Yara International ASA · OSL:YAR
Yara International ASA — Q2 2019 Earnings Presentation
32 slides from Yara International ASA's earnings presentation, Jul 16, 2019
Slide 1: Yara International ASA 2019 second quarter results
Yara International ASA 2019 second quarter results 16 July 2019
Slide 2: Safety is our first priority
Safety is our first priority TRI Ensuring a safe workplace environment for 12M rolling employees and partners 5 Striving toward zero accidents with no fatalities and Total Reported Incidents (“TRI”) <1.2 by 2025 9,8 6,1 1.5 TRI 1,4 0 Norwegian Fertilizer Europe Yara 2018 .Jan-16 Jun-19 industry aver
Slide 3: Improved second-quarter results
Improved second-quarter results Earnings improvement continuing Improved but not satisfactory profitability L12M EBITDA ex. special items (MUSD) 2 500 • EBITDA excluding special items and IFRS 16 increased by 62%1 2 000 • Improved results with higher production and lower energy cost 1 500 • Premium
Slide 4: 9% increase in own-produced deliveries, with increase for all main product groups
9% increase in own-produced deliveries, with increase for all main product groups Total own-produced deliveries (million tonnes) Comments +7% +4% 2Q18 • Total 2Q deliveries up 2% to 9.61 +11% 1.6 2Q19 million tonnes 1.6 1.5 1.5 1.4 +29% • Higher own-produced deliveries 1.3 partly offset by lower del
Slide 5: Improved margins
Improved margins Lower European natural gas Higher urea prices outside China Higher nitrate and NPK prices prices Spot gas prices1 (USD/Mmbtu) Urea price development1 (USD/t) Yara realized CAN and NPK price2 (USD/t) -37% -6% +1% +6% 310 457 463 7,7 291 259 244 4,8 +4% -4% 212 221 2,8 2,7 Europe US U
Slide 6: Capex reduced in 2019, growth projects ramping up
Capex reduced in 2019, growth projects ramping up Capex plan1 Status USD Billions Major growth projects under execution: Growth - acquisitions • Sluiskil (Netherlands): completion 2H 2019 2.2 Growth - expansions • Salitre (Brazil): chemical production 1H 2020 Cost&capacity improvements • Rio Grande
Slide 7: Improving earnings and profitability trend
Improving earnings and profitability trend Quarterly EBITDA ex. special items L12M ROIC USD millions Percent 546 5.4 464 424 402 4.1 3.7 3.8 321 3.1 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 7
Slide 8: Performance overview
Performance overview 2Q 2018 2Q 2019 EBITDA ex. special items 321 546 (USD millions) EPS ex. currency and special items 0.16 0.77 (USD per share) Cash from operations 523 680 (USD millions) Investments 589 246 (USD millions) ROIC 3.1% 5.4% (12-month rolling) 8
Slide 9: EBITDA improvement mainly driven by higher Yara-produced deliveries and lower energy cost
EBITDA improvement mainly driven by higher Yara-produced deliveries and lower energy cost EBITDA ex. special items 546 USD millions 30 27 103 5 60 IFRS 16 +27 MUSD 321 Portfolio +8 MUSD Other -5 MUSD 2Q18 Volume Price/Margin Energy costs Currency Other 2Q19 9
Slide 10: Higher production margins
Higher production margins EBITDA ex. special items (MUSD) 2Q18 308 2Q19 196 174 125 31 37 Production Sales & Marketing New Business • Higher nitrogen margins in Europe • Underlying results in line with last year • Deliveries up 1% excluding Cubatão • Finished fertilizer production up 4%, • Significa
Slide 11: Net interest-bearing debt reduced
Net interest-bearing debt reduced 2Q development Comments USD millions • Strong cash earnings and 4,205 operating capital release - funding 4,019 investments, annual dividend and 368 86 net debt reduction 39 203 314 246 • Lower operating capital reflects seasonal prepayments in Brazil • Net debt/EBI
Slide 12: Improvement Program as presented at CMD: volume improvements
Improvement Program as presented at CMD: volume improvements1 Ammonia production volumes, kt annualized Comments Qtr, annualized 2023 target 8,900 • Positive production volume trend, with some 12 month rolling quarterly volatility L12M 7,791 • Reliability negatively affected by 1Q outages, 2018 but
Slide 13: Improvement Program as presented at CMD: non-volume KPIs
Improvement Program as presented at CMD: non-volume KPIs Ammonia energy efficiency Fixed costs Operating capital GJ/ton MUSD Days 12 month rolling 33,7 33,9 34,4 2 340 2 356 2 340 L12M: 32,7 2 217 2018: 104 102 2023 target 90 2017 2018 L12M 2023 2017 2018 L12M 2023 2Q17 2Q18 2Q19 2023 target target
Slide 14: Sales & Marketing performance
Sales & Marketing performance Increased EBITDA with higher Premium product deliveries Higher revenues deliveries in Brazil up 7% EBITDA ex. SI (MUSD) Volumes (Mt) Revenues (MUSD) +2% +6% +12% 8.4 8.6 2.9 196 2.7 174 4.7 1.5 5.0 1.5 3.4 3.6 1.2 1.4 2Q18 2Q19 2Q18 2Q19 2Q18 2Q19 Portfolio Commodity Pr
Slide 15: Fertilizer deliveries by region
Fertilizer deliveries by region Total fertilizer deliveries Mill. tonnes Portfolio 0% 2.5 2.5 +23% Commodity 2.1 0.1 1.7 -12% 0% 1.0 1.1 1.1 -22% 0.9 Premium +16% 0.7 0.5 0.3 0.4 OPP 2.1 2.2 0.4 0.7 0.6 0.6 0.6 0.6 0.4 0.3 0.1 0.2 Europe Brazil Asia North Latin Africa America America *Premium = NPK,
Slide 16: Our long term targets; increased premium product deliveries and higher margins
Our long term targets; increased premium product deliveries and higher margins Increase premium product Increase YaraVita deliveries to Increase EBITDA margin deliveries by > 3.5 mill tonnes > 100 million units Premium products in mill. tonnes YaraVita in mill. units EBITDA margin in USD/tonne +27%
Slide 17: The Crop Nutrition Company for the Future
The Crop Nutrition Company for the Future Delivering improved returns as a focused company Crop Nutrition Focus Industrial Focus Improvement Evaluating IPO of industrial business • Capturing the full value of our growth investments • First major integrated industrial nitrogen-player • Extending p
Slide 18: Attractive Yara prospects
Attractive Yara prospects Attractive industry Operating cash flow Focused long-term strategy fundamentals improvement • Growing population and dietary • Operating cash flow improving with • Crop nutrition focus; #1 market improvement drives demand cycle and Yara actions presence and #1 premium ferti
Slide 19: Appendix
Knowledge grows
Slide 20: Yara is protecting its investment-grade rating while providing cyclical upside in dividends
Yara is protecting its investment-grade rating while providing cyclical upside in dividends through a revised policy • Overall objective to maintain mid investment-grade rating Net Debt / EBITDA ex Special Items o BBB Standard & Poor’s / Baa2 Moody’s o Mid- to long-term target FFO1 / net debt of 0.4
Slide 21: Bridge between original Yara Improvement Program and extended YIP
Bridge between original Yara Improvement Program (YIP) and extended YIP1 Extended YIP @ original 2015 methodology Extended YIP @ 2018 methodology New target: 495 MUSD from 2018 baseline New target: 600 MUSD from 2018 baseline MUSD MUSD 600 500 495 40 40 Var cost* Var cost* 495 150 Fixed cost Fixed c
Slide 22: Reconciliation of growth volumes with extended YIP
Reconciliation of growth volumes with extended YIP1 Table shown at CMD: Overview of volumes from Yara Improvement Growth program target: Program (YIP) and Growth investments 2.9 mill tonnes included in extended YIP Kt Change 2018 2020 2023 2018 6,1 YIP volumes (kt) 750 1,100 2,090 1,340 Ammonia 80 4
Slide 23: Breakdown of finished products from Yara Improvement Program and growth investments
Breakdown of finished products from Yara Improvement Program and growth investments1 Total volume growth2 from improvement program Finished products breakdown per product group and growth investments Kilotonnes Kilotonnes YIP ammonia 8,200 NPK+CN Growth ammonia 6,000 720 Nitrates YIP finished produc
Slide 24: Higher nitrogen upgrading margin, global NPK premium above last year
Higher nitrogen upgrading margin, global NPK premium above last year Nitrogen upgrading margins1 NPK premium over blend2 USD/t (monthly publication prices) USD/t 500 450 139 Yara’s NPK price 125 213 260 Weighted average global CAN premium above blend cost Urea Egypt Nitrate premium, CIF inland Germa
Slide 25: Energy cost
Energy cost Yearly averages 2010-2017, quarterly averages for 2018-2019 with forward prices* for 3Q19 and 4Q19 11,4 11,0 10,7 10,5 9,4 9,1 9,2 9,4 8,1 8,2 7,6 7,7 7,1 8,2 8,2 8,0 8,0 8,1 8,4 7,7 7,4 6,6 6,1 5,5 6,9 6,4 6,6 5,5 5,0 5,7 6,3 4,8 5,4 5,9 6,1 6,0 4,2 5,7 5,5 4,5 4,9 4,8 4,3 4,4 4,4 4,1 3
Slide 26: Improving industry fundamentals
Improving industry fundamentals Declining grains stocks Nitrogen supply growth set to Lower expected European excluding China reduce significantly natural gas prices Grain stocks ex. China and grain prices Global urea capacity additions ex. China Spot gas prices1 (USD/Mmbtu) Mill. Index -38% tonnes
Slide 27: Yara stocks
Yara stocks Finished fertilizer Mill. tonnes 8 Other Compound NPK Nitrates Urea 0 Q2-15 Q2-16 Q2-17 Q2-18 Q2-19 27
Slide 28: European producers' nitrate stocks
European producers’ nitrate stocks Index June 2007 = 1 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 18/19 12/13 13/14 14/15 15/16 16/17 17/18 Source: Fertilizers Europe, Yara estimate for June 28
Slide 29: Nitrogen supply growth is forecast to reduce significantly
Nitrogen supply growth is forecast to reduce significantly Global urea capacity additions ex. China (mill. tonnes) India Iran USA Others Russia Algeria Nigeria 6.7 4.7 4.2 2.8% consumption growth 3.4 3.4 3.4 3.1 2.3 1.5 1.1 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: CRU May 2019 29
Slide 30: Tighter global urea market, Chinese exports required
Tighter global urea market, Chinese exports required Urea price development1 (USD/t) 350 Urea inland proxy China Urea granular fob Egypt 170 Jul-16 Jun-19 1 Source: BOABC, CFMW 30
Slide 31: Definitions: Extended improvement program
Definitions: Extended improvement program Production volumes (Finished products and ammonia) Production output measured on rolling 12 months, adjusted for major turnarounds and market optimization effects. Adjustments done to better reflect the underlying production performance. Numbers exclude Qafc
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