Yara International ASA · OSL:YAR
Yara International ASA — Q3 2019 Earnings Presentation
33 slides from Yara International ASA's earnings presentation, Oct 18, 2019
Slide 1: Yara International ASA 2019 third quarter results
Yara International ASA 2019 third quarter results 18 October 2019
Slide 2: Safety is our first priority
Safety is our first priority Ensuring a safe workplace for employees and partners Lower injury rate established Improving historical and leading indicators TRI1 (12-month rolling) • Lower level and industry-leading performance established in the last year 10 • TRI rate improvement compared with 2Q •
Slide 3: Improved third-quarter results
Improved third-quarter results Earnings improvement continuing Increased profitability L12M EBITDA ex. special items (MUSD) • EBITDA excluding special items and IFRS 16 2,500 increased by 49%1 2,000 • Lower energy cost and higher production 1,500 • Positive product mix effect with strong premium del
Slide 4: Positive product mix effect with strong premium deliveries, in line with strategy
Positive product mix effect with strong premium deliveries, in line with strategy Total own-produced deliveries (million tonnes) Comments +3% -4% 3Q18 • Positive mix effect on EBITDA, as 3Q19 deliveries were up for NPKs and 1.6 1.6 +2% 1.6 1.5 -22% other high-margin products 1.3 1.3 1.3 • Strong nit
Slide 5: Improved nitrogen margins
Improved nitrogen margins Lower European natural gas Flat 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) -55% -8% +1% 0% 294 444 450 7.7 278 277 272 +8% -23% 230 213 3.5 2.9 2.3 Euro
Slide 6: Improving earnings and profitability trend
Improving earnings and profitability trend 5-year high 3Q EBITDA ex. special items Improving profitability trend last 12 months USD millions ROIC % (12-month rolling) 6.1 630 5.4 559 4.1 402 3.7 3.8 359 347 3Q15 3Q16 3Q17 3Q18 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 ROIC Quarter annualized: 5.3 3.4 5.5 7.1 8.
Slide 7: Performance overview
Performance overview 3Q 2019 3Q 2018 EBITDA ex. special items 630 402 (USD millions) EPS ex. currency and special items 0.94 0.50 (USD per share) Cash from operations 285 89 (USD millions) Investments 255 303 (USD millions) ROIC 6.1% 3.7% (12-month rolling) 7
Slide 8: EBITDA increase mainly driven by lower energy cost, improved product mix and higher margins
EBITDA increase mainly driven by lower energy cost, improved product mix and higher margins EBITDA ex. special items USD millions 630 13 12 170 IFRS 16 +29 MUSD Other -17 MUSD 402 14 18 3Q18 Volume/Mix Price/Margin Energy costs Currency Other 3Q19 8
Slide 9: Higher earnings in all segments
Higher earnings in all segments EBITDA ex. special items (MUSD) 3Q18 3Q19 375 248 214 161 59 26 Production Sales & Marketing New Business • Improved nitrogen margins in Europe • Strong premium deliveries with • Underlying improvement in all units • Positive production regularity trend improved margi
Slide 10: Strong New Business operations and earnings improvement
Strong New Business operations and earnings improvement New Business EBITDA Comments • Underlying result improvement for all business 59 units • Strong quarter for Maritime • Volume increase mainly for AdBlue in Europe and North America 26 • Higher margins mainly within Mining Applications • IPO sco
Slide 11: Improvement Program status: production KPIs
Improvement Program status: production KPIs1 Ammonia production volumes, kt annualized Comments Qtr, annualized 8,900 • Improved reliability overall 12 month rolling L12M 7,901 • Largest effect on ammonia 2018 (up 79 kt compared with 7,850 2Q19), main contribution from Pilbara 3Q17 3Q18 3Q19 2023 •
Slide 12: Improvement program: non-production KPIs
Improvement program: non-production KPIs Ammonia energy efficiency Fixed costs Operating capital GJ/ton MUSD Days 33.7 33.9 33.9 32.7 2,340 2,342 2,340 109 109 2,217 102 90 2017 2018 L12M 2023 2017 2018 L12M 2023 2017 2018 L12M 2023 target target target • Improved reliability and fewer • Fixed costs
Slide 13: No change to committed investments
No change to committed investments Capex plan1 USD Billions Growth - acquisitions 2.2 Growth - expansions Cost&capacity improvements 0.7 Maintenance 1.6 0.0 1.3 0.5 1.2 0.6 0.2 1.0 0.6 0.2 0.2 0.2 0.2 0.1 0.8 0.8 0.8 0.7 0.6 2017 2018 2019 2020 2021 1 Committed investments as of end 3Q19 13
Slide 14: Net interest-bearing debt reduced
Net interest-bearing debt reduced 3Q development Comments USD millions • Strong cash earnings, more than 4,019 covering investments and 3,968 operating capital increase 255 480 238 • Increased operating capital 64 0 0 mainly reflects seasonal prepayments reduction in Brazil • Investments include 93
Slide 15: Delivering on revised distribution policy
Delivering on revised distribution policy Net Debt/EBITDA ex. special items1 Comments 2.6 2.5 • Yara plans to buy back 0.5% of outstanding shares by 2.3 2.3 the end of 2019, or approx. 0.8% including 2.2 2.0 proportional redemption of Norwegian state shares 1.9 • Targeted capital structure is a mid-
Slide 16: Sales & Marketing performance
Sales & Marketing performance Strong premium product Increased EBITDA with higher Stable revenues deliveries, positive mix effect margins in Brazil and Europe Volumes (Mt) Revenues (BUSD) EBITDA ex. SI (MUSD) -1% -5% +33% 8.9 3.0 3.0 8.4 214 161 5.3 1.7 1.6 4.8 +1% 3.6 3.6 1.3 1.4 3Q18 3Q19 3Q18 3Q1
Slide 17: Sales & Marketing deliveries by region
Sales & Marketing deliveries by region Total deliveries 3Q18 Mill. tonnes 3Q19 -8% 3.5 -7% 3.3 2.8 2.6 Commodity -9% +18% -19% 1.0 +36% 1.0 Premium* 0.6 0.7 0.5 0.5 0.4 0.3 OPP 2.5 2.3 1.3 1.1 0.7 0.7 0.3 0.4 0.4 0.3 0.1 0.2 Europe Brazil Asia North Latin Africa America America *Premium = NPK, Diffe
Slide 18: 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 13.3
Slide 19: 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 20: Delivering on our Strategy, our KPIs and our Ambition
Delivering on our Strategy, our KPIs and our Ambition Advance operational excellence Create scalable solutions Drive innovative growth Delivering improved operations and Improving margins and nitrogen use Building closeness to farmers through superior profits efficiency through premium product scali
Slide 21: Yara Food Chain initiatives address key global challenges
Yara Food Chain initiatives address key global challenges The environmental footprint of Yara’s food chain initiatives create connections agriculture is at the top of the from production to end consumers current political agenda • Yara is strengthening its Food Chain Collaboration activities to grow
Slide 22: Appendix
Appendix 10/21/2019 22
Slide 23: 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 24: 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 25: 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 Yara’s NPK price 135 95 225 298 Weighted average global CAN premium above blend cost Urea Egypt Nitrate premium, CIF inland German
Slide 26: Energy cost
Energy cost Yearly averages 2010-2017, quarterly averages for 2018-2019 with forward prices* for 3Q19 and 4Q19 10.7 11.0 11.4 9.4 9.4 9.2 10.5 9.1 7.6 8.2 8.1 7.7 7.8 8.2 8.1 8.4 8.2 8.0 8.0 7.1 6.6 6.4 7.7 7.4 6.9 6.1 6.1 6.3 5.7 6.3 6.6 5.5 5.7 5.0 5.9 6.1 6.0 4.5 5.7 5.5 5.2 4.5 4.8 4.0 4.7 4.9 4
Slide 27: 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 -52% tonnes
Slide 28: Yara stocks
Yara stocks Finished fertilizer Mill. tonnes 8 Other Compound NPK Nitrates Urea 0 Q3-15 Q3-16 Q3-17 Q3-18 Q3-19 28
Slide 29: 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 19/20 14/15 15/16 16/17 17/18 18/19 Source: Fertilizers Europe, Yara estimate for September 29
Slide 30: 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 Algeria Others Russia USA Series Iran Nigeria Production 6.7 4.7 4.2 2.8% consumption growth 3.4 3.3 3.4 3.1 2.3 1.7 1.1 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source:
Slide 31: Tighter global urea market, Chinese exports required
Tighter global urea market, Chinese exports required, but lower prices in China negatively affect global pricing Urea price development1 (USD/t) 350 Urea inland proxy China Urea granular fob Egypt 170 Jul-16 Sep-19 1 Source: BOABC, CFMW 31
Slide 32: Alternative performance measures
Alternative performance measures Alternative performance measures are defined, explained and reconciled to the Financial statements in the APM section of the Quarterly report on pages 31- 36 32
Slide 33: 10/21/2019
10/21/2019 33