Yara International ASA · OSL:YAR
Yara International ASA — Q4 2020 Earnings Presentation
43 slides from Yara International ASA's earnings presentation, Feb 9, 2021
Slide 1: Yara International ASA 2020 Fourth quarter results
Yara International ASA 2020 Fourth quarter results 9 February 2021
Slide 2: Cautionary note
Cautionary note This presentation contains forward-looking information and statements relating to the business, financial performance and results of Yara and/or industry and markets in which it operates. Forward-looking statements are statements that are not historical facts and may be identified by
Slide 3: Our ambition is zero injuries
Our ambition is zero injuries TRI1 (12-month rolling) 5 4 People 3 2 1.3 1 0 4Q16 4Q20 3 1 Total Recordable Injuries per 1 million working hours
Slide 4: 4Q highlights: 10th consecutive quarter of ROIC increase
4Q highlights: 10th consecutive quarter of ROIC increase ROIC2 12M rolling 8.0 % • Improved deliveries and production offset energy cost increase • NOK 20 per share annual dividend proposed • Total NOK 52 per share cash returns1 paid and proposed for 2020 • Taking steps to enable the hydrogen econom
Slide 5: USD 2.3 billion free cash flow rolling 4 quarters
USD 2.3 billion free cash flow1 rolling 4 quarters Free cash flow before financing activities1 Comments USD millions, rolling 4 quarters 2 491 • Strategy execution and 2 298 Operations Investments Free cash flow capital discipline driving improved earnings and cash flow 1 008 863 845 • USD 1.4 billi
Slide 6: Proposed dividend of 20 NOK per share
Proposed dividend of 20 NOK per share Dividend and buy back per share1 Comments 52 Ordinary dividend • The Yara Board will propose to the Additional dividend Proposed, Annual General Meeting a 2020 Buy-back and 20 to be paid dividend of NOK 20 per share redemption May 2021 • Ongoing share buybacks a
Slide 7: Yara is taking steps to enable the hydrogen economy
Yara is taking steps to enable the hydrogen economy • Energy distribution is the key challenge for the hydrogen economy • Ammonia is the best suited long-distance hydrogen carrier • Hydrogen production in existing ammonia plants can be made carbon-free, at significantly lower cost than greenfield pr
Slide 8: Ammonia is the best suited hydrogen energy carrier
Ammonia is the best suited hydrogen energy carrier Attractive storage & transport properties Multiple growth drivers Hydrogen Ammonia H2 NH3 Zero-carbon fuel for the maritime sector Carbon-free fertilizer and food Energy content Best suited long-distance hydrogen carrier Preferred substitute for coa
Slide 9: Existing ammonia plants can be retrofitted at lower cost than greenfield
Existing ammonia plants can be retrofitted, at significantly lower cost than greenfield projects Ammonia production plant Shipping and storage Steam Methane Ammonia Site Export facilities and captive Reforming production Infrastructure use of ammonia (incl. nitrate- (Haber-Bosch) and utilities based
Slide 10: Utilizing existing ammonia infrastructure is the only realistic way to EU hydrogen goals
Utilizing existing ammonia infrastructure is the only realistic way to EU hydrogen goals EU Power to Hydrogen projects 40 GW (cumulative planned) 9 EU targets: 6 GW by 2024 6 GW 40 GW by 2030 5 5 Planned Capacity (GW) 3 3 2 3 2 1 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Current EU Hydroge
Slide 11: Yara's ammonia position is unique across production, trade and shipping
Yara’s ammonia position is unique, with leading positions across production, trade and shipping Production • 8.5 mt capacity across 17 units • Proximity to major bunkering sites • Electrolysis can replace SMR step; rest of infrastructure can be utilized • Three green ammonia pilots, start-ups schedu
Slide 12: Yara is establishing a new Clean Ammonia unit
Yara is establishing a new Clean Ammonia unit Effective 9 February; external financial reporting from 1Q 2021 results Yara Clean Ammonia Green & blue project Existing end-to-end infrastructure and trade development H2 Hydrogen Green ammonia Marketing and Logistics and trade production production dis
Slide 13: Clean Ammonia unit reporting directly to CEO
Clean Ammonia unit reporting directly to CEO Yara International Svein Tore Holsether Chief Financial Officer Legal & HR Lars Røsæg Kristine Ryssdal Farming Solutions Communications & Procurement Terje Knutsen Pablo Barrera Lopez Regional units: Europe Africa & Asia Americas Global Plants & Clean Amm
Slide 14: World-scale project possible in Porsgrunn
World-scale project possible in Porsgrunn, with the right partners and regulation • Full electrification of ~500 kt ammonia unit (removing ~800 kt CO2) possible with limited infrastructure investments • Renewable power supply from Norwegian grid, leading to 100 % hydrogen asset utilization • Deep se
Slide 15: Disruptive innovation since 1905
Disruptive innovation since 1905 15
Slide 16: Our legacy is also our future
Our legacy is also our future 16
Slide 17: Financial performance
Financial performance EBITDA ex. Special items EPS ex. currency and special items ROIC (MUSD) (USD per share) (12-month rolling) -3% -0.05 -0.05 525 511 0.80 0.76 6.6 % 8.0 % 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 Prosperity Change in net operating capital1 Investments (net) Cash from operations (MUSD) (MUSD
Slide 18: Stable revenues as improved deliveries offset lower commodity prices
Stable revenues as improved deliveries offset lower commodity prices Compound NPK Total revenues1 Nitrate revenues2 revenues3 MUSD MUSD MUSD 2 291 2 303 341 331 708 645 952 149 117 330 1 103 330 1 350 192 214 1 188 379 315 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 Premium Commodity value 1) Total revenues for s
Slide 19: Strong premium product growth
Strong premium product growth Premium product deliveries Full year Mill. tonnes +8% • Growth in all regions: Africa & Asia 11%, 13.7 14.8 Americas 9% and Europe 5% 13.5 • Compound NPK deliveries increased ~530 kt, nitrates ~320 kt 2018 2019 2020 +16% Fourth quarter Mill. tonnes 3.7 3.3 3.2 • Growth
Slide 20: Stable earnings as improved deliveries offset energy cost increase
Stable earnings as improved deliveries offset energy cost increase and cost phasing Fixed costs: -26 EBITDA ex. special items (MUSD)1 Portfolio: -16 Other: -8 ROIC2 600 27 -31 6 34 -50 300 525 511 0 4Q19 Volume/Mix Price/margin Energy cost Currency Other 4Q20 5.8 % 6.2 % 1) EBITDA ex. special items.
Slide 21: Strong quarter in Africa and Asia, premium product growth in all regions
Strong quarter in Africa and Asia, premium product growth in all regions Europe Americas Africa and Asia Industrial Solutions Global Plants EBITDA ex. special EBITDA ex. special EBITDA ex. special EBITDA ex. special EBITDA ex. special items (MUSD)1 items (MUSD)1 items (MUSD)1 items (MUSD)1 items (MU
Slide 22: Positive improvement program trend
Positive improvement program trend Ammonia production Finished product production Ammonia energy consumption Million tonnes Million tonnes GJ/ton 8.9 23.9 34.1 33.7 33.2 33.5 32.7 7.9 7.8 7.7 8.1 20.9 21.1 21.3 21.9 2018 2019 2020 Quarter 2023 2018 2019 2020 Quarter 2023 2018 2019 2020 4Q20 2023 ann
Slide 23: Unchanged total capex for 2020/21, phasing into 2021
Unchanged total capex for 2020/21, phasing into 2021 as previously communicated Committed investments1 (BUSD) Comments 2.2 • 2020 capex at USD 0.8bn (previously indicated at USD 0.9-1.1bn), driving expected phasing into 2021 1.6 • Total commitments for 2020/21 unchanged at USD 2.2 billion 1.3 max. o
Slide 24: Solid cash earnings more than fund investments
Solid cash earnings more than fund investments; strong cash distribution in line with capital allocation policy 4Q development Comments MUSD 62 • Solid cash earnings more than 674 fund investments -385 268 • Strong deliveries in 4Q generated 49 increase in receivables 2 930 • Net debt/EBITDA3 ratio
Slide 25: Full year condensed profit and loss statement
Full year condensed profit and loss statement USD million, except stated Comments 2020 2019 Variance Revenue and other income 11,728 12,936 -1,208 Raw materials, energy costs and freight expenses -8,021 -9,334 1,313 • Lower revenues reflect lower market Payroll and related costs -1,136 -1,180 44 pri
Slide 26: Condensed balance sheet
Condensed balance sheet Comments USD million Assets 2020 2019 • Change in cash position mainly due to Total non-current assets 10,969 11,940 divestment proceeds, payment of dividends and Total current assets 5,637 4,785 share buybacks Total assets 16,605 16,725 • Non-current-liabilities increased du
Slide 27: Yara is committed to food system transformation
Yara is committed to food system transformation World Benchmarking Alliance Sustainalytics2 ESG risk rating update Planet • Yara recognized among 12 top • Improved risk rating from Sustainalytics (25 performers in the World Benchmarking – Medium risk), down from 31 in 2019 Alliance Food & Agricultur
Slide 28: Our employees are key to delivering results in a demanding environment
Our employees are key to delivering results in a demanding environment KEY INITIATIVES 2020 Income security • Introduced global paid sick leave and guaranteed three months’ pay in the event of temporary layoffs during Covid-19 for all Yara employees and full-time contractors Mental health • Emplo
Slide 29: Attractive Yara prospects
Attractive Yara prospects Attractive opportunities Focused strategy Strong shareholder returns • Resource and environment • Crop nutrition leader; #1 premium • Strict capital discipline with clear challenges require strong agri product and market presence capital allocation policy productivity impro
Slide 30: Additional information
Additional information 30
Slide 31: Europe: higher deliveries and revenues
Europe: higher deliveries and revenues Revenues (MUSD) EBITDA ex SI (MUSD) ROIC (12-month rolling) +13% Premium products +1% 690 612 Commodities 532 483 105 106 8% 7% 129 158 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 • 4Q deliveries 15% up driven by a • Volume increase offset by lower • L12M ROIC lower compared
Slide 32: Americas: revenues and earnings impacted by lower market prices
Americas: revenues and earnings impacted by lower market prices Revenues (MUSD) EBITDA ex SI (MUSD) ROIC (12-month rolling) -11% Premium products -20% 1 230 1 096 Commodities 514 526 143 6% 115 5% 716 570 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 • 4Q deliveries up 2%, driven by • Lower margins impacted EBITDA
Slide 33: Africa & Asia: Strong results driven by increased deliveries
Africa & Asia: Strong results driven by increased deliveries Revenues (MUSD) EBITDA ex SI (MUSD) ROIC (12-month rolling) +15% Premium products 177 % 517 Commodities 449 272 235 51 2% 214 245 18 0% 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 • Stronger deliveries and realized price • Strong improvement driven by v
Slide 34: Global Plants: Lower results reflect reduced margins and Qafco divestment
Global Plants: Lower results reflect reduced margins and Qafco divestment Volumes (thousand tonnes) EBITDA ex SI (MUSD) ROIC (12-month rolling) Qafco -21% +2% -16% Finished 634 634 products Ammonia 1652 1767 142 14% 120 11% 570 492 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 • Strong finished fertilizer productio
Slide 35: Industrial Solutions: stable earnings in challenging market
Industrial Solutions: stable earnings in challenging market Revenues (MUSD) EBITDA ex SI (MUSD) ROIC (12-month rolling) -12% +16% 519 84 17% 454 73 13% 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 • Continued overall volume recovery • Strong margin development • Improved production compared with from April Covid-1
Slide 36: Key product price developments
Key product price developments Urea price development1 (USD/t) Spot gas prices1 (USD/Mmbtu) Yara realized CAN2 and NPK price3 (USD/t) +4% +21% -5% +1% 260 252 445 249 249 4.5 421 3.7 -8% -7% 2.5 2.3 217 201 Urea granular Urea inland Europe US CAN 27 Compound NPK FOB Egypt China proxy 4Q19 4Q20 1) So
Slide 37: Short-term impact on premiums from increasing commodity nitrogen prices
Short-term impact on premiums from increasing commodity nitrogen prices Nitrogen upgrading margins1 NPK premium over blend2 USD/t (monthly publication prices) USD/t 500 450 Yara’s NPK price 148 CAN CFR 118 Weighted average global 269 premium above blend cost Urea Egypt 242 CFR proxy Nitrate premium,
Slide 38: Strong deliveries in Europe and Asia; premium product growth in all regions
Strong deliveries in Europe and Asia; premium product growth in all regions Fertilizer deliveries Mill. tonnes +15% 4Q19 -3% 4Q20 2.3 2.1 2.1 2.0 Commodity +18% +7% 0.9 +16% 0.8 0.8 0.8 +12% Premium* 0.5 0.4 0.4 0.3 Europe Brazil Asia North Latin Africa America America 1) Premium defined as Differen
Slide 39: Energy cost
Energy cost Quarterly averages for 2018-2020 with forward prices* for 1Q21 and 2Q21 9.4 8.4 8.2 7.8 8.2 7.1 6.6 6.3 6.4 6.1 6.0 6.7 5.8 5.5 6.1 5.1 5.7 4.8 4.7 4.3 4.0 4.3 4.3 4.1 4.0 3.8 3.9 4.5 4.2 3.3 3.2 3.1 3.1 2.9 2.9 2.8 2.8 2.8 2.5 2.7 2.6 2.3 2.3 2.5 1.9 1.9 1.7 1.7 3Q18 4Q18 1Q19 2Q19 3Q19
Slide 40: Yara stocks
Yara stocks Finished fertilizer Mill. tonnes 8 Other Compound NPK Nitrates Urea 0 Q4-16 Q4-17 Q4-18 Q4-19 Q4-20 40
Slide 41: 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 20/21 14/15 15/16 16/17 17/18 18/19 19/20 Source: Fertilizers Europe 41
Slide 42: Higher nitrogen supply growth forecast in 2021
Higher nitrogen supply growth forecast in 2021, however higher than normal risk of project delays Global urea capacity additions ex. China (mill. tonnes) India USA Russia Nigeria Iran Others Algeria Production 6.7 5.5 5.3 4.5 4.2 3.9 2.6% consumption growth 3.2 2.7 1.9 1.2 1.0 0.2 2014 2015 2016 201
Slide 43: 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 35-40 43