Yara International ASA 217 third quarter results 19 October 217
Safe operations is our first priority 4.5 4. TRI (Total recordable injuries 12-month rolling) 1 3.5 3. 2.5 2. 1.5 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
Summary third quarter Strong production performance Improvement program ahead of schedule Results reflect lower commodity fertilizer margins 3
Earnings per share* EPS excluding currency and special items 14.56 8.26 7.3 7.74 6.4 7.62 6.18 8.17 6.74 1.51 2.65 1.59 9.58 7.41 3.97 1.58 1.22 9.12 11.23 6.29 3.43 3. 1.58 6.19 4.95 2.9 3.21 2.56 2.6-1.22 Annual 214 215 216 YTD 217 NOK 27.59 29.38 23.25 11.35 *Average number of shares for 3Q 217: 273.2 million (3Q 216: 273.2 million). 4
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, 214 215 216 217 214 215 216 217 Urea Nitrates NPK CN UAN SSP - based fertilizer 1) Including share of equity-accounted investees 5
Yara Improvement Program ahead of schedule Program progress Financial benefits Start: 216 217 218 219 22 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 3Q17 15 217 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
Yara Productivity System in practice Base production (excluding effect of planned maintenance stops) Total production at site, thousand tonnes Uusikaupunki 292 332 262 1 +14% Sluiskil 1,476 1,444 1,55 +2% Belle Plaine 49 439 535 +9% 3Q15 3Q16 3Q17 7 1 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
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 214 215 216 YTD 217 16,47 21,361 15,563 8,594 8
EBITDA: Higher energy cost and weaker US dollar more than offset the impact of higher deliveries NOK millions 3,4 439 36 357 214 379 144 2,386 EBITDA 3Q16 Volume Price/Margin Energy costs Currency translation Special items Other EBITDA 3Q17 9
Lower blend margins in Brazil impact Crop Nutrition segment EBITDA (NOK millions) EBITDA excluding special items 1,52 1,153 894 857 98 637 43 411 Crop Nutrition Industrial Production 3Q16 3Q17 1
Higher natural gas cost expected for the next two quarters USD/ MMBtu 8. 7. 6. 5. 4. 3. 2. 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, 8 6 187 41 169 4 1 543 161 2 382 212 31 13 (2) (251) (4) (74) (6) (8) 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 EU/US actual EU/US estimate* Pilbara actual Pilbara estimate 11
Higher European nitrate premiums USD/t 6 Nitrogen upgrading margins 1 (monthly publication prices) USD/t 9 European nitrate premium 2 (quarterly Yara realized) 5 8 7 4 3 2 1 3Q14 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 6 5 4 3 2 1 3Q14 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. 12
Solid commodity phosphate margins and compound NPK premiums USD/t 6 Phosphate upgrading margins USD/t 7 NPK premium over blend 1 5 6 4 3 Value above raw material 5 4 3 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 19-1-13, net of transport and handling cost. 13
Lower net interest-bearing debt as cash earnings and currency effects more than offset investments NOK millions 16,831 139 745 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 14
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 -.8.9 3.1 4.7 Nigeria.7 Russia.7 Algeria.8 USA 1.2 7.2 Nigeria.7 Russia.2 Iran 1.4 USA 3. Malaysia.9 Bangladesh.5 India.4 Bolivia.2 Indonesia -.1 3.8 Russia.4 Iran.6 USA 1.6 India.9 Bolivia.5 Azerbaijan.5 Turkmenistan.3 Indonesia.1 Kuwait -1.2 2.1 Iran.5 Turkmenistan.9 Indonesia.4 Azerbaijan.2 1.6 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 -.9 214 215 216 Source: CRU, September 217. Numbers include both additions and closures of capacity. CRU year-over-year production change 217 218 219 22 221 222 15
.but higher domestic price and lower exports from China are offsetting oversupply elsewhere USD/t 39 37 35 33 31 29 27 25 23 21 19 17 Increasing urea pricing Kilotons 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, 8 6 4 2 Chinese exports Urea fob Black Sea Urea granular fob Egypt Urea prilled fob China Urea inland proxy China Source: BOABC, CFMW 16
Import catch-up need in India Calendar year Season-to-date (Apr Aug) +2.7% +1.5% 32.5 31.5 29.4 29.6 29.7 3.2 Million tonnes 26.9 27.3 26.4 25.5 24.4 23.5 23.7 22.6 2.8 21.5 22. 22.3 23. 22.7 19.7 2.1 2. 2.7 Million tonnes 9.9 11.8-2% + 3% 9.7 12.1 25 216 216 217 Production Sales 17
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 1,1 7.9.6 1.3 Improvement program: + 35 MUSD cost improvement +15 MUSD volume improvement: ->.4 mill. tonnes ammonia ->.7 mill. tonnes fertilizer 14 4 216 25 15 1 217 6 3 3 218 85 45 4 219 5 6 22 7.3 216 1.1 217 4.3 1.3 3. 218 1.1.7.4 219 22 Committed expansions + M&A: + 1.2 mill. tonnes ammonia + 3.5 mill. tonnes fertilizer 1 Currency assumptions for 217 onwards: USD/NOK 7.9, EUR/NOK: 9.32, USD/BRL: 3.15 2.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) 1 1 216 3 3 217 7 6 1 218 12 9 3 219 16 1 6 22 18
Additional information
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 25 16 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 2
Growth and capex pipeline NOK bn 16.5 1.5 14.2.4 6.9 Capex plan 1 Committed growth 1.5 3.5 Maintenance Cost&capacity improvements 2) M&A 1.9 1.6 6.3 3. 7.5 1.3.4 19.2.3 1.6 Production growth 215-22 3 Finished products 4 Ammonia Mill.tons 23.8 2.3 1.2.7.7.3 7..4.2.2 1.1 1.2 9. 5.3 5.3 6.3 5.8 17.3 5.8 216 217 218 219 Committed growth (NOK bn): Porsgrunn 1.2.7 - Köping.4.5.1 Sluiskil.7.7, BASF JV 1.6.9.5 Rio Grande.1 1.2.7.4 Salitre.8 2. 1.6 Other projects 2.1.3.1 Total 6.9 6.3 3..4 215 5 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 215 5 T/R 6 Yara-operated 21
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) 14 4 216 25 15 1 217 6 3 3 218 85 45 4 219 5 6 22.4 Ammonia.7 Urea Earnings improvement 2 (NOK per share) 16 12 1 7 9 Growth: Impact 3 of +1 USD/t price change (NOK/share).7.7 1.4 1 1 3 3 6 1 3 6 Ammonia Urea DAP 4 216 217 218 219 22 1 Currencies for all amounts from 217: USD/NOK 7.9, EUR/NOK: 9.32, USD/BRL: 3.15 2 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) 22
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 213 214 215 216 217 +5% 3Q 1H 213 214 215 216 217 Industry (ANDA) Yara Brazil Brazil season-to-date premium product deliveries Kilotons 1,6 +21% 1,4 1,2 3Q 1, 8 6 1H 4 2 8 9 1 11 12 13 14 15 16 17 23
Fertilizer deliveries Kilotons 7, 6,5 6, 5,5 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 21 211 212 213 214 215 216 217 Europe Outside Europe 24
Yara 3Q fertilizer deliveries by market and product Kilotons 3,19 3,325 3Q16 3Q17 2,1 2,123 619 65 655 427 591 557 322 44 Europe Brazil Latin America North America Asia Africa 1,419 1,75 1,473 1,545 1,468 1,473 913 1,194 1,19 1,463 229 281 279 284 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) 25
Fertilizer deliveries by product and source Kilotons 1,468 1,473 1,419 1,473 1,75 1,545 1,469 1,747 1,194 913 229 281 3Q16 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 26
Strong premium product deliveries Value-added fertilizer deliveries 1 Value-added fertilizer deliveries 1 4, 3,5 3, 2,5 517 618 398 2, 1,5 CAGR 16% 35 3 268 25 236 32 1, 5 37 128 117 85 84 78 3Q13 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 27
YaraMila (compound NPK) and YaraBela (nitrate) deliveries Yara-produced YaraMila deliveries Kilotons 1,6 1,4 1,2 1, 8 6 4 2 3Q13 3Q14 3Q15 3Q16 3Q17 Yara-produced YaraBela deliveries Kilotons 16 14 12 1 8 6 4 2 3Q13 3Q14 3Q15 3Q16 3Q17 Outside Europe Europe Outside Europe Europe 28
AdBlue deliveries Kilotons 6 5 4 3 2 1 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 29
Industrial volume development 866 Kilotons 816 849 852 864 859 892 815 829 847 866 9 912 967 939 938 432 367 382 339 456 361 438 38 511 346 482 333 54 364 541 385 577 328 538 31 571 299 572 663 637 64 618 152 177 171 135 172 4Q13 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 3
Debt/equity ratio Net interest-bearing debt / equity ratio (end of period).22.22.17.13.15.16.13.14.17.18.11.7.8.6.6.6.5.8.6.6.2.1 -.4 212 213 214 215 216 217 31
Yara stocks Kilotons Finished fertilizer 8, Bunge Fertilizer included from 3Q 213 7, 6, 5, 4, 3, 2, 1, - Urea Nitrates Compound NPK Other 32
Normal start to the European fertilizer season, slow in USA like last season Million tons N 1.8 1.6 1.4 1.2 1..8.6.4.2. West Europe +1% 3Q13 3Q14 3Q15 3Q16 3Q17 USA Million tons N 4.5 4. +% 3.5 3. 2.5 2. 1.5 1..5. 3Q13 3Q14 3Q15 3Q16 3Q17 Domestic Imports Domestic Net imports Source: Yara estimate, TFI, US Customs. 33
Production Export Domestic Domestic Export Production Chinese urea production suffering from increased production costs, domestic demand lower this season Million tons 7. 6.5 6. Chinese urea production 15/16 14/15 Million tons 8 7 6 5 4 7.8 11.3 Domestic urea balance -14% 59.4 51.3 6. 57.2 5.5 3 5. 4.5 16/17 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2 1 Source: CFMW Jul-May 15/16 Jul-May 16/17 34
Increased coal prices drove nitrogen prices higher Coal price in China (fob Qinhuangdao 55, RMB/mt) China anthracite and urea prices (RMB/mt) 8 7 6 5 4 3 2 1 217 216 215 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: IHS, CFMW 35
European producers nitrate stocks Index June 27 = 1 1.4 1.2 1..8.6.4.2. 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 36
Energy cost Yearly averages 29 215, quarterly averages for 216-18 with forward prices* for 4Q17 and 1Q18. 1.7 11. 11.4 6.6 4.7 4.8 4. 7.6 6.6 5.7 4.4 1.5 9.2 9.4 8.2 8. 8. 4. 3.7 2.8 9.1 8.1 6.9 4.4 7.1 6.4 5.5 2.6 6.9 6.5 6.5 5.7 6.3 5.6 6.2 5. 4.6 4.9 5.3 5.4 5.8 5. 5.5 5.3 5.4 4.2 4.7 5.1 4.4 4.2 4.6 4.1 3.8 4. 4.3 2.8 3. 3. 3. 2.9 2.9 3.2 2. 2.1 29 21 211 212 213 214 215 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge 29-212) Yara Europe *Dotted lines denote forward prices as of 1 October 217 Source: Yara, World Bank, Argus/ICIS Heren 37
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, 1,95 8 9 1 11 12 13 14 15 16 17E 18F Days of consumption in stocks Days 1 95 9 85 8 75 7 65 6 55 8 9 1 11 12 13 14 15 16 17E 18F Consumption Production Source: USDA October 217 38
Non-commercials net long position in corn Thousand contracts 5 4 3 2 1-1 -2 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: US Commodity Futures Trading Commission 39
Relatively weak grain economics Index 3 FAO price index 25 2 15 1 5 1/26 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. 4
Key value drivers quarterly averages TTF day ahead (USD/MMBtu) 5.8 5.4 4.2 5. 5.5 183 193 Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (dotted line, USD/t) 233 26 265 242 19 21 234 27 CAN cif Germany (USD/t) 231 166 184 198 25 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 US gas price Henry Hub (USD/MMBtu) 2.9 3. 3. 3. 2.9 Ammonia fob Black Sea (USD/t) 31 21 19 282 198 NOK/USD exchange rate 8.4 8.4 8.3 8.5 8. 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 3Q16 4Q16 1Q17 2Q17 3Q17 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank 41
1-year fertilizer prices monthly averages USD/t Ammonia fob Black Sea 1, 8 6 4 2 27 28 29 21 211 212 213 214 215 216 217 USD/t CAN cif Germany 5 4 3 2 1 27 28 29 21 211 212 213 214 215 216 217 USD/t Urea prilled fob Black Sea/Urea granular fob Egypt 8 6 4 2 27 28 29 21 211 212 213 214 215 216 217 Source: Fertilizer Market Publications USD/t DAP fob US Gulf/MOP granular fob Vancouver 1,2 1, 8 6 4 2 27 28 29 21 211 212 213 214 215 216 217 Average prices 27-216 42