Yara International ASA · OSL:YAR
Yara International ASA — Q2 2004 Earnings Presentation
48 slides from Yara International ASA's earnings presentation, Jul 16, 2004
Slide 1: Yara International ASA Second quarter results
Yara International ASA Second quarter results 16 July 2004
Slide 2: Summary second quarter 2004
2 Summary second quarter 2004 Strong second quarter results and cash generation Urea price increasing to historically high level towards end of quarter Yara’s European volumes increased and compensated for reduction in first quarter this year Good production level, and Qafco-4 on stream Provisions f
Slide 3: Net income after minority interest
3 Net income after minority interest NOK million 1,200 962 1,000 811 786 750 800 650 600 496 521 420 400 261 197 200 0 2002 2003 2004 Accumulated NOK mill 1,894 2,186 1,773 USD mill 237 311 258 IR - Date: 2004-07-16 - Page: 3
Slide 4: Net income after minority interest adjusted for foreign exchange gain / (loss)
4 Net income after minority interest adjusted for foreign exchange gain / (loss)* NOK million 1,200 1,000 821 796 770 800 662 571 600 453 470 342 400 208 200 134 0 2002 2003 2004 Accumulated NOK mill 1,457 2,179 1,591 USD mill 182 310 227 * Adjusted for tax IR - Date: 2004-07-16 - Page: 4
Slide 5: Earnings per share
5 Earnings per share NOK 3.50 3.01 3.00 2.54 2.46 2.50 2.35 2.03 2.00 1.55 1.63 1.50 1.31 1.00 0.82 0.62 0.50 0.00 2002 2003 2004 Accumulated NOK 5.93 6.84 5.55 IR - Date: 2004-07-16 - Page: 5
Slide 6: Earnings before interest, tax, depreciation and amortization (EBITDA)
6 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK million 1,600 1,456 1,480 1,416 1,367 1,400 1,206 1,200 1,145 1,062 1,000 947 800 692 613 600 400 200 0 2002 2003 2004 Accumulated NOK mill 3,817 4,671 2,896 USD mill 478 664 421 IR - Date: 2004-07-16 - Page: 6
Slide 7: Net interest-bearing debt / equity ratio
7 Net interest-bearing debt / equity ratio Per quarter 1.20 1.06 1.00 0.86 0.80 0.65 0.60 0.43 0.40 0.20 0.00 3Q 2003* 4Q 2003* 1Q 2004 2Q 2004 * Figures from Demerger Information Memorandum and Offering Memorandum IR - Date: 2004-07-16 - Page: 7
Slide 8: Fertilizer price development during quarter
8 Fertilizer price development during quarter Ammonia prices increased through the quarter; on average in line with production cost for US producers Fob urea prices increased strongly in June due to higher demand in Latin America and Asia, and lower freight rates Lower European nitrate prices toward
Slide 9: Key value drivers – quarterly averages
9 Key value drivers – quarterly averages Ammonia fob Caribbean (USD/t) Urea prilled fob Arabian Gulf (USD/t) CAN cif Germany (USD/t)* 300 200 200 256 168 175 241 164 164 159 250 150 146 151 194 196 150 136 150 133 200 185 150 100 100 100 50 50 50 0 0 0 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 2Q 03 3Q 03 4Q 03
Slide 10: Overall fertilizer market development
10 Overall fertilizer market development Improved economics of agricultural production increases global fertilizer demand and trade European market volume higher than same quarter last year, total volume for the season up approximately 1% on last year Increased European imports Increased Chinese exp
Slide 11: Listed gas prices US and Europe – yearly averages
11 Listed gas prices US and Europe – yearly averages USD/MMBtu 7 6 US gas price (Henry Hub) 5 4 3 European gas price 2 (Zeebrugge Hub) 1 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1H 04 Source: World Bank, Platts (average import price into EU from World Bank used up to 1999 ) IR - Date: 200
Slide 12: Ammonia price compared to production cost in US Gulf
12 Ammonia price compared to production cost in US Gulf – quarterly averages 300 Ammonia 250 fob Caribbean 200 USD/tonne 150 Cash cost US Gulf – transportation cost* 100 50 0 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q * Based on Henry Hub forward
Slide 13: Urea price compared to production cost in US Gulf
13 Urea price compared to production cost in US Gulf – quarterly averages 250 Urea fob US Gulf (granular) 200 150 USD/tonne Cash cost US Gulf* 100 50 0 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q * Based on Henry Hub forward price for gas per June
Slide 14: Pro forma vs. actual financial figures
14 Pro forma vs. actual financial figures All financial information up to the demerger (25 March 2004) and year to date (YTD) figures are pro forma Figures after 25 March 2004 are actual Pro forma figures have adjustments that illustrate the situation as if Yara was a stand-alone company prior to 25
Slide 15: Income statement
15 Income statement NOK million 2Q 2004 2Q 2003 Operating revenues 10,138 9,312 Operating income 901 617 Share of net income in non-consolidated investees 180 146 Interest income and other financial income 34 31 Other income 0 0 Interest expense and net foreign exchange gain / (loss) (74) (10) Incom
Slide 16: Net interest-bearing debt year to date 2004
16 Net interest-bearing debt year to date 2004 NOK million 8,000 7,584 2,054 7,000 6,000 361 348 128 332 567 5,000 4,516 4,000 3,000 Net Interest Earnings* Net Investments Dividends Tax Other*** Net Interest Bearing Operating Received** Receivable Bearing Debt Dec03 Capital from Hydro Debt Jun04 * N
Slide 17: EBITDA and operating income
17 EBITDA and operating income Individual operating segments EBITDA (NOK million) 2Q 2004 2Q 2003 Upstream 722 376 Downstream 573 589 Industrial 227 173 Other and eliminations (106) (75) Yara total 1,416 1,062 Operating income (NOK million) 2Q 2004 2Q 2003 Upstream 479 156 Downstream 375 410 Industr
Slide 18: Variance analysis Yara group
18 Variance analysis Yara group Second quarter Year to date NOK USD NOK USD million million* million million* EBITDA 2004 1,416 207 2,896 421 EBITDA 2003 1,062 152 2,269 323 Variance EBITDA in NOK 354 - 628 - Conversion (NOK vs. USD) 25 - 48 - Variance EBITDA 380 55 676 98 Volume 151 22 (1) 0 Price/
Slide 19: Upstream – Second quarter
19 Upstream – Second quarter Nearly doubled EBITDA compared with same quarter last year Increased fertilizer prices while stable energy cost Good production levels compared with same quarter last year, production records in several plants Qafco-4 completed and up-and-running from mid-June IR - Date:
Slide 20: Upstream – EBITDA
20 Upstream – EBITDA NOK million 1,200 994 1,000 939 800 722 593 600 499 418 441 376 400 228 200 122 0 2002 2003 2004 Accumulated NOK mill 1,267 2,403 1,661 USD mill 158 342 241 IR - Date: 2004-07-16 - Page: 20
Slide 21: Upstream – Production volume
21 Upstream – Production volume* Thousand tonnes Ammonia Finished fertilizer 3,500 3,081 3,100 2,941 2,990 3,011 2,903 3,000 2,872 2,818 2,788 1,810 1,834 1,728 1,771 2,655 1,760 1,709 1,763 1,661 1,632 2,500 1,508 2,000 1,500 1,212 1,219 1,271 1,251 1,266 1,000 1,163 1,157 1,156 1,147 1,140 500 0 2
Slide 22: Upstream – Variance analysis
22 Upstream – Variance analysis Second quarter Year to date NOK USD USD/tonne NOK USD USD/tonne million million* ** million million* ** EBITDA 2004 722 106 34 1,661 241 40 EBITDA 2003 376 54 17 817 116 20 Variance EBITDA in NOK 346 - - 844 - - Conversion (NOK vs. USD) 8 - - 17 - - Variance EBITDA 35
Slide 23: Downstream – Second quarter
23 Downstream – Second quarter Improved margins despite high ammonia price European fertilizer volume up due to good demand and good supply capability Scaled down sales of low margin products in Asia Provisions in West Africa due to political uncertainty and weak financial situation for the farming
Slide 24: Downstream – EBITDA
24 Downstream – EBITDA NOK million 800 691 700 620 611 589 574 573 600 500 399 384 400 324 314 300 200 100 0 2002 2003 2004 Accumulated NOK mill 2,016 1,916 1,147 USD mill 252 272 167 IR - Date: 2004-07-16 - Page: 24
Slide 25: Downstream – Sales volume fertilizer
25 Downstream – Sales volume fertilizer Europe Outside Europe Thousand tonnes 5,213 5,304 5,305 5,029 5,114 4,937 4,898 4,956 4,934 5,000 3,077 3,110 2,175 4,807 2,871 2,498 2,124 2,492 2,195 2,564 2,775 4,000 3,000 3,130 2,813 2,762 2,616 2,406 2,370 2,000 2,137 2,194 2,032 2,158 1,000 0 2002 2003
Slide 26: Downstream – Net operating capital turnover
26 Downstream – Net operating capital turnover* Operating revenues / net operating capital 6 5.0 5.0 4.9 5 4.4 4.6 4.6 4.3 4.3 3.9 4 3.7 3 2 1 0 2002 2003 2004 * 12-month rolling average IR - Date: 2004-07-16 - Page: 26
Slide 27: Downstream – Variance analysis
27 Downstream – Variance analysis Second quarter Year to date NOK USD NOK USD USD/tonne USD/tonne million million* million million* ** ** EBITDA 2004 573 84 17 1,147 167 17 EBITDA 2003 589 84 17 1,208 172 17 Variance EBITDA in NOK (16) - - (61) - - Conversion (NOK vs. USD) 12 - - 26 - - Variance EBI
Slide 28: Industrial – Second quarter
28 Industrial – Second quarter Strong results – EBITDA up by more than 30% compared with same quarter last year Volume growth for most products Improved margins for nitrogen chemicals Strengthened position in German CO2 market after opening of Dormagen plant Small gain on divestment of gas activity
Slide 29: Industrial – EBITDA
29 Industrial – EBITDA NOK million 250 238 227 220 214 204 200 173 164 160 162 150 125 100 50 0 2002 2003 2004 Accumulated NOK mill 797 701 389 USD mill 100 100 57 IR - Date: 2004-07-16 - Page: 29
Slide 30: Industrial – Variance analysis
30 Industrial – Variance analysis Second quarter Year to date NOK USD NOK USD million million* million million* EBITDA 2004 227 33 389 57 EBITDA 2003 173 25 377 54 Variance EBITDA in NOK 54 - 13 - Conversion (NOK vs. USD) 4 - 8 - Variance EBITDA 58 8 21 3 Volume 26 4 54 8 Margin 42 6 12 2 Divestment
Slide 31: Yara's guiding principles
Yara’s guiding principles Yara does not provide estimates for future market prices, volumes or financial results Yara gives sensitivities that can be used to calculate financial effects of changes in market prices and exchange rates Yara will refer to sources of relevant, publicly available informat
Slide 32: Short-term prospects
32 Short-term prospects US forward gas price at high level in third quarter supporting global nitrogen prices Lower nitrate margins at start of European season compared with last year Upstream margins at high level at the beginning of third quarter Yara’s gas cost to remain at high level, modest inc
Slide 33: Medium-term prospects
33 Medium-term prospects Strong grain fundamentals supporting good fertilizer demand Higher than average urea demand growth required to compensate for increased capacity coming on stream High forward price for US gas indicates continued high floor prices for ammonia and urea Quantity of Chinese urea
Slide 34: Additional information
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Slide 35: Earnings per share adjusted for foreign exchange gain / (loss)
35 Earnings per share adjusted for foreign exchange gain / (loss)* NOK 3.00 2.49 2.57 2.38 2.50 2.07 2.00 1.79 1.44 1.47 1.50 1.07 1.00 0.58 0.42 0.50 0.00 2002 2003 2004 Accumulated NOK 4.51 6.82 4.95 * Adjusted for tax IR - Date: 2004-07-16 - Page: 35
Slide 36: Key value drivers – 10-year history
36 Key value drivers – 10-year history Ammonia fob Caribbien (USD/t) Urea prilled fob Arabian Gulf (USD/t) CAN cif Germany (USD/t) 250 250 180 167 163 203 211 160 197 197 140 200 185 200 140 167 124 119 160 115 110 111 148 137 139 148 120 103 150 150 136 117 110 110 109 109 100 86 91 93 80 100 100 7
Slide 37: 10-year fertilizer prices – monthly averages
37 10-year fertilizer prices – monthly averages Ammonia fob Caribbean USD/tonne 300 250 200 150 100 CAN cif Germany USD/tonne 50 200 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 150 100 Urea prilled fob Arabian Gulf 50 USD/tonne 250 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200
Slide 38: 10-year grain/oilseed prices – yearly averages
38 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/tonne USD/tonne 220 350 200 300 180 160 250 140 200 120 100 150 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1H04 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1H04 Maize (US Gulf) USD/tonne Soybeans (
Slide 39: Share of net income in non-consolidated investees
39 Share of net income in non-consolidated investees NOK million 2Q 2004 2Q 2003 YTD 2004 YTD 2003 Qafco 79 66 152 117 Tringen 36 25 88 59 Other 64 55 81 61 Total 180 146 322 237 IR - Date: 2004-07-16 - Page: 39
Slide 40: Cash from operations and cash used in investing activities
40 Cash from operations and cash used in investing activities NOK million YTD 2004 YTD 2003 Operating activities: Net income 1,773 1,017 Depreciation and amortization 603 530 Change in net operating capital 128 (176) Other 859 (381) Net cash from operating activities 3,363 990 Investing activities:
Slide 41: Net financial income (expense)
41 Net financial income (expense) YTD YTD NOK million 2Q 2004 2Q 2003 2004 2003 Interest income on customer credits 24 27 50 54 Other interest income 10 3 13 6 Dividends and net gain (loss) on securities 1 1 1 3 Interest income and other financial income 34 31 64 63 Interest expense (47) (78) (125)
Slide 42: Depreciation and amortization
42 Depreciation and amortization Individual operating segments NOK million 2Q 2004 2Q 2003 YTD 2004 YTD 2003 Upstream 139 128 282 254 Downstream 94 86 195 169 Industrial 63 52 120 106 Other and eliminations 3 1 6 1 Yara total 300 267 603 530 IR - Date: 2004-07-16 - Page: 42
Slide 43: Operating income – EBIT – EBITDA
43 Operating income – EBIT – EBITDA Second quarter 2004 Depr. Operating Non-cons Interest Selected Other NOK million EBIT and EBITDA income investees income fin. Items income amort.* Upstream 479 103 - - - 583 139 722 Downstream 375 73 28 1 - 477 96 573 Industrial 161 3 - - - 164 63 227 Other and (1
Slide 44: Consolidated balance sheets
44 Consolidated balance sheets NOK million 30 June 2004 30 June 2003 Deferred tax assets 1,075 484 Property, plant and equipment 6,933 7,284 Other non-current assets 3,871 3,503 Inventories 5,259 4,643 Receivables 6,685 6,692 Other current assets 1,171 1,520 Cash and cash equivalents 1,419 1,020 Tot
Slide 45: Income statement
45 Income statement NOK million YTD 2004 YTD 2003 Operating revenues 21,033 18,425 Operating income 1,904 1,396 Share of net income in non-consolidated investees 322 237 Interest income and other financial income 64 63 Other income - 40 Interest expense and net foreign exchange gain / (loss) 98 (202
Slide 46: EBITDA and operating income
46 EBITDA and operating income Individual operating segments EBITDA (NOK million) YTD 2004 YTD 2003 Upstream 1,661 817 Downstream 1,147 1,208 Industrial 389 377 Other and eliminations (301) (133) Yara total 2,896 2,269 Operating income (NOK million) YTD 2004 YTD 2003 Upstream 1,150 386 Downstream 79
Slide 47: Yara – annual sensitivities for each value driver
Yara – annual sensitivities for each value driver EBITDA Operating income NOK million NOK million CAN + 10 USD/t 500 500 Urea + 10 USD/t 190* 140 Ammonia + 10 USD/t 25 0 Oil price + 1 USD/boe - 110 - 110 Currency + 0.1 NOK/USD 80 70 * Increased by NOK 20 million after opening of Qafco-4 Sensitivitie
Slide 48: Definition of non-GAAP measures
48 Definition of non-GAAP measures* Operating income before financial items and other income Total assets + Share of net income in non-consolidated investees + Interest income - Cash and other liquid assets + Net gain/loss on securities - Deferred tax assets + Dividends received from 0-20 companies