Yara International ASA 3Q17 results roadshow. Svein Tore Holsether, CEO Thor Giæver, SVP Investor Relations

Transcription

1 Yara International ASA 3Q17 results roadshow Svein Tore Holsether, CEO Thor Giæver, SVP Investor Relations

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

3 Summary third quarter Strong production performance Improvement program ahead of schedule Results reflect lower commodity fertilizer margins 3

4 Earnings per share* EPS excluding currency and special items Annual YTD 217 NOK *Average number of shares for 3Q 217: million (3Q 216: million). 4

5 Higher finished fertilizer and ammonia production Kilotons 2,5 Ammonia 1 Kilotons 6, Finished fertilizer & industrial products 1 2, +7% 5, +8% 1,5 4, 3, 1, 2, 5 1, Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accounted investees 5

6 Yara Improvement Program ahead of schedule Program progress Financial benefits Start: Today End: 22 Annualized EBITDA improvement, USD million, vs. 215 baseline, at 215 prices 5 Program still progressing according to plan, with benefits ahead of target Yara Productivity System continues to be rolled out. Production reliability strong compared to same period last year Procurement Excellence progressing into Wave 2 and delivering ahead of plan 64 Status as of 4Q16 9 Status as of 1Q17 12 Status as of 2Q17 21 Status as of 3Q target A total of USD 97 million one-off cash improvement realized, primarily working capital release 22 target Accumulated one-off program costs: opex USD 47 million and capex USD 147 million 6

7 Yara Productivity System in practice Base production (excluding effect of planned maintenance stops) Total production at site, thousand tonnes Uusikaupunki % Sluiskil 1,476 1,444 1,55 +2% Belle Plaine % 3Q15 3Q16 3Q Includes 58kt production volume related to expansions (not counted in overall benefits realization); Producing more high-n NPK grades in 217 compared to 216 and 215

8 EBITDA: Higher energy cost and weaker US dollar more than offset the impact of higher deliveries NOK millions 3, ,386 EBITDA 3Q16 Volume Price/Margin Energy costs Currency translation Special items Other EBITDA 3Q17 8

9 Higher natural gas cost expected for the next two quarters USD/ MMBtu Yara European natural gas cost 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 TTF (1-month lag) Yara Europe *Dotted lines denote forward prices as of 1 October 217 Source: Yara, World Bank, Argus/ICIS Heren Change in global natural gas cost NOK millions 1, (2) (251) (4) (74) (6) (8) 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 EU/US actual EU/US estimate* Pilbara actual Pilbara estimate 9

10 Higher European nitrate premiums USD/t 6 Nitrogen upgrading margins 1 (monthly publication prices) USD/t 9 European nitrate premium 2 (quarterly Yara realized) Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 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 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 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 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 DAP, fob USG Source: Fertilizer Market Publications MOP, CIF inland Germany 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1) Export NPK plants, average grade , net of transport and handling cost. 11

12 Strong urea oversupply outside China Capacity additions, excl. China (mill. tonnes urea) Egypt.6 Indonesia.5 Saudi Arabia.5 Malaysia.3 Bangladesh.1 Vietnam.1 Romania Nigeria.7 Russia.7 Algeria.8 USA Nigeria.7 Russia.2 Iran 1.4 USA 3. Malaysia.9 Bangladesh.5 India.4 Bolivia.2 Indonesia Russia.4 Iran.6 USA 1.6 India.9 Bolivia.5 Azerbaijan.5 Turkmenistan.3 Indonesia.1 Kuwait Iran.5 Turkmenistan.9 Indonesia.4 Azerbaijan Iran.5 India.7 Egypt.3 Uzbekistan.1 2. Nigeria.6 India.7 Egypt.3 Uzbekistan.3 Tajikistan.2 ~3 Mt = 1 year historical trend consumption growth 2.1 Nigeria.6 Russia.1 Iran.5 Brunei.6 Tajikistan.2 Indonesia -,7 Bangladesh -,1 Bangladesh -,5 Romania Source: CRU, September 217. Numbers include both additions and closures of capacity. CRU year-over-year production change

13 .but higher domestic price and lower exports from China are offsetting oversupply elsewhere USD/t Increasing urea pricing Kilotons 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, Chinese exports Urea fob Black Sea Urea granular fob Egypt Urea prilled fob China Urea inland proxy China Source: BOABC, CFMW 13

14 China domestic pricing and utilization China anthracite and urea prices (RMB/mt) Urea plant utilization rate (%) Source: CFMW 14

15 Import catch-up need in India Calendar year Season-to-date (Apr Aug) +2.7% +1.5% Million tonnes Million tonnes % + 3% Production Sales 15

16 Major improvement and growth investments in 217; main earnings improvement from 218 onwards 1 EBITDA improvement3 (MUSD) Improvement and growth capex 2 (BNOK) 11.4 Improvement program Committed expansions + M&A 1, Improvement program: + 35 MUSD cost improvement +15 MUSD volume improvement: ->.4 mill. tonnes ammonia ->.7 mill. tonnes fertilizer Committed expansions + M&A: mill. tonnes ammonia mill. tonnes fertilizer 1 Currency assumptions for 217 onwards: USD/NOK 7.9, EUR/NOK: 9.32, USD/BRL: Excluding maintenance capex on existing assets see page 21. Yara s share of capex. Fully consolidated entities presented at 1% basis 3 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 Earnings improvement 3 (NOK per share)

17 IR 18 July 217 Additional information

18 Integrated business model creates value through scale, flexibility and value chain presence 18

19 We sold 34.1 million tonnes of products and solutions globally in Sales figures mill. tonnes Fertilizers Industrial products & solutions %= total sales *Ammonia trade not included North America 12.1% Latin America ex. Brazil 7.3% Brazil 28.2% Europe 41.4% Africa 4.4% Asia 6.6%

20 Differentiated product portfolio represents a key source of competitive edge Fertilizer product portfolio (216/17 season volume) NPK blends 19% 34% Standard products (Urea, UAN, Ammonia) 26% Specialty (CN, Compound NPK, Fertigation) 21% Differentiated products (CAN, AN) 2

21 Strong growth and profitability through the cycle Average cash return on gross investment (CROGI) well above the Yara CROGI target of 1% NOK/share Average annual shareholder return of 23% % 14.1% 14.1% 16.1% 22.8% 8.5% 17.4% 2.9% 17.3% 13.3% 14.% 12.6% 9.5 % % target '6 '8 '1 '12 '14 16 Ex special items Yara avg. gross investment, 12M rolling IPO Accumulated cash dividend payments Book equity Average annual share price Share price 19 Oct 217 1) Share price appreciation (end 216) plus dividend payments 21

22 Yara has expected commodity nitrogen oversupply, and has focused its growth pipeline on premium & industrial products Growth focused on premium & industrial Pipeline tonnes by product (kt) 1 Expand premium products sales and supply Uusikaupunki NPK (3Q 216) Porsgrunn/Glomfjord CN/NPK (4Q 217) Sluiskil urea+s (4Q 217) Rio Grande NPK/NPK blends (2H 22) 1, 5 Rio Gr. 4 Nordic NPK CN Urea+S NPK Blends Expand commodity scale based on attractive full-cost growth opportunities Freeport ammonia JV (1Q 218) Babrala urea acquisition (4Q 217) 5 1,2 Ammonia Urea Act on attractive opportunities to grow industrial sales and supply Pilbara TAN (1H 217) Köping TAN (2Q 218) 25 TAN Structurally secure P and K supply Galvani / Salitre (mining: 1Q18, chemical 1H19) 1, SSP/NP Exposure to commodity nitrogen prices: Low Medium High 1 Including Yara s share of volume in non-consolidated investees. Fully consolidated entities presented at 1% basis 22

23 Growth and capex pipeline NOK bn Capex plan 1 Committed growth Maintenance Cost&capacity improvements 2) M&A Production growth Finished products 4 Ammonia Mill.tons Committed growth (NOK bn): Porsgrunn Köping Sluiskil.7.7, BASF JV Rio Grande Salitre Other projects Total T/R 6 Regularity Babrala Other growth 7 Est. 22 GrowHow UK (divested mid-215) Yara share of Qafco & Lifeco Regularity Pilbara 8 Freeport Est. 22 & Babrala 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: 235kt, 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 T/R 6 Yara-operated 23

24 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.7 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 7.9, EUR/NOK: 9.32, 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) 24

25 Yara Improvement Program targets sustained improvement of minimum $5MM EBITDA, plus cash benefits USD$MM, vs. 215 baseline and 215 prices Sustained EBITDA improvement 64 1 ~15 ~3 ~45 5 ~3% ~15% ~3% ~25% Production volume Consumption factor Variable unit cost Fixed cost Sustained capex improvement Sustained capex improvement: Target under development One-off working capital release ~4 ~4 ~15 ~15 ~15 (~125MM total) One-off cost ~1 ~3 ~2 ~1 ~1 EBITDA impact (~8MM total) One-off capex ~7 ~17 ~17 ~9 (~5M total) Effects calculated on 215 prices. If actual prices in 216 are applied, the total is $25M; Only confirmed 216 benefits included 25

26 The improvement program is organized into concrete projects across the company More for less Yara Productivity System Procurement Excellence Better Cheaper Faster Improve safety, customer responsiveness, reliability, cost, productivity and quality on our sites as well as the ability to assess and integrate acquired assets Realize sustainable, incremental savings based on advanced category management and collaborative procurement Improve quality, cost and speed of construction through standard specifications, by challenging requirements and focus on execution strategy Support function efficiency and quality IT Optimization Working Capital Standardize processes in supply chain and finance to improve customer experience and efficiency Improve project execution and cost position of basic IT services while increasing customer and business orientation Improve working capital management in selected countries EBITDA target 1 Cash effects Added value Sales & Marketing enhancement Improve our commercial activities in Crop Nutrition and Industrial segments through being more focused, efficient and effective in developing our sales & marketing channels 1 Projects contribute primarily towards EBITDA, but also contain elements of capex improvement 26

27 Volume and energy consumption improvement targets Ammonia production, thousand tonnes 6,471 ~6,4 1 Finished fertilizers production, thousand tonnes ~18,7 1 Production volume 243 ~ ,961 ~7 5,755 17, Consumption factor Energy consumption, Mmbtu (HHV 2 ) per tonne Ammonia (weighted average) % Ammonia production (excl. pipeline growth) Finished fertilizers production Adjustment to normalized / 216 turnaround level Pilbara acquisition effect (last 49%) Improvement program target Note: Volume and energy targets are not final; they are subject to change as additional plant assessment deep-dives are completed 1 Indicative target based on improvements to the baseline (improvement program target), and known turnarounds and expansions in 216; 2 Higher Heating Value 27

28 Yara has invested for the long term in Brazil; Bunge acquisition brought critical mass in distribution Volume (MM tons) Acquisition Acquisition Divestment Acquisition Acquisition 6% 28

29 Yara Brazil today: unrivalled market presence and farmer-centric strategy Unrivalled presence: 28 sites in 11 states Farmer-centric strategy drives growth > 2, growers using Yara solutions Yara (offices, production, blending and distribution of fertilizers, port operation) Galvani (fertilizer production, mining and port operation) > 2 Yara agronomists and 6 sales representatives > 55% of Yara deliveries are direct to farmer > 55, interactions with growers p.a. 29

30 CVI Crop Value Index a key guide to our approach High value, Low volume Double price premium for high quality 2% yield increase= +12 USD/ha What is CVI: Crop revenue Fertilizer costs Take the position in cash crop but not enough scale Key parameters: Quality and yield Build positions for crop with both value and scale Yield, quality and productivity Optimal cost position for lower value segments Low level of differentiation Global area grown (ha) Low value - High volume Limited price premiums for quality Nutrient use efficiency is key +12 USD/ha = 5% yield increase 3

31 Brazil: focus on premium products and solutions drives growth Kilotons 3, 25, 2, 15, 1, 5, Kilotons 8, 6, 4, 2, Brazil season-to-date fertilizer deliveries +1% 3Q 1H % 3Q 1H Industry (ANDA) Yara Brazil Brazil season-to-date premium product deliveries Kilotons 1,6 +21% 1,4 1,2 3Q 1, 8 6 1H

32 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 2,386 Annual NOK millions YTD ,47 21,361 15,563 8,594 32

33 Lower net interest-bearing debt as cash earnings and currency effects more than offset investments NOK millions 16, ,476 2,142 2,9 229 Net debt Jun 17 Cash earnings* Net operating capital change Investments (net) Foreign currency translation loss Other Net debt Sep 17 * Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges 33

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

35 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 35

36 Yara 3Q fertilizer deliveries by market and product Kilotons 3,19 3,325 3Q16 3Q17 2,1 2, Europe Brazil Latin America North America Asia Africa 1,419 1,75 1,473 1,545 1,468 1, ,194 1,19 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) 36

37 Fertilizer deliveries by product and source Kilotons 1,468 1,473 1,419 1,473 1,75 1,545 1,469 1,747 1, Q16 3Q17 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 3Q16 3Q17 Nitrate NPK compounds NPK blends Urea UAN Other Yara-produced deliveries Joint venture & third party sourced 37

38 Strong premium product deliveries Value-added fertilizer deliveries 1 Value-added fertilizer deliveries 1 4, 3,5 3, 2, , 1,5 CAGR 16% , Q13 3Q14 3Q15 3Q16 3Q17 Outside Europe 1) YaraBela, YaraMila and YaraLiva deliveries Europe Asia Brazil Latin America excl. Brazil 3Q15 3Q16 Africa 3Q17 North America 38

39 YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Kilotons 1,6 1,4 1,2 1, Q13 3Q14 3Q15 3Q16 3Q17 Yara-produced YaraBela deliveries Kilotons Q13 3Q14 3Q15 3Q16 3Q17 Outside Europe Europe Outside Europe Europe 39

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

41 Industrial volume development 866 Kilotons Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 1 European CO2 business divested 1 June 216 Industrial N-chemicals Environmental products Other 1 41

42 Yara stocks Kilotons Finished fertilizer 8, Bunge Fertilizer included from 3Q 213 7, 6, 5, 4, 3, 2, 1, - Urea Nitrates Compound NPK Other 42

43 Normal start to the European fertilizer season, slow in USA like last season Million tons N West Europe +1% 3Q13 3Q14 3Q15 3Q16 3Q17 USA Million tons N % Q13 3Q14 3Q15 3Q16 3Q17 Domestic Imports Domestic Net imports Source: Yara estimate, TFI, US Customs. 43

44 European producers nitrate stocks Index June 27 = Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 17/18 12/13 13/14 14/15 15/16 16/17 Source: Fertilizers Europe, Yara estimate for September 44

45 Production Export Domestic Domestic Export Production Chinese urea production suffering from increased production costs, domestic demand lower this season Million tons Chinese urea production 15/16 14/15 Million tons Domestic urea balance -14% /17 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2 1 Source: CFMW Jul-May 15/16 Jul-May 16/17 45

46 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 46

47 Energy cost Yearly averages , quarterly averages for with forward prices* for 4Q17 and 1Q Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge ) Yara Europe *Dotted lines denote forward prices as of 1 October 217 Source: Yara, World Bank, Argus/ICIS Heren 47

48 Reduced inventories expected for the 217/18 season 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 of consumption in stocks Days E 18F Consumption Production Source: USDA October

49 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 Source: US Commodity Futures Trading Commission 49

50 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. 5

51 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 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank 51