Yara International ASA · OSL:YAR
Yara International ASA — Q1 2020 Earnings Presentation
35 slides from Yara International ASA's earnings presentation, Apr 23, 2020
Slide 1: Yara International ASA 2020 first quarter results
Yara International ASA 2020 first quarter results 23 April 2020
Slide 2: Safety is our first priority
Safety is our first priority Ensuring a safe workplace for employees and partners with zero as our ambition Total Recordable Injuries Covid-19 priorities TRI1 (12-month rolling) 5 • Safeguard our employees, contractors, partners, neighbors and society at large 4 • Be a responsible company and act in
Slide 3: Continued profit growth
Continued profit growth Earnings improvement continuing Increased 1Q profitability L12M EBITDA ex. special items (MUSD)1 • EBITDA1 up 9%, mainly reflecting higher deliveries − Northern hemisphere planting and application 2,500 progressing well • Sustaining operations through Covid-19 is a top priori
Slide 4: Lower prices and input costs
Lower prices and input costs Lower European natural gas Lower urea prices outside China Lower nitrate and NPK prices prices Urea price development1 (USD/t) Spot gas prices1 (USD/Mmbtu) Yara realized CAN2 and NPK price3 (USD/t) -15% -11% -13% -48% 287 466 277 7.0 416 240 244 -18% -37% 247 3.6 3.2 202
Slide 5: Increased deliveries and lower gas cost more than offset lower prices
Increased deliveries and lower gas cost more than offset lower prices ROIC2 EBITDA ex. special items (MUSD)1 140 36 36 504 464 230 130 Fixed costs: -10 Portfolio: -9 Other: -17 1Q19 Volume/Mix Price/Margin Energy costs Currency Other 1Q20 5.5% 6.6% 1) EBITDA ex. special items. For definition and rec
Slide 6: Decision to develop “Industrial Holding” within Yara
Decision to develop “Industrial Holding” within Yara Decision driven by value capture Separate governance and visibility amid Covid-19 increased autonomy • Sustaining operations is the top priority • 100% Yara owned, minor carve-out • IPO evaluation has identified new value dissynergies pockets and
Slide 7: Supporting farmers and food value chain is a top priority
Supporting farmers and food value chain is a top priority Supporting food value chain at all levels Strong demand growth for digital offerings Thousand Farmweather active users • Focus on continuity in supply of agricultural inputs • Accelerated digital 1,300 farming ramp-up as physical farmer inter
Slide 8: Nitrogen fertilizer demand shows strong resilience historically
Nitrogen fertilizer demand shows strong resilience historically, as annual application is needed in order to maintain yields Annual N-application is critical for yield Stable global nitrogen consumption pattern Grain yield1 from Nitrogen fertilizer Million tonnes nitrogen Ton per hectar 120 -43% 9.6
Slide 9: Performance overview
Performance overview EBITDA ex. Special items EPS ex. currency and special items ROIC (USD millions) (USD per share) (12-month rolling) 464 504 0.59 6.9% 0.39 4.1% 1Q19 1Q20 1Q19 1Q20 1Q19 1Q20 Change in net operating capital Investments (net) Cash from operations (USD millions) (USD millions) (USD
Slide 10: Stronger value creation in commercial segments, main margin impact in Production segment
Stronger value creation in commercial segments, main margin impact in Production segment 1Q19 EBITDA ex. special items1 (MUSD) 1Q20 263 222 216 170 44 42 Production Sales & Marketing New Business • Focus on operational continuity through • Strong fertilizer deliveries, with spring • Improved results
Slide 11: Improvement Program status: production volume KPIs
Improvement Program status: production volume KPIs1 Ammonia production volumes, kt annualized Comments Qtr, annualized 2023 target 12 month rolling 8,900 Operations running without significant disruption L12M 7,692 Q1 decline driven by portfolio effects 2018 2019 7,850 7,772 Several 4Q outages
Slide 12: Growth project status and Covid-19 impact
Growth project status and Covid-19 impact Impacted by local government ordered pause: Not currently impacted: Rio Grande (Brazil) Salitre (Brazil) Pilbara TAN (Australia) Timeline as presented in Startup end 2020 Startup 2H 2021 Startup 2Q 2020 4Q19: • Increased uncertainty regarding phasing and • P
Slide 13: Improvement program: non-volume KPIs
Improvement program: non-volume KPIs Ammonia energy efficiency Fixed costs1 Operating capital days2 34.1 33.9 33.7 32.7 2,314 2,291 2,300 2,314 115 113 104 90 2018 2019 L12M 2023 2018 2019 L12M 2023 2018 2019 L12M 2023 target target target • Fewer turnarounds compared to • Fixed costs in line with t
Slide 14: Committed investments unchanged, but optimization due to Covid-19 may postpone some spending
Committed investments unchanged, but optimization due to Covid-19 may postpone some spending Capex plan1 USD Billions 2.2 Growth - acquisitions Cost&capacity improvements Growth - expansions Maintenance 0.7 1.6 0.0 0.5 1.2 0.6 1.1 1.0 0.4 0.2 0.5 0.2 0.2 0.2 0.1 0.8 0.8 0.7 0.6 0.6 2017 2018 2019 20
Slide 15: Further reduction in forward gas prices
Further reduction in forward gas prices European gas prices1 Comments TTF, USD/MMBtu • European forward prices 29 Jan 2020 significantly lower than last 16 Apr 2020 quarter • Forward market sees prices staying lower for longer 5.2 4.7 4.5 4.3 4.1 • Yara energy cost guiding based 4.0 3.6 on forward m
Slide 16: Stable net interest-bearing debt
Stable net interest-bearing debt 1Q development Comments USD millions • Cash earnings fully funded 3,725 3,723 investments, operating capital 26 52 increase and buy-backs 384 199 • Operating capital increased as 107 receivable increase exceeded inventory decrease • Net debt/EBITDA3 ratio at 1.7, sta
Slide 17: Currency translation P&L effects 1Q
Currency translation P&L effects 1Q 1Q development Comments USD million Yara’s long-term earnings are positively correlated to the US dollar. External debt position Internal positions Net translation effect • Yara therefore keeps most of its external debt in USD Currency translation effects on U
Slide 18: Improving cash flow trend
Improving cash flow trend Free cash flow before financing activities1 Comments USD millions, rolling 4 quarters Operations Investments • Strategy execution driving Free cash flow improved free cash flow1 863 845 • Strong deliveries in 1Q generated increase in receivables 14 -141 -230 • Negative one-
Slide 19: Robust Yara track record; steady cash return also during financial crisis
Robust Yara track record; steady cash return also during financial crisis Net Debt/EBITDA ex. special items1 Dividends and buy-backs2 per share (NOK) 2.6 2.5 2.3 Share buy-backs 18 2.3 2.2 Dividends 2.0 3 1.9 1.7 1.7 Target range 15 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2004 2005 2006 2007 20
Slide 20: Strong commercial performance reflecting increased premium deliveries
Strong commercial performance reflecting increased premium deliveries Strong premium product Lower revenues mainly reflecting Increased EBITDA due to higher deliveries lower commodity prices deliveries of premium products Volumes (Mt)1 Revenues (BUSD)1 EBITDA ex. SI (MUSD) +10% -4% +27% 7.4 2.5 2.4
Slide 21: Strong delivery increase, especially of premium products in Europe
Strong delivery increase, especially of premium products in Europe Total deliveries 1Q19 Mill. tonnes 1Q20 +14% 3.4 3.0 Commodity -1% 1.6 1.6 +2% +17% +21% +5% 0.8 0.8 0.8 Premium* 0.7 0.4 0.5 0.3 0.3 OPP 2.6 3.0 0.8 0.8 0.6 0.7 0.5 0.5 0.3 0.3 0.1 0.2 Europe Brazil Asia North Latin Africa America A
Slide 22: 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 margin1 deliveries by > 3.5 mill tonnes > 100 million units Premium products in mill. tonnes YaraVita in mill. units EBITDA margin in USD/tonne 14.3
Slide 23: 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 24: Appendix
Appendix 4/22/2020 24
Slide 25: 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 Improving margins and nitrogen use Building closeness to farmers through Delivering improved operations and efficiency through premium product scaling up digital far
Slide 26: Yara has a strong financial position
Yara has a strong financial position Funding Funding sources as of sources 1Q 20, BUSD Debt Maturity profile* as of 1Q20, maturity profile1 BUSD USD billion USD billion Unutilized credit facilities Drawn amounts Unutilized credit Banks 1.6 1.1 facilities (30%) 1.6 (30%) 0.5 1.0 0.5 Bonds 2.1 0.4 0.4
Slide 27: Lower nitrogen upgrading margin, global NPK premium above last year
Lower 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 117 286 128 CAN CFR Weighted average global premium above blend cost Urea Egypt 248 CFR proxy Nitrate premium, CIF
Slide 28: Energy cost
Energy cost Quarterly averages for 2018-2020 with forward prices* for 2Q20 and 3Q20 9.4 8.4 7.7 8.1 7.8 8.2 8.2 7.7 7.4 6.1 6.6 6.3 5.5 5.9 6.1 6.0 4.8 4.3 4.3 3.3 3.3 4.0 4.3 3.0 3.9 4.1 4.2 3.8 4.0 3.3 2.9 3.1 2.9 3.1 2.4 2.9 2.9 2.2 2.5 2.3 2.3 1.9 2.0 1.7 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Slide 29: Stable grain stocks excluding China from last season, same for average grain prices
Stable grain stocks excluding China from last season, same for average grain prices Grain stocks ex. China (left axis) and grain prices (right axis) Mill. tonnes Index 360 260 350 240 340 220 330 200 320 180 310 160 300 140 290 120 280 100 10 11 12 13 14 15 16 17 18 19E 20F Sources: FAO, USDA 29
Slide 30: Yara stocks
Yara stocks Finished fertilizer Mill. tonnes 8 Other Compound NPK Nitrates Urea 0 Q1-16 Q1-17 Q1-18 Q1-19 Q1-20 30
Slide 31: 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 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 31
Slide 32: 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 Production 6.7 Iran Nigeria 4.9 4.2 4.4 3.5 3.4 3.4 2.8% consumption growth 2.4 1.8 1.2 0.4 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source
Slide 33: Lower Chinese prices negatively affecting global urea prices
Lower Chinese prices negatively affecting global urea prices, some Chinese urea needed in the global market also during Q1 Urea price development1 (USD/t) 350 170 Jul-16 Mar-20 1Source: BOABC, CFMW 33
Slide 34: 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 29-34 34
Slide 35: 4/22/2020
4/22/2020 35