YARA BUY TP: NOK430. CMD preview to raise or not to raise

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1 EQUITY RESEARCH Research report prepared by DNB Markets, a division of DNB Bank ASA Materials Company update This report was completed and disseminated at 17:18 CET on 0 YARA CMD preview to raise or not to raise Ahead of Yara s Q4 results and CMD, 52% of respondents to our buy-side survey said they expect Yara to increase the improvement target at the CMD; the median expectation is a 2020 target of USD625m. We are confident Yara will raise the target, but not necessarily at the CMD. We are bullish on urea in Q1 given India s inventory position and China s supply restrictions, and keep our BUY recommendation and NOK430 target price. CMD to raise or not to raise. According to our buy-side survey, expectations are not particularly high ahead of Yara s Q4 results and CMD on 8 February % of respondents believe Yara will raise the improvement target at the CMD; the median expectation is an increase to USD625m in 2020, versus the current USD500m target. We also believe Yara will raise the improvement target, but not necessarily at the CMD, as the programme has not yet been rolled-out to several important plants. We factor in USD350m in improvements in 2018 (versus the USD300m target), but still USD500m in 2020, in line with its target. Q4 preview finally set for earnings growth. For the first time in more than two years we forecast positive EBITDA growth, to NOK3.2bn (excluding one-offs), up 32% YOY. This is in line with consensus, and driven by positive price/margin, which we expect to rise by] NOK1.2bn YOY due to higher urea and nitrate prices. We see this being partially offset by higher gas costs and a stronger NOK. We expect Yara to have reached USD240m in cumulative savings by end-q4 2017, compared to the USD150m target. We are NOK1 above consensus on the DPS for 2017e at NOK10, as we believe no share buybacks and strong future FCF warrant a slightly higher payout ratio. BUY on strong urea momentum and CMD update. We are bullish urea given India s inventory position and China s supply restrictions, potentially leaving the two markets competing for product in Q1 for the first time since the mid-1990s. As we also expect positive comments at the CMD we reiterate our BUY recommendation on Yara. Our target price remains NOK430, as we have made limited net estimate changes ahead of Q4, with gas costs increases offset by higher DAP upgrading margins. Year-end Dec e 2018e 2019e 2020e Revenue (NOKm) 95, ,011 95,245 93,605 99, , ,068 EBITDA adj (NOKm) 16,544 18,919 14,450 12,198 17,265 19,569 22,929 EBIT adj (NOKm) 11,641 14,434 9,136 5,726 10,542 12,307 14,937 PTP (NOKm) 9,808 13,127 9,463 5,314 9,548 11,205 13,835 EPS rep (NOK) EPS adj (NOK) DPS (NOK) Revenue growth (%) EBITDA growth adj (%) EPS growth adj (%) EBITDA margin adj (%) EV/Sales adj (x) EV/EBITDA adj (x) EV/EBIT adj (x) P/E adj (x) P/Book (x) ROE (%) ROCE (%) Dividend yield (%) BUY TP: NOK430 YAR versus OSEBX (12m) Jan Mar May Jul Sep Nov Jan Yara OSEBX (Rebased) Source: Factset SUMMARY Recommendation (prev.) BUY (BUY) Share price (NOK) 397 Target price (previous) (NOK) 430 (430) Upside/downside potential (%) 8 Tickers YAR NO, YAR.OL CAPITAL STRUCTURE No. of shares (m) No. of shares fully dil. (m) Market cap. (NOKm) 109,225 NIBD adj end-2017e (NOKm) 25,334 Enterprise value adj (NOKm) 134,558 Net debt/ebitda adj (x) 2.08 SHARE PRICE PERFORMANCE Abs. 1/3/12m (%) 8/11/13 Rel. 1/3/12m (%) 2/5/-8 High/Low 12m (NOK) 397/301 Free float (%) 57 Source: Company, DNB Markets (estimates) NEXT EVENT Q4 17/ CMD 08/02/2018 ESTIMATE CHANGES (NOK) Year-end Dec 2017e 2018e 2019e EPS (old) EPS (new) Change (%) Consensus Sales (old) 93,525 99, ,824 Sales (new) 93,605 99, ,814 Change (%) Consensus 95, , ,398 Source: DNB Markets, Bloomberg ANALYSTS Eivind Sars Veddeng Eivind.Sars.Veddeng@dnb.no Please see the last two pages for important information. This research report was not produced in the US. Analysts employed by non-us affiliates are not registered/ qualified research analysts with FINRA in the United States.

2 2016 Revenues Costs Other 2017e Revenues Costs Other 2018e DNB Markets Yara Investment case overview Share price performance, DNB Markets target price, bear- and bull-case scenarios 580 NOK550 (39%) NOK397 NOK430 (8%) 330 NOK300 (-24%) 280 Jan 2017 May 2017 Sep 2017 Jan 2018 May 2018 Sep 2018 Jan 2019 Historical Share Price Performance Price Target (Jan 19) Current Share Price Target price methodology We continue to base our target price on the present value of 2020e earnings using the historical average 7x EV/EBITDA (unchanged). In our view the shares do not reflect improved market fundamentals or the solid progress in Yara s improvement programme. Our DCF is NOK570/share. Our bull- and bear-case fair values assume urea prices of USD300/mt and USD200/mt, respectively, on the same EV/EBITDA multiple approach. Source: FactSet, DNB Markets Source: DNB Markets Downside risks to our investment case China and India over-apply nitrogen; more rational application could mean downside to demand. Coal is the prime input for marginal producers, so lower coal prices (we assume flat) could cut cash costs further. As European gas prices are Yara s most important input, higher gas prices could mean downside risk. Removal of trade barriers could increase supply of AN (e.g. Russia). DNB Markets investment case and how we differ from consensus We are 10% ahead of consensus on 2018e EBITDA as it does not seem to reflect the strong performance of the improvement programme. Consensus urea and nitrate price assumptions also look too low given higher coal prices, lower Chinese exports, and lower nitrate inventories. We assume a 12% EBITDA CAGR for e. We believe the improvement targets could be raised already in Upside risks to our investment case Many Chinese urea plants operate at a loss; a rational approach would be to shut capacity and reduce exports, leaving the market more balanced. A 10% weakening of the NOK versus the USD would raise our annual EPS by cnok6.7. New project announcements or acquisitions could drive up the share price. More than USD500m of improvements from the current programme. Source: DNB Markets Source: DNB Markets Source: DNB Markets Sustainable EPS bridge e (NOKm) Source: DNB Markets (forecasts), company (historical data) 2

3 CMD to raise or not to raise 52% of investors surveyed expect improvement targets to be raised Ahead of the Q4 results and CMD on 8 February 2018 we surveyed 23 investors to get a better understanding of buy-side expectations on Yara s improvement programme targets. 52% believe Yara will raise the target at the CMD; the median expectation is a target of USD625m in 2020e versus the current USD500m target. We also believe Yara will raise the improvement target, but not necessarily at the CMD as the programme has not yet been rolled-out to several important plants. We factor in USD350m in improvements in 2018e (versus the USD300m target), but still USD500m in 2020e, in line with its target. Figure 1: Survey results Keep current target, 13% Raise target at a later stage, 13% 50/50, 22% Rase target at CMD, 52% Source: DNB Markets Survey results: We received 23 responses, of which 65% were from Norwegian investors. 52% of respondents believe Yara will raise the target at the CMD on 8 February. 13% think it will be raised at a later stage, while 13% believe it will keep its current target. The remaining 22% believe it is 50/50 whether it raises the target. The median expectation is for Yara to raise its improvement target to USD625m in 2020e versus the current USD500m target. In our sample, local investors were more positive than the internationals (mostly UK), with median target expectations of USD650m and USD513m, respectively. The highest target expectation was USD750m, both in locally and internationally Figure 2: Survey results (USDm) Source: DNB Markets High Domestic Median Median Average London Median Low 3

4 Our take: In our Yara estimates, we have not factored in an increase in the USD500m improvement target, but given the strong feedback from the plants (please see our comments from our Sluiskil site visit in our report published on 13 December 2017), and the strong initial results from the programme (see figure 4 below), we believe management could very well raise the targets. The arguments against an increase are that the programme has not yet been rolled out in all plants, and that Yara does not want to over-promise and under-deliver. The programme has not yet been implemented at sites like Porsgrunn, Glomfjord, Køping or Galvani, and before it is, management may not be comfortable with raising the bar yet, but that an upgrade is likely at a later stage. As the programme is running 40% ahead of schedule, we have factored in improvements of USD350m (current target USD300m) by end We still expect the CMD to be a positive event as it will most likely contain bullish comments on further savings potential Figure 3: Yara improvement programme (USDm) Figure 4: Improvement programme target (USDm) e 2018e 2019e 2020e 0 Q4 Q1 Q2 Q3 Q4e Yara targets in 2015 prices DNBe in 2015 prices Program annualized in 2015 price Program in 2017 prices DNBe estimated P&L effect DNB estimate in 2017 running prices Source: Company (targets), DNB Markets (Further calculations, estimates) Source: Company (historical figures), DNB Markets (Further calculations, estimates) The aim was to roll out the improvement programme to 50% of the 27 sites by end- 2017However, it had only been fully rolled-out to seven sites at that date, but according to the company it had identified potential improvements far exceeding initial expectations, predominantly in higher production volumes. Five out of those seven plants set 12-month rolling production records in September or October Further, several monthly production records were set in November Figure 5: Roll-out schedule Sites Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Slusikil Pilbara Porsgrunn Large Uusikaupunki Rio Grande Galvani, Salitre (Luis E, Angico) Belle Plane Trinidad & Tringen I and II QAFCO Small and Medium Rostock Tertre Brünsbuttel Ferrara Ravenna Ambes Le Havre Montoir Glomfjord Köping Source: Company Sillinjärvi Kokkola SVI Mining Pontagrossa Cartagena 4

5 DNB Markets Yara Figure 6: Production volumes Source: Company Q4 preview finally set for earnings growth For the first time in more than two years we forecast positive EBITDA growth, to NOK3.2bn (excluding one-offs), up 32% YOY. This is in line with consensus, and driven by positive price/margin, which we expect to rise by NOK1.2bn YOY due to higher urea and nitrate prices. We see this being partially offset by higher gas costs and a stronger NOK. We expect Yara to have reached USD240m in cumulative savings by end-q4 2017, compared to the USD150m target. We are NOK1 above consensus on the DPS for 2017e at NOK10, as we believe no share buybacks and strong future FCF warrant a slightly higher payout ratio. Figure 7: Urea and nitrates (USD/mt) CAN CIF Germany Urea granular FOB Egypt Source: Profercy Figure 8: EU Natgas (USD/mmbtu) Day ahead EU Natgas Source: Bloomberg (underlying data), DNB Markets (further calculations) 5

6 Figure 9: YOY EBITDA bridge 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 2,474 3,262 3,204 Source: DNB Markets (forecasts), company (historical data), Bloomberg (consensus) Figure 10: EBITDA (NOKm) 7,000 6,000 5,000 4,000 3,000 2,000 1, % 80% 60% 40% 20% 0% -20% -40% -60% EBITDA ex special items YoY, rhs Source: ads 6

7 Figure 11: Q4 preview Q4 2017e DNB vs. Cons. Q4 16 DNBe NOKm, NOK per share DNB Cons. Abs. % Actual 2017e Revenues 23,857 24, % 22,169 93,605 Raw Materials, energy costs etc -17,495-16,650-70,096 SG&A and other -3,569-3,469-12,867 Share of net income in EAI's Interest and other financial income EBITDA (Yara definition) 3,262 3, % 2,015 11,856 Non recurring effects in Yara EBITDA EBITDA ex one offs (Yara def.) 3,262 3, % 2,474 12,198 Depreciation,Amortisation and impairments -1,476-1,492-1% -1,687-6,130 EBIT ex one offs (Yara def.) 1,786 1, % 342 5,726 Net income 1,234 1, % ,336 Net profit adjusted 1,234 1, % 192 4,114 EPS reported Sustainable EPS % DPS % 10.0 Market data USDNOK EURNOK Urea Price Yuzhnyy (USD/Mt) Yara realised Nitrate price (USD/mt) Realised Nitrate Premium (USD/Mt) TTF (USD/Mmbtu) Yara Europe gas cost (USD/Mmbtu) Own production (k tons) Ammonia 1,900 1,885 7,386 Urea 1,336 1,326 5,235 Nitrates 1,594 1,554 6,151 NPK (ex blends) 1,329 1,226 5,470 NPK - blends (sales) 1,397 1,330 4,921 Source: DNB Markets (forecasts), company (historical data), Bloomberg (consensus) BUY on strong urea momentum and CMD update We are bullish urea given India s inventory position and China s supply restrictions, potentially leaving the two markets competing for product in Q1 for the first time since the mid-1990s. As we also expect positive comments at the CMD we reiterate our BUY recommendation on Yara. Our target price remains NOK430, as we have made limited net estimate changes ahead of Q4. Our target price is based on 16x 2018e earnings, justified by a 2020e ROCE of 13% (similar ROE) and a e EBITDA CAGR of 12%. We also believe the shares could re-rate as earnings growth is based on endogenous improvements and not exogenous price variables. Figure 12: Target price 2020e EBITDA (NOKm) 22,929 Fair multiple 7x NIBD + min (NOKm) 19, e FCF (NOKm) 12,243 Fair value 149,070 Per share 546 Current value e EV/EBITDA (x) e P/E (x) 16.1 P/B (x) 1.5 Shares (m) 273 ROE 12% Source: DNB Markets 7

8 Figure 13: Peer 2018e P/E (x) Source: Bloomberg (underlying data), DNB Markets (further calculations) Figure 14: Historical EV/EBITDA (x) Source: Bloomberg (underlying data), DNB Markets (further calculations) EV/EBITDA (7.9x) Average (6.9x) DNBe Figure 15: P/E (x) P/E (16.6x) Average (10.6x) DNBe Source: Bloomberg (underlying data), DNB Markets (further calculations) 8

9 Forecast changes P&L New Old Change (NOKm) 2017e 2018e 2019e 2017e 2018e 2019e 2017e 2018e 2019e Revenues 93,605 99, ,814 93,525 99, , Operating expenses -82,265-83,093-82,865-82,297-82,770-82, EBITDA 11,856 17,265 19,569 11,734 17,256 19, EBITDA adj 12,198 17,265 19,569 12,076 17,256 19, EBITDA margin (%) Depreciation -6,130-6,724-7,261-6,004-6,735-7, EBIT 5,726 10,542 12,307 5,731 10,520 12, EBIT adj 5,726 10,542 12,307 5,731 10,520 12, Net interest FX gains Net financial items Non-recurring items PBT 5,314 9,548 11,205 5,319 9,527 11, Taxes -1,372-2,319-2,738-1,375-2,318-2, Minorities Discontinued operations Net profit 3,994 7,281 8,519 3,996 7,261 9, Adjustments to net profit Net profit adj 4,024 7,281 8,519 4,026 7,261 8, Per share data (NOK) EPS EPS adj DPS ordinary DPS Other key metrics (%) Revenue growth EBIT adj growth EPS adj growth Avg. number of shares (m) Capex -16,766-10,900-7,500-16,766-10,900-7, Working capital 16,002 16,381 16,481 15,949 16,267 16, NIBD adj 25,334 25,340 20,712 25,438 24,974 20, Source: DNB Markets Forecast changes By segment and assumptions New Old Change (NOKm) 2017e 2018e 2019e 2017e 2018e 2019e 2017e 2018e 2019e Assumptions USDNOK Urea CAN Urea 5,235 6,653 6,700 5,235 6,653 6, Nitrate 6,151 6,576 6,646 6,151 6,576 6, NPK(compound) 5,470 5,840 5,887 5,390 5,840 5, Source: DNB Markets 9

10 Quarterly numbers (NOKm) Q Q Q Q Q Q Q4 2017e Q1 2018e Q2 2018e Q3 2018e Q4 2018e Revenues 24,310 23,864 22,169 22,743 23,345 23,660 23,857 24,420 24,787 25,675 24,837 Operating expenses -20,460-20,848-19,954-19,497-20,537-21,379-20,852-19,713-20,828-21,580-20,972 EBITDA 5,488 3,005 2,015 3,217 2,991 2,386 3,262 4,762 4,142 4,246 4,115 Depreciation -1,715-1,563-1,687-1,443-1,665-1,546-1,476-1,681-1,681-1,681-1,681 EBIT 3,773 1, ,774 1, ,786 3,081 2,461 2,566 2,434 Net interest FX gains Net financial items Non-recurring items 1, PBT 5,169 1, ,068 1, ,617 2,849 2,229 2,312 2,159 Taxes Minorities Discontinued operations 1, , ,234 2,187 1,703 1,753 1,639 Net profit 6,287 1, ,944 1,610 1,244 2,469 4,374 3,406 3,505 3,278 Adjustments to net profit -4, , ,234-2,187-1,703-1,753-1,639 Net profit adj 1, , ,234 2,187 1,703 1,753 1,639 Dividend paid -3, , , Avg. number of shares (m) Per share data (NOK) EPS EPS adj Growth and margins (%) Revenues, QOQ growth Revenues, YOY growth EPS adj, YOY growth Gross margin nm nm nm nm nm nm nm nm nm nm nm EBITDA adj margin Depreciation/revenues EBIT adj margin nm nm nm nm nm nm nm nm nm nm nm Net profit margin nm Adjustments to quarterly numbers (NOKm) Q Q Q Q Q Q Q4 2017e Q1 2018e Q2 2018e Q3 2018e Q4 2018e EBITDA 5,488 3,005 2,015 3,217 2,991 2,386 3,262 4,762 4,142 4,246 4,115 Gains and losses -1, Other EBITDA adjustments 1, EBITDA adj 3,958 2,968 2,474 3,335 2,873 2,728 3,262 4,762 4,142 4,246 4,115 Gains and losses -1, EBIT 3,773 1, ,774 1, ,786 3,081 2,461 2,566 2,434 Gains and losses -1, Net profit 6,287 1, ,944 1,610 1,244 2,469 4,374 3,406 3,505 3,278 Gains and losses -1, Other adjustments -4, , ,234-2,187-1,703-1,753-1,639 Net profit adj 1, , ,234 2,187 1,703 1,753 1,639 10

11 Annual P&L (NOKm) e 2018e 2019e 2020e Revenues 77,725 83,997 84,668 95, ,011 95,245 93,605 99, , ,068 Operating expenses -64,127-69,520-72,774-79,809-90,220-81,261-82,265-83,093-82,865-82,824 EBITDA 18,113 16,952 13,394 16,318 21,366 15,562 11,856 17,265 19,569 22,929 Depreciation -2,677-3,423-3,744-4,677-6,932-6,426-6,130-6,724-7,261-7,992 EBIT 15,436 13,529 9,650 11,641 14,434 9,136 5,726 10,542 12,307 14,937 Net interest FX gains , Net financial items ,439-1,057-3, Non-recurring items 2, ,447 1, PBT 16,505 13,285 7,357 9,808 13,127 9,463 5,314 9,548 11,205 13,835 Taxes -2,315-2,583-1,603-2,092-2,209-2,040-1,372-2,319-2,738-3,397 Effective tax rate (%) Minorities Discontinued operations Net profit 14,167 10,653 5,405 7,398 10,566 7,391 3,994 7,281 8,519 10,490 Adjustments to net profit -3, ,725 1,099-1,940-2, Net profit adj 10,566 9,877 7,129 8,497 8,626 5,312 4,024 7,281 8,519 10,490 Dividend paid -1,584-1,998-3,647-2,770-3,581-4,108-2,732-2,732-3,552-4,372 Avg. number of shares Per share data (NOK) EPS EPS adj DPS ordinary DPS Growth and margins (%) Revenue growth EPS adj growth Gross margin nm nm nm nm nm nm nm nm nm nm EBITDA margin EBITDA adj margin Depreciation/revenues EBIT margin EBIT adj margin PBT margin Net profit margin

12 Adjustments to annual P&L (NOKm) e 2018e 2019e 2020e EBITDA 18,113 16,952 13,394 16,318 21,366 15,562 11,856 17,265 19,569 22,929 Gains and losses -4,516-2,475-1,500-1,081-3,575-1, Other EBITDA adjustments 2, ,447 1, EBITDA adj 16,010 16,850 13,834 16,544 18,919 14,450 12,198 17,265 19,569 22,929 Gains and losses -4,516-2,475-1,500-1,081-3,575-1, EBIT 15,436 13,529 9,650 11,641 14,434 9,136 5,726 10,542 12,307 14,937 Gains and losses -4,516-2,475-1,500-1,081-3,575-1, EBIT adj 15,436 13,529 9,650 11,641 14,434 9,136 5,726 10,542 12,307 14,937 Net profit 14,167 10,653 5,405 7,398 10,566 7,391 3,994 7,281 8,519 10,490 Gains and losses -4,516-2,475-1,500-1,081-3,575-1, Other adjustments -3, ,725 1,099-1,940-2, Net profit adj 10,566 9,877 7,129 8,497 8,626 5,312 4,024 7,281 8,519 10,490 Per share data (NOK) EPS Recommended adjustment EPS adj Cash flow (NOKm) e 2018e 2019e 2020e Net profit 14,167 10,653 5,405 7,398 10,566 7,391 3,994 7,281 8,519 10,490 Change in net working capital -4,990 1,629 2,187-3,827-1,465 4,266-2, Cash flow from operations (CFO) 7,364 13,234 12,304 8,606 14,631 14,083 5,878 13,627 15,680 18,228 Capital expenditure 431-3,956-9,513-9,697-6,889-10,603-16,766-10,900-7,500-7,000 Cash flow from investing (CFI) 431-3,956-9,513-9,697-6,889-10,603-16,766-10,900-7,500-7,000 Net change in debt -2,371-1,792-1, ,460 1,138 11,073 5, Dividends paid -1,584-1,998-3,647-2,770-3,581-4,108-2,732-2,732-3,552-4,372 Other , Cash flow from financing (CFF) -4,873-5,205-5,908-2,142-8,113-2,949 8,306 2,268-3,552-4,372 Total cash flow (CFO+CFI+CFF) 2,922 4,073-3,117-3, ,582 4,994 4,628 6,857 FCFF calculation Less: net interest Growth (%) CFO CFI FCF nm nm nm nm nm nm nm nm nm nm CFF FCFF nm nm nm nm nm nm nm nm nm nm 12

13 Balance sheet (NOKm) e 2018e 2019e 2020e Assets 73,900 81,250 88, , , , , , , ,779 Inventories 12,683 11,927 13,129 18,639 19,948 17,580 20,245 20,797 21,000 21,402 Trade receivables 8,680 8,045 9,339 12,100 12,098 10,332 11,651 12,126 12,408 12,817 Current financial assets 2,947 2,618 3,386 4,243 5,916 4,905 4,773 4,773 4,773 4,773 Cash and cash equivalents 5,868 9,941 6,824 3,591 3,220 3,751 1,169 6,163 10,791 17,648 Current assets 30,177 32,531 32,678 38,573 41,182 36,568 37,838 43,859 48,972 56,640 Property, plant and equipment 24,118 27,893 34,611 44,584 52,424 59,739 69,103 73,721 74,519 74,255 Goodwill 5,164 7,512 8,419 12,008 9,583 9,183 8,835 8,393 7,834 7,106 Investments in associates 11,092 10,509 9,361 10,926 9,769 9,190 8,601 8,601 8,601 8,601 Defferred tax assets 1,474 1,376 1,984 2,804 2,950 2,585 2,907 2,907 2,907 2,907 Non-current financial assets 1,875 1,429 1,549 2,737 2,956 3,240 3,270 3,270 3,270 3,270 Non-current assets 43,723 48,719 55,924 73,059 77,682 83,937 92,716 96,892 97,131 96,139 Total assets 73,900 81,250 88, , , , , , , ,779 Equity and liabilities 73,900 81,250 88, , , , , , , ,779 Total equity to the parent 44,622 48,246 53,621 63,765 73,890 74,444 73,778 78,328 83,294 89,412 Minority interests 157 1,745 2,152 4,196 1,837 2,326 2,197 2,197 2,197 2,197 Total equity 44,779 49,991 55,773 67,961 75,727 76,770 75,975 80,525 85,491 91,609 Trade payables 8,523 9,665 11,961 14,628 14,674 14,762 15,894 16,542 16,927 17,484 Other payables and accruals 3,341 4,209 6,837 6,697 7,409 3,942 5,439 5,439 5,439 5,439 Short-term debt Total current liabilities 12,194 14,115 19,267 21,684 22,419 19,038 21,957 22,605 22,990 23,547 Long-term debt 10,280 9,287 5,833 10,609 9,354 13,992 22,038 27,038 27,038 27,038 Deferred tax liabilities 3,489 4,442 4,423 5,767 5,392 4,396 4,739 4,739 4,739 4,739 Pension liabilities Other non-current liabilities 2,907 3,008 2,908 4,886 5,199 5,475 5,006 5,006 5,006 5,006 Total non-current liabilities 16,928 17,144 13,562 21,987 20,718 24,697 32,622 37,622 37,622 37,622 Total liabilities 29,121 31,259 32,829 43,671 43,137 43,735 54,579 60,227 60,612 61,169 Total equity and liabilities 73,900 81,250 88, , , , , , , ,779 Key metrics Net interest bearing debt 2,603-1, ,823 11,871 12,805 25,334 25,340 20,712 13,855 Invested capital 56,562 59,026 66,431 89,170 95,054 97, , , , ,873 13

14 Valuation ratios (NOKm) e 2018e 2019e 2020e Enterprise value Share price (NOK) Number of shares (m) Market capitalisation 68,959 77,326 72,730 92, ,345 92, , , , ,468 Net interest bearing debt 2,603-1, ,823 11,871 12,805 25,334 25,340 20,712 13,855 Adjustments to NIBD Net interest bearing debt adj 2,603-1, ,823 11,871 12,805 25,334 25,340 20,712 13,855 EV 71,562 75,673 72, , , , , , , ,323 EV adj 71,562 75,673 72, , , , , , , ,323 Valuation EPS EPS adj DPS ordinary DPS P/E P/E adj P/B Average ROE 35.4% 22.5% 10.2% 12.0% 14.7% 9.7% 5.2% 9.3% 10.3% 11.8% Earnings yield adj 14.6% 12.9% 9.5% 9.2% 8.2% 5.7% 4.2% 6.7% 7.9% 9.7% Dividend yield 2.9% 4.7% 3.8% 3.9% 3.9% 2.9% 2.7% 3.3% 4.0% 4.8% EV/SALES EV/SALES adj EV/EBITDA EV/EBITDA adj EV/EBIT EV/EBIT adj EV/capital employed Key accounting ratios e 2018e 2019e 2020e Profitability (%) ROA ROCE Return on invested capital (%) Net PPE/revenues Working capital/revenues Revenues/invested capital (pre-gw) Cash flow ratios (%) CFO/revenues CFO/market capitalisation CFO/capex CFO/current liabilities Capex/revenues Capex/depreciation Total payout ratio Leverage and solvency (x) Interest cover EBIT/interest payable Cash coverage Net debt/ebitda Total debt/total capital (BV) LTD / (LTD + equity (MV))

15 15

16 Important Information Company: Yara Coverage by Analyst: Eivind Sars Veddeng Date: 09/1/2018 This report has been prepared by DNB Markets, a division of DNB Bank ASA. DNB Bank ASA is a part of the DNB Group. This report is based on information obtained from public sources that DNB Markets believes to be reliable but which DNB Markets has not independently verified, and DNB Markets makes no guarantee, representation or warranty as to its accuracy or completeness. This report does not, and does not attempt to, contain everything material which there is to be said about the Company. Any opinions expressed herein reflect DNB Markets judgement at the time the report was prepared and are subject to change without notice. The report is planned updated minimum every quarter. Any use of non-dnb logos in this report is solely for the purpose of assisting in identifying the relevant issuer. DNB is not affiliated with any such issuer. This Report is for clients only, and not for publication, and has been prepared for information purposes only by DNB Markets, a division of DNB Bank ASA. This research report is the property of DNB Markets. DNB Markets retains all intellectual property rights (including, but not limited to, copyright) relating to the research report. Sell-side investment firms are not allowed any commercial use (including, but not limited to, reproduction and redistribution) of the research report contents, either partially or in full, without DNB Markets explicit and prior written consent. However, buy-side investment firms may use the research when making investment decisions, and may also base investment advice given to clients on the research. Such use is dependent on the buy-side investment firm citing DNB Markets as the source. Recommendation structure and risk classification DNB Markets recommendations are based on absolute performance: Buy Hold Sell - indicates an expected return greater than 10% within 12 months - indicates an expected return between 0 and 10% within 12 months - indicates an expected negative return within 12 months The return-requirement bands above may be applied with some degree of flexibility depending on the liquidity and volatility characteristics of the individual share. High risk Medium risk Low risk - Volatility over 40 percent. - Volatility from 25 percent to 40 percent. - Volatility under 25 percent. Current 6 months volatility rates this security as LOW risk. Investing in any security is subject to substantial risk. Return on investment may vary greatly. Careful consideration for possible financial distress should be accounted for before investing in any security. Price targets are based on a combination of several valuation methods such as discounted cash flow, pricing based on earnings multiples, multiple on book value, net asset value and peer comparison. Substantial material sources for coverage of this company include historical financial figures and communication with the company, and relevant third party information. Recommendations and historical target prices below may not compile all recommendations by DNB Markets, for further information please contact DNB Markets. Price, Rating, and Price Target History Yara (YAR NO) as of S : H : H : B : Source: Factset Estimates (Prices) / DNB (ratings and target price) Conflict of interest DNB Markets has provided investment services and/or ancillary services to the company and received compensation for it during the past 12 months. DNB Markets has been lead or co-lead manager related to an Investment Banking assignment for the company and received compensation for it during the past 12 months. Readers should assume that DNB Markets may currently or may in the coming three months and beyond be providing or seeking to provide confidential investment banking services or other services to the company/companies Share positions in the company: Analyst* Employees** DNB*** Update Number of shares /01/2018 *The analyst or any close associates. **Share positions include people involved in the production of credit and equity research, including people that could reasonably be expected to have access to it before distribution. ***Share positions as part of DNB Group. Holdings as part of DNB Markets investment services activity are not included. Recommendation distribution and corporate clients for the last 12 months Buy Hold Sell No_rec Total Number % of total 49% 31% 15% 5% DNB Markets client 23% 11% 4% 4% 94 16

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