Yara International ASA Third quarter results 211 21 October 211
1 Summary third quarter Strong results driven by improved margins Strong demand outside Europe, satisfactory sales in Europe Sluiskil urea expansion successfully completed Strong Industrial margins despite raw material price increases
2 Earnings per share* NOK 2 EPS excluding currency and special items 15 14.93 1.91 12.86 12.42 1 5 9.63 3.6 3.88 121 1.21 4.93 5.27 6.68 5.42 1.2 7.73-5 -1-7.27 28 29 21 211 Annual NOK 28.27 13.8 3.24 3.16 * Average number of shares for 3Q 211: 287.2 million (3Q 21: 288.7 million).
Fertilizer market development in third quarter 3 Tight agricultural markets with continued strong demand for all nutrients Average Black Sea urea price 73% higher than third quarter 21 but lower Chinese urea exports, due to higher domestic prices and a stricter export policy West Europe nitrogen industry deliveries down 13%, imports down 21% Continued strength in NPK markets
4 Stocks-to-use decline despite strong incentives and record production Grain production and consumption Million tons 2,4 2,3 2,22 2,1 2, 1,9 1,8 2 4 6 8 1 12F Consumption Production Days of consumption in stocks Days 12 11 1 9 8 7 6 5 4 2 4 6 8 1 12F Source: USDA, October 211
5 Grain prices at high levels despite recent drop Wheat (HRW US Gulf) Corn (US Gulf) USD/bu 14 12 1 8 6 4 2 USD/bu 9 8 7 6 5 4 3 2 1 Source: World Bank Jun 6-Sep 11, IGC Oct 19
6 Strong demand in regions that are in season Record Indian import need Brazilian urea import Kilotons 8, Kilotons 3, 7, 6, 2,5 5, 4, 2, 3, 1,5 2, 1, 1, -1, 5-2, Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 211/12 28/9 29/1 21/11 211 28 29 21 Source: Indian Statistics Source: GTIS
7 Strong US deliveries, catch-up likely in Europe Million tons USA Million tons West Europe 4.5 2.5 4. 3.5 +5% 2. -13% 3. 2.5 1.5 2. 1.5 1. 1..5 5.5. 3Q7 3Q8 3Q9 3Q1 3Q11 Production Net imports. 3Q7 3Q8 3Q9 3Q1 3Q11 Domestic Imports Source: Yara estimate for fertilizer deliveries to selected West European countries. Total nitrogen deliveries based on TFI, US Trade Commission, Blue-Johnson and Yara estimates
8 Chinese domestic urea price remains strong RMB/t 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, Higher coal price lifts floor Demand driven price increase 8 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Urea price ex works Anthracite price Higher coal prices, increased exports and focus on emission control and energy efficiency has led to higher domestic urea prices Source: China Fertilizer Market Week
9 Higher urea swing price USD/t FOB China 8 7 Higher domestic price and stricter tariff system 6 5 4 3 Higher coal price lifts floor 2 1 Ukraine /China floor 8/9 Anthracite cost and 7% tax Current domestic price 11% tax
1 Significant growth in finished fertilizer capacity Urea expansion in Sluiskil Qafco expansion NPK expansion 211 211/12 213 Million tons Million tons Million tons 1.4 1.6 65 6.5 1.2 1..8.6.7.5 1.2 1.4 1.2 1 1..8.6.7.3.3 1.4 6. 5.5 5. 4.5 5.6.3 5.9 4.4.4 4 4..2.2 3.5. Before U7 New capacity. After U7 21 1-4 Qafco 5 Qafco 6 213 1-6 3. NPK capacity 211 Expansion NPK capacity 213
Earnings before interest, tax, depreciation and amortization (EBITDA) 11 NOK millions 7, 6, 6,215 6,89 EBITDA excluding special items 6,587 5,444 5, 4, 3, 2, 3,988 1,626 2,36 1,259 86 1,394 3,251 2,992 2,486 4,281 3,455 1, 28 29 211 21 Annual NOK millions 17,917 5,549 15,315 13,18
12 Strong return on equity Source: The Norwegian Society of Financial Analysts
13 Third-quarter EBITDA and operating income excluding special items NOK million EBITDA Operating income Yara total reported 5,444 4,398 Downstream Environmental provisions (16) (16) Import duty charge prior years (26) (26) Upstream Libya costs (57) Qafco restatement of prior periods (82) Rossosh sale 1,415 1,475 Contract derivatives (1) () Yara total excluding special items 4,211 2,965
14 Variance analysis Yara group NOK millions 3Q 211 EBITDA 211 5,444 EBITDA 21 2,486 Variance EBITDA 2,958 Volume & mix (384) Price/Margin 2,99 Oil & gas costs in Europe (68) Special items 1,283 Other (48) Conversion (NOK vs. USD)* (275) Total variance explained 2,958 * Based on average NOK per USD rate for the quarter 211: 5.55 (21: 6.16)
15 Net debt development NOK millions 9, 8,281 8, 7, 6, 962 5, 4, 3,186 96 629 378 85 438 41 4,961 3, 2,488 2, Net interestbearing debt Jun 11* Cash earnings** Dividends Net operating received from capital change equity accounted investees Rossosh divestment, incuding dividend Investments (net) Share buybacks and redemption of shares Yara dividend Foreign exchange gain/(loss) Other Net interestbearing debt Sep 11 * Included in net interest-bearing debt are external bank time deposits (4-12 months), this is part of other current assets in balance sheet ** Operating income plus depreciation and amortization, minus tax paid, net gain/loss on disposals, net interest expense and bank charges
16 EBITDA per segment NOK millions 5, 4, EBITDA excluding special items 4,71 3, 2, 1, 1,32 966 1,194 323 326 Downstream Industrial Upstream 3Q11 3Q1
17 Downstream segment Continued strong results Improved margins for all product groups, particularly nitrates Strong overseas demand for nitrate-based products Satisfactory sales in Europe
18 Nitrates competitively priced Nitrate premium in percentage terms Nitrate premium in absolute terms Premium proxy* 9% 8% 7% 6% 5% 4% 3% 2% 1% USD/t CAN 2 18 16 14 12 1 8 6 4 2 % Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun - Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Avg 2-7 1/11 season 11/12 season Avg 2-7 1/11 season 11/12 season * Urea fob Black Sea adjusted for freight (USD 35) and duty (6.5%) to calculate a CFR NWE proxy
19 Industrial segment Strong margins despite raw material price increases Strong volume growth in environmental solutions and water treatment TAN recovery due to favorable change in customer portfolio mix
2 Upstream segment Strong result Value creating Rossosh divestment Sluiskil urea expansion successfully completed
21 Share of net income in equity-accounted investees NOK millions 3Q 211 3Q 21 Qafco 198 196 Tringen 55 45 Burrup (24) 17 GrowHow UK Ltd. 141 73 Lifeco (57) 36 Other 17 45 Total 329 413
22 Estimated European energy cost NOK millions 1,4 Actual for quarter October 211 estimate* Cost ch hange on pr revious yea ar 1,2 1, 8 6 4 2 915 746 75 68 464 5 4Q1 1Q11 2Q11 3Q11 4Q11 1Q12 * Based on forward prices as of 7 October
23 Prospects fourth quarter 211 Urea prices sustained at third-quarter levels following India purchases Chinese 11% urea export tax planned from 1 November Low nitrate stocks in Europe Qafco-5 expansion start-up at end of quarter Yara s energy costs expected to be NOK 75 million higher last year
24 Healthy farm margins at today s grain prices Wheat (HRW US Gulf) Corn (US Gulf) USD/bu 14 12 1 8 6 4 2 USD/bu 9 8 7 6 5 4 3 2 1 Source: World Bank Jun 6-Sep 11, IGC Oct 11
25 Fourth-quarter Chinese exports likely lower Million tons 12. Global urea trade 1. China exported 3.3 3 million tons in 4Q1 8. As much as 1.5 million tons were exported in December when the export 6 6. tax was 11% 4. 2. An additional.6 million tons were allowed exported in 1Q. Ex China China Source: IFA, Iran from GTIS
26 Prospects next twelve months Global agricultural ral markets are strong, with FAO food price index up 15% from last year Healthy farm margins at today s grain prices, indicating catch-up in European deliveries likely during remainder of season Global nitrogen fertilizer industry outside China running at full capacity; half of projected capacity increase in Algeria but timing estimates vary Qafco-6 expansion start-up in fourth quarter 212
Additional information
28 Net income after non-controlling interests NOK millions 5, 4,354 4, 3, 2, 1, 3,716 3,175 2,88 2,889 1,927 1,424 1,522 1,564 1,122 887 349 2,225 3,566-1, -2, -3, -2,19 28 29 21 211 Annual NOK millions 8,228 3,782 8,729 8,68
29 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period).9.8 7.7.6.5 4.4.3.2 1.1. 34.34.84.75.63.57.56.49.4.38.28.32.27.2.22.12 28 29 21 211
3 Fertilizer volumes Kilotons 7, Outside Europe Europe 6, 5, 4, 3, 2, 6,284 6,17 2,575 3,15 3,71 3,2 4,742 2,18 2,562 3,496 1,54 1,956 5,21 5,216 5,129 4,882 4,791 2,658 2,765 2,146 2,29 2,355 2,983 2,592 2,551 2,451 2,436 5,474 5,481 2,91 4,914 2,543 4,97 4,759 4,834 2,715 2,514 2,412 2,617 2,937 2,347 2,564 2,4 2,256 2,216 1, 28 29 21 211 Accumulated, Kt Fin. fertilizer 2,54 2,99 2,276 15,285
31 Yara 3Q fertilizer sales by market and product 211: 4.8 million tons (21: 5.5 million tons) Kilotons 3, 2,5 2, 1,5 1, 5 2,564 2,216 1,266 1,27 744 599 55 527 Europe Latin America Asia North America Africa 3Q1 396 3Q11 284 Kilotons 3, 3Q1 3Q11 2, 1, 1,868 1,714 1,593 1,419 1,72 871 52 4 217 196 222 233 NPK Nitrate Urea Other products UAN CN
32 Yara production volume* Finished fertilizer Ammonia Kilotons 5, Kilotons 2,5 4,5 4, 2, 3,5 3, 1,5 2,5 2, 1, 1,5 1, 5 5 28 29 21 211 28 29 21 211 UAN CN NPK Nitrates Urea *I Including share of equity-accounted t dinvestees
33 Spot natural gas versus Yara average Yearly averages 25 29, quarterly averages for 21-12 with forward prices* for 4Q11 and 1Q12 USD per MMBtu 14 12 1 8 6 4 5.4 4.4 7.5 5.6 12. 9.6 7. 7. 6.6 5.6 4.8 5.4 6.7 5.2 7.9 5.9 8.5 64 6.4 1.1 7.6 11.1 1.9 8.3 8.3 11.5 8.7 12. 9. 2 25 26 27 28 29 1Q1 2Q1 3Q1 4Q1 1Q11 2Q11 3Q11 4Q11 1Q12 US gas price (Henry Hub) Yara Global Zeebrugge day ahead Yara Europe *Dotted lines denote forward prices as of 7 October Source: Yara, World Bank, Platts
34 Low European producer nitrate stocks Index, June 27=1 1.8 1.6 1.4 1.2 1 1..8.6.4.2. Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 11/12 7/8 8/9 9/1 1/11 Source: Fertilizers Europe, September estimate from Yara
35 Strong farm incentives FAO price index Index 28 26 24 22 2 18 16 14 12 1 8 1/2 1/21 1/22 1/23 1/24 1/25 1/26 1/27 1/28 1/29 1/21 1/211 Food Price Index Cereals Price Index Source: FAO
36 Non-commercials net long position in corn Thousand contracts 5 4 3 2 1-1 Jan-8 Apr-8 Jul-8 Oct-8 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Source: US Commodity Futures Trading Commission
37 Chinese exports needed to balance the global market Accumulated urea exports Urea price and export tax Kilotons USD per ton Export tax 8, 9 2 % 7, 21 8 18 % 6, 5, 4, 3, 2, 1, 211 27 28 29 7 6 5 4 3 2 1 Urea fob Black Sea Export tax 16 % 14 % 12 % 1 % 8 % 6 % 4 % 2 % % Source: BOABC
Projected nitrogen capacity additions in line with historical consumption growth 38 Year 21 China 52% Trinidad 7% Urea capacity growth relative Driving regions to nitrogen capacity World Excluding China World Excluding China Trinidad 15% Iran 12% 2.5% (2.5%) 1.9% (2.%) 211 China 53% Pakistan 31% 2.% (2.1%) 1.5% (1.5%) Pakistan 15% Iran 15% 212 China 55% Algeria 41% 4.2% (4.3%) 3.1% (3.1%) Algeria 18% Qatar 17% 213 China 31% UAE 21% 2.% (2.2%) 2.2% (2.2%) UAE 14% Iran 19% 214 India 15% Indonesia 13% India 17% Indonesia 16%.9% (.9%) 1.4% (1.6%) Gross annual addition 211-214214 ~2.1% Assumed annual closures ~.5% Net annual addition 211-214 ~1.6% Trend consumption growth from 21 2.5% 2.% Source: Fertecon update October 211, IFA on consumption figures
39 Key value drivers quarterly averages Zeebrugge day ahead(usd/mmbtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 1 9 8 7 6 5 4 3 2 1 9.5 9. 8.3 9.2 7. 3Q 1 4Q 1 1Q 11 2Q 11 3Q 11 6 5 4 3 2 1 28 359 354 48 484 45 4 35 3 25 2 15 1 5 244 318 377 384 376 3Q 1 4Q 1 1Q 11 2Q 11 3Q 11 3Q 1 4Q 1 1Q 11 2Q 11 3Q 11 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate 5 4.5 4 3.5 3 2.5 2 15 1.5 1.5 4.3 44 4.4 4.2 4.1 3.8 3Q 1 4Q 1 1Q 11 2Q 11 3Q 11 6 5 4 3 2 1 526 499 47 43 357 3Q 1 4Q 1 1Q 11 2Q 11 3Q11 1 9 8 7 6 5 4 3 2 1 6.2 5.9 5.7 5.4 5.5 3Q 1 4Q 1 1Q 11 2Q 11 3Q 11 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
4 1-year fertilizer prices monthly averages Ammonia fob Black Sea USD/t 1, 8 6 4 2 21 22 23 24 25 26 27 28 29 21 211 CAN cif Germany USD/t 5 4 3 2 1 21 22 23 24 25 26 27 28 29 21 211 Urea prilled fob Black Sea USD/t 8 6 4 2 21 22 23 24 25 26 27 28 29 21 211 Source: Average of international publications DAP fob US Gulf USD/t 1,2 1, 8 6 4 2 21 22 23 24 25 26 27 28 29 21 211 Average prices 21-21