in capital 2,686 3,913 Retained earnings 12,773 9,306 Total equity attributable to shareholders of the parent 15,459 13,219 Minority shareholders interest in consolidated subsidiaries Total equity 2 16,034 13,296 Non-current liabilities Employee benefits 1,5 2,192 2,225 Deferred tax liabilities 1 1,238 1,065 Other long-term liabilities Long-term provisions Long-term interest bearing debt 4,732 5,180 Total non-current liabilities 8,773 8,889 Current liabilities Trade and other payables 5,915 6,080 Current tax liabilities Short-term provisions Other short-term liabilities Bank loans and other interest-bearing short-term debt 1,575 1,147 Current portion of long-term debt Total current liabilities 8,457 8,431 Total equity and liabilities 33,263 30,617 Total number of shares outstanding 1) 2 295,699, ,236,556 1) Number of shares outstanding was reduced in second, third and fourth quarter 2005, and first, second, third and fourth quarter 2006, due to the share buy-back program. The Board of Directors of Yara International ASA Oslo, 8 February 2007

20 page/20 condensed Consolidated interim Statement of Cash Flow NOK millions Notes Operating activities Operating income 3 3,352 3,821 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 3 1,373 1,348 Tax paid (720) (1,342) Dividend from non-consolidated investees 1, Change in net operating capital 1) 349 (872) Other (1,519) (551) Net cash from operating activities 3,854 3,106 Investing activities Purchases of property, plant and equipment 3 (1,870) (1,471) Purchases of other long-term investments 3,4 (1,615) (1,161) Net sales/(purchases) of short-term investments - 3 Proceeds from sales of property, plant and equipment Proceeds from sales of other long-term investments 4 1, Net cash used in investing activities (1,759) (2,044) Financing activities Loan proceeds/(repayments), net (340) 245 Purchase of treasury shares 2 (809) (682) Redeemed shares Norwegian State 2 (444) (116) Dividend 2 (722) (712) Net cash transfers (to)/from minority interest (3) (20) Net cash used in financing activities (2,317) (1,284) Foreign currency effects on cash flows Net increase (decrease) in cash and cash equivalents (105) (122) Cash and cash equivalents at beginning of period 1,108 1,230 Cash and cash equivalents at end of period 1,003 1,108 Bank deposits not available for the use of other group companies ) Operating capital consists of trade receivable, inventories and trade payable.

21 YARA FOURTH QUARTER AND PRELIMINARY results 2006 page/21 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 non-consolidated investees and joint ventures. The consolidated financial statements of the Group as at and for the year ended 31 December 2005 are available upon request from the Company s registered office at Bygdøy allè 2, Oslo, Norway or at These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting. 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. As a result of rounding differences, numbers or percentages may not add up to the total. NOTE 01 Judgements, estimates and assumptions 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 2005 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. NOTE 02 Consolidated shareholders equity 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 Reconciliation of numbers of shares Ordinary shares Own shares 2) Balance at 31 December ,442,590 (3,001,400) Redeemed shares Norwegian State (1,703,834) Shares cancelled (3,001,400) 3,001,400 Treasury shares (6,500,800) Balance at 31 December ,737,356 (6,500,800) Redeemed shares Norwegian State 1), 3) (4,257,712) Shares cancelled 1), 3) (7,500,200) 7,500,200 Treasury shares (8,278,860) Balance at 31 December ,979,444 (7,279,460) 1) Shares cancelled. 2) Including employee trust. 3) As approved by extraordinary General Meeting 16 October 2006.

22 page/22 Reconciliation of equity Hedging, fair Attributable Premium value, translation Other Total to share- Share paid-in and actuarial retained retained holders of Minority Total NOK millions capital 1) capital reserves 2) earnings 2) earnings the parent Interests equity Balance at 31 December ,703 (831) 7,625 6,794 11, ,098 IFRS implementation effects, 1 January (7) (7) (7) - (7) Net income ,198 3,198 3, ,210 Foreign currency translation, net Actuarial gain/loss recognised in equity - - (147) - (147) (147) - (147) Cash flow hedges Total recognised income and expense ,198 3,700 3, ,722 Other items recorded directly to equity Treasury shares (11) (201) - (470) (470) (682) - (682) Redeemed shares Norwegian State 3) (3) (113) (116) - (116) Dividend s distributed (712) (712) (712) (56) (768) Balance at 31 December (329) 9,634 9,306 13, ,296 Net income ,188 4,188 4, ,210 Foreign currency translation, net - - (143) - (143) (143) 6 (137) Actuarial gain/loss recognised in equity Available for sale investments - change in fair value Cash flow hedges - - (1) - (1) (1) - (1) Hedge of net investments - - (2) - (2) (2) - (2) Total recognised income and expense ,188 4,216 4, ,244 Companies purchased/sold Treasury shares (1) - - (26) (26) (27) - (27) Redeemed treasury shares 4) (13) (769) (782) (782) Redeemed shares Norwegian State 4) (7) (437) (444) - (444) Dividend s distributed (722) (722) (722) (16) (738) Balance 31 December ,183 (301) 13,073 12,773 15, ,034 1) Par value ) Included in retained earnings. 3) Shares cancelled in ) As approved by extraordinary General Meeting 16 October 2006, cancelled in Related to the current share buy-back programs in 2006, Yara purchased 2,203,600 shares in fourth-quarter 2006 in the open market at an average price of NOK 109,35 and with a total cost of NOK 245 million. Year-to-date Yara purchased 8,274,500 shares in the open market at an average price of NOK 97,21 and with a total cost of NOK 809 million. In addition Yara purchased 4,257,712 shares from the Norwegian State with a total cost of NOK 444 million.