Yara International ASA · OSL:YAR
Yara International ASA — Q2 2005 Earnings Presentation
53 slides from Yara International ASA's earnings presentation, Jul 15, 2005
Slide 1: Yara International ASA Second quarter results
Yara International ASA Second quarter results 15 July 2005 IR – Date: 2005-07-15
Slide 2: Summary second quarter 2005
2 Summary second quarter 2005 z Strong financial results z Continued tight global fertilizer market z Improved European market position for Yara z Higher fertilizer prices more than compensated for increased European energy costs z Rossosh integration on track z Successful refinancing at BBB+ equiva
Slide 3: Net income after minority interest
3 Net income after minority interest NOK million 1,400 1,251 1,200 985 917 1,000 846 800 751 759 800 496 521 600 420 400 200 0 2003 2004 2005 Accumulated NOK mill 2,188 3,794 1,763 USD mill 311 564 279 IR – Date: 2005-07-15
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 1,047 1,007 972 1,000 798 784 808 800 724 574 600 467 340 400 200 0 2003 2004 2005 Accumulated NOK mill 2,178 3,288 2,054 USD mill 309 489 325 * After tax IR – Date: 2005-07-15
Slide 5: Earnings per share
5 Earnings per share* NOK 4.50 3.94 4.00 3.50 3.08 2.90 3.00 2.68 2.50 2.38 2.35 2.50 2.00 1.55 1.63 1.31 1.50 1.00 0.50 0.00 2003 2004 2005 Accumulated NOK 6.85 11.90 5.57 * Average number of shares for 2Q 2005: 316.2 million; YTD 316.3 million IR – Date: 2005-07-15
Slide 6: Earnings per share adjusted for foreign exchange gain / (loss)
6 Earnings per share adjusted for foreign exchange gain / (loss)* NOK 3.50 3.31 3.18 3.06 3.00 2.50 2.53 2.46 2.50 2.27 2.00 1.80 1.46 1.50 1.06 1.00 0.50 0.00 2003 2004 2005** Accumulated NOK 6.82 10.31 6.49 * After tax ** Average number of shares outstanding in 2Q 2005: 316.2 million; YTD 316.3 mi
Slide 7: Net interest-bearing debt / equity ratio
7 Net interest-bearing debt / equity ratio Per quarter 0.80 0.68 0.70 0.60 0.50 0.44 0.45 0.40 0.37 0.36 0.35 0.30 0.20 0.10 0.00 1Q 2004 2Q 2004 3Q 2004 4Q 2004 1Q 2005 2Q 2005 IR – Date: 2005-07-15
Slide 8: Overall fertilizer market development for quarter
8 Overall fertilizer market development for quarter z Global fertilizer demand showed continued strength z West European fertilizer volumes at the same level as second quarter 2004, while season as a whole down 5% z Chinese exports curtailed, primarily due to export tax z North American imports at a
Slide 9: Fertilizer price development during quarter
9 Fertilizer price development during quarter z Urea prices increased further in April and May; downward correction in June z Ammonia prices relatively stable and supply-driven through the quarter z Nitrate prices in Europe declined through the quarter, which is normal towards the end of the season
Slide 10: Downstream and Industrial – Key topics
10 Downstream and Industrial – Key topics z Stability in earnings z Value-added differentiation z Macro development IR – Date: 2005-07-15
Slide 11: Provide a stable platform
11 Downstream and Industrial – Stability Provide a stable platform EBITDA pro forma year to date first half numbers USD million Downstream + Industrial USD million Upstream 500 500 400 400 314 300 264 300 218 221 247 203 164 60 200 53 55 200 53 140 38 100 108 100 204 100 126 150 165 166 0 0 2001 200
Slide 12: China's main focus is on high value cash crops
12 Downstream and Industrial – Value-added China’s main focus is on high value cash crops 000 ha Million ha 0 500 1000 1500 2000 2500 25 Watermelons Vegetables Cabbages 20 Cucumbers Tomatoes 15 Asparagus 1991 Eggplant 2004 Onions 10 Spinach Fruit Garlic 5 Chillies&Pepper Lettuce Carrots 0 Source: FA
Slide 13: Yara's Air1 AdBlue concept is catching on
13 Downstream and Industrial – Value-added Yara’s Air1™ AdBlue concept is catching on z Agreements with truck manufacturers corresponding to 36% of first fill market for new trucks complying with EU regulations from October 2005 Factory filling of trucks Vehicle servicing First sales supplies
Slide 14: Yara's Downstream position is strong
14 Downstream and Industrial – Macro development Yara’s Downstream position is strong Region General market development in Development in Yara’s relative 2005 position Brazil Positive medium term, Positive medium term, negative short term negative short term z Bread basket for Asia z Well-positioned
Slide 15: Upstream – Key topics
15 Upstream – Key topics z China Low grain stocks as grain consumption consistently above production since 2000 More scarce domestic energy resources leading to import of energy, while energy intensive urea being exported Logistics chain stress due to strong economic development and growth in
Slide 16: China's production of grain has been consistently below consumption since 2000
16 Upstream – China China’s production of grain has been consistently below consumption since 2000 Chinese grain production vs. consumption Chinese grain stocks mill. t mill. t 400 350 380 Consumption 300 250 360 200 340 150 100 320 Production 50 300 0 1994 1996 1998 2000 2002 2004 1995 1997 1999 20
Slide 17: Chinese urea export lower than in 2004
17 Upstream – China Chinese urea export lower than in 2004 due to agri, energy or logistics policy or a combination 4,500 4,000 2004 3,500 3,000 2,500 kt product 2,000 2003 1,500 1,000 2005 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -500 IR – Date: 2005-07-15
Slide 18: Listed gas prices US and Europe
18 Upstream – Energy Listed gas prices US and Europe Yearly averages 1994 – 2004, quarterly averages for 2005 with forward prices 3Q – 4Q 2005* USD/MMBtu 9 8 7 US spot gas price 6 (Henry Hub) European spot gas price 5 (Zeebrugge Hub) 4 4.2 3.6 3 3.2 3.5 Yara’s global 2 energy cost (weighted average)
Slide 19: Urea price compared to production cost in US Gulf
19 Upstream – Energy Urea price compared to production cost in US Gulf – quarterly averages 350 300 Urea fob US Gulf (granular) 250 USD/tonne 200 Cash cost US Gulf* 150 100 50 0 02 02 02 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q *
Slide 20: Fuel oil prices important for Yara's 05 energy costs
20 Upstream – Energy Fuel oil prices important for Yara’s 2005 energy costs* NOK million Cost increase 2005 over 2004 1,200 ~1,140 ~1,000 1,000 4Q 500 3Q 800 400 2Q 1Q 600 300 300 400 240 200 200 100 100 0 Based on forward market at Updated 6 July 1Q05 presentation * A minor part of the indicated in
Slide 21: New urea capacity growth corresponds to historic average demand growth
21 Upstream – Supply-demand New urea capacity growth corresponds to historic average demand growth Global urea capacity Driving regions growth estimate* China: 61% 2004 2.3% (3.1%) Qatar: 17% China: 51% 2005 2.8% (3.4%) Oman: 21% China: 53% 2006 5.4% (4.4%) Iran: 20% Egypt: 31% 2007 3.1% (3.5%) Chin
Slide 22: Grain consumption in 2005 expected to outpace production
22 Upstream – Supply-demand Grain consumption in 2005 expected to outpace production Grain consumption again expected … leading to decline in to exceed production in 2005 … global grain inventories mill. t mill. t 2100 800 2050 700 Global grain inventory 2000 600 Consumption 1950 500 1900 400 1850 3
Slide 23: Recent strategic growth investments improve Yara's competitiveness
23 Recent strategic growth investments improve Yara’s competitiveness Investments Low-cost gas High growth market Increased ownership in SQM, Chile N/A Yes 30% equity stake in Rossosh, Russia Yes Yes 30% equity stake in Burrup, Australia Yes Yes Letter of intent for Qafco-5 Yes Yes IR – Date: 2005-0
Slide 24: Earnings before interest, tax, depreciation and amortization (EBITDA)
24 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK million 2,000 1,866 1,868 1,800 1,582 1,565 1,600 1,456 1,484 1,477 1,400 1,206 1,200 1,062 947 1,000 800 600 400 200 0 2003 2004 2005 Accumulated NOK mill 4,671 6,108 3,734 USD mill 664 909 590 IR – Date: 2005-07-15
Slide 25: Income statement
25 Income statement NOK million 2Q 2005 2Q 2004 Operating revenues 12,172 10,138 Operating income 1,117 912 Share of net income in non-consolidated investees 310 180 Interest income and other financial income 76 34 Interest expense and net foreign exchange gain / (loss) (379) (89) Income before tax
Slide 26: Net interest-bearing debt YTD 2005
26 Net interest-bearing debt YTD 2005 NOK million 8,000 7,584 7,000 6,000 5,000 244 4,384 4,199 2,403 423 4,000 759 259 3,000 908 486 481 2,000 1,000 0 Net Interest- Net Interest- Cash Dividends Net Investments: Other Yara Foreign Other Net Interest- Bearing Debt Bearing Debt Earnings* Received** Op
Slide 27: EBITDA and operating income
27 EBITDA and operating income Individual operating segments EBITDA (NOK million) 2Q 2005 2Q 2004 Downstream 628 573 Industrial 173 211 Upstream 988 738 Other and eliminations 80 (38) Yara total 1,868 1,484 Operating income (NOK million) 2Q 2005 2Q 2004 Downstream 404 362 Industrial 119 141 Upstream
Slide 28: Variance analysis Yara group
28 Variance analysis Yara group Second quarter Year to date NOK million USD million* NOK million USD million* EBITDA 2005 - actual 1,868 293 3,734 590 EBITDA 2004 - actual 1,484 217 3,066 446 Variance EBITDA in NOK 384 - 668 - Conversion (NOK vs. USD) 99 - 244 - Variance EBITDA 483 76 912 144 Volume
Slide 29: Downstream – second quarter
29 Downstream – second quarter z Strong financial results z Reduced margins in Europe and Brazil z Improved volumes in Europe due to late spring and captured market share z New Rossosh volumes increased Yara’s activity in China and compensated for reduced volumes in Brazil due to drought IR – Date:
Slide 30: Downstream – EBITDA
30 Downstream – EBITDA NOK million 700 665 628 595 573 600 566 566 526 477 500 400 370 301 300 200 100 0 2003 2004 2005 Accumulated NOK mill 1,833 2,142 1,292 USD mill 260 319 204 IR – Date: 2005-07-15
Slide 31: Downstream – Sales volume fertilizer
31 Downstream – Sales volume fertilizer Europe Outside Europe Thousand tonnes 5,305 5,098 5,029 5,114 4,956 4,934 4,996 5,000 2,175 4,807 4,726 4,742 2,871 2,498 2,195 2,564 2,664 2,559 2,775 2,171 2,094 4,000 3,000 3,130 2,762 2,648 2,616 2,555 2,539 2,370 2,332 2,000 2,032 2,158 1,000 0 2003 2004
Slide 32: Downstream – Variance analysis
32 Downstream – Variance analysis Second quarter NOK million USD million* USD/tonne** EBITDA 2005 - actual 628 98 19 EBITDA 2004 - actual 573 84 16 Variance EBITDA in NOK 55 Conversion (NOK vs. USD) 40 Variance EBITDA 95 15 3 Volume 63 10 2 Margin (65) (10) (2) Divestments 5 1 0 Other 91 14 3 Total
Slide 33: Industrial – second quarter
33 Industrial – second quarter z Strong financial results z Improved prices and margins for technical nitrates z Reduced average margins for nitrogen chemicals due to increased ammonia price z AdBlue network expanding through marketing agreement with Brenntag to supply European truck fleet complying
Slide 34: Industrial – EBITDA
34 Industrial – EBITDA NOK million 250 211 207 201 200 170 173 161 164 165 156 156 150 100 50 0 2003 2004 2005 Accumulated NOK mill 688 696 380 USD mill 98 104 60 IR – Date: 2005-07-15
Slide 35: Industrial – Variance analysis
35 Industrial – Variance analysis Second quarter USD NOK million million* EBITDA 2005 - actual 173 27 EBITDA 2004 - actual 211 31 Variance EBITDA in NOK (39) Conversion (NOK vs. USD) 14 Variance EBITDA (24) (4) Volume 9 1 Margin (24) (4) Other (9) (1) Total variance explained (24) (4) * Based on ave
Slide 36: Upstream – second quarter
36 Upstream – second quarter z Strong financial results z Improved fertilizer prices more than compensated for increased cost of energy and dry raw materials, and a weaker dollar z Negative effect of net long ammonia position as price increased through second quarter 2004 while it was flat during se
Slide 37: Upstream – EBITDA
37 Upstream – EBITDA NOK million 1,200 965 1,004 988 961 1,000 925 910 800 738 564 600 412 400 348 200 0 2003 2004 2005 Accumulated NOK mill 2,249 3,573 1,991 USD mill 320 531 314 IR – Date: 2005-07-15
Slide 38: Upstream – Production volume
38 Upstream – Production volume* Thousand tonnes Ammonia Finished fertilizer 3,500 3,253 3,134 3,180 3,087 3,100 2,990 3,011 2,976 1,915 2,903 3,000 1,815 1,834 1,866 1,965 1,771 2,656 1,760 1,786 1,763 2,500 1,509 2,000 1,500 1,272 1,266 1,268 1,339 1,219 1,251 1,190 1,215 1,000 1,147 1,140 500 0 2
Slide 39: Upstream – Variance analysis
39 Upstream – Variance analysis Second quarter NOK million USD million* USD/tonne** EBITDA 2005 - actual 988 155 48 EBITDA 2004 - actual 738 108 33 Variance EBITDA in NOK 250 Conversion (NOK vs. USD) 46 Variance EBITDA 296 47 14 Volume 34 5 2 Price/Margin 599 94 29 Effect of long position (62) (10)
Slide 40: Prospects third quarter 2005
40 Prospects third quarter 2005 z Fertilizer prices currently at a higher level than third quarter 2004 z Chinese export tax could positively support supply-demand balance z Drought in Brazil may impact negatively z Yara’s European energy costs expected to be approximately NOK 300 million higher tha
Slide 41: Prospects full year 2005
41 Prospects full year 2005 z Food and Agriculture Organization of the UN expects global grain production to decline in 2005-2006, potentially leading to lower grain inventories, supporting fertilizer demand z High forward price for US gas could support prices for ammonia and urea should a weakening
Slide 42: Additional information
4 YARA Additional information j Ai ¥ eee
Slide 43: Pro forma vs. actual financial figures and transition to IFRS
43 Pro forma vs. actual financial figures and transition to IFRS Pro forma vs. actual figures z All financial information up to the demerger (25 March 2004) and full year 2004 figures are pro forma z Figures after 25 March 2004 are actual z Pro forma figures have adjustments that illustrate the situ
Slide 44: Key value drivers – quarterly averages
44 Key value drivers – quarterly averages Ammonia fob Caribbean (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 350 300 250 292 300 261 273 241 201 250 185 230 210 211 200 178 250 198 159 196 200 150 200 143 150 150 150 100 100 100 50 50 50 0 0 0 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 2Q 0
Slide 45: Key value drivers – 10-year history
45 Key value drivers – 10-year history Ammonia fob Caribbien (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 200 187 181 180 167 163 175 165 251 180 160 146 250 160 139 197 185 203 140 124 119 140 117 110 111 200 120 103 160 120 101 96 148 137 94 100 86 150 100 84 117 110 80 9
Slide 46: 10-year fertilizer prices – monthly averages
46 10-year fertilizer prices – monthly averages Ammonia fob Caribbean USD/tonne 300 250 200 150 100 CAN cif Germany USD/tonne 50 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 150 100 Urea prilled fob Black Sea 50 USD/tonne 300 0 250 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20
Slide 47: 10-year grain/oilseed prices – yearly averages
47 10-year grain/oilseed prices – yearly averages Quarterly averages for 2005 Wheat (HRW US Gulf) Rice (Thailand) USD/tonne USD/tonne 220 350 200 300 180 160 250 140 200 120 100 150 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Q1 Q2 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Q1 Q2 Maize
Slide 48: Seasonality in urea import by region
48 Seasonality in urea import by region* Average monthly urea import per region for 2003 and 2004 Thousand tonnes 2,500 2,000 1,500 Europe Asia Latin America 1,000 North America Africa 500 0 g r b p ly ov ar ne ct ay n ec Ap Au Fe Se Ja Ju O M N M Ju D * Covering ~80% of global trade IR – Date: 2005
Slide 49: Fuel oil price has increased and is in line with crude oil
49 Upstream – Energy Fuel oil price has increased and is currently in line with historical regression with crude oil Historically good correlation between Higher fuel oil prices more in line with fuel oil and crude oil prices crude oil during 2005 June 2005 Apr 2005 250 y = 3.70x + 36.33 300 60 R2 =
Slide 50: Downstream – Net operating capital turnover
50 Downstream – Net operating capital turnover* External operating revenues / External net operating capital 6 5 4.7 4.6 4.6 4.6 4.6 4.5 4.5 4.2 4.3 4.3 4 3 2 1 0 2003 2004 2005 * 12-month rolling average IR – Date: 2005-07-15
Slide 51: Share of net income in non-consolidated investees
51 Share of net income in non-consolidated investees NOK million 2Q 2005 2Q 2004 YTD 2005 YTD 2004 Qafco 190 79 361 152 Tringen 59 36 88 88 Other 61 64 74 81 Total 310 180 524 322 IR – Date: 2005-07-15
Slide 52: Consolidated balance sheets
52 Consolidated balance sheets NOK million 30 June 2005 30 June 2004 Deferred tax assets 1,598 1,196 Property, plant and equipment 7,254 7,388 Other non-current assets 4,391 3,200 Inventories 5,513 4,987 Receivables 6,903 6,685 Other current assets 1,492 1,171 Cash and cash equivalents 1,130 1,419 T
Slide 53: Definition of EBITDA and CROGI
53 Definition of EBITDA and CROGI Operating income before financial items Total assets + Share of net income in non-consolidated investees - Cash and other liquid assets + Interest income - Deferred tax assets + Net gain/loss on securities - Other current liabilities + Dividends received from 0-20 c