Yara International ASA · OSL:YAR
Yara International ASA — Q4 2007 Earnings Presentation
57 slides from Yara International ASA's earnings presentation, Feb 14, 2008
Slide 1: Yara International ASA Fourth quarter 2007 results
Yara International ASA Fourth quarter 2007 results 14 February 2008
Slide 2: Summary fourth quarter 2007
1 Summary fourth quarter 2007 Strong financial results, deliveries up 10% ex Kemira GrowHow Significant margin improvement – longer time lag in pricing Strong volume and margin growth in industrial applications Kemira GrowHow integration on track Phosphate market development merits rock expansion Pr
Slide 3: Yara's 5-year average return significantly above cost of capital
2 Yara’s 5-year average return* significantly above cost of capital Cash Return On Gross Investment** 18% 16.1% 16% 14.4% 14.1% 14.1% Average: 14% 13.9% 12% 10.6% 10% 8% 6% 4% 2% 0% 2003 2004 2005 2006 2007 * Target: Minimum 10% CROGI as an average over the business cycle. ** CROGI defined as gross
Slide 4: Net income after minority interest
3 Net income after minority interest NOK millions 2,500 2,044 2,000 1,500 1,403 1,422 1,487 1,041 1,085 1,000 917 846 846 853 891 588 500 0 2005 2006 2007 Accumulated NOK mill 3,198 4,188 6,037 USD mill 500 657 1,045 IR - Date: 2008-02-14
Slide 5: Earnings per share
4 Earnings per share* NOK 8.00 7.01 7.00 6.00 5.10 4.68 4.85 5.00 4.00 3.67 3.42 2.90 3.01 3.00 2.68 2.70 2.77 1.90 2.00 1.00 0.00 2005 2006 2007 Accumulated NOK 10.20 13.86 20.60 * Average number of shares for 4Q 2007: 291.6 million (4Q 2006: 296.3 million) IR - Date: 2008-02-14
Slide 6: Earnings per share adjusted for foreign exchange gain / loss
5 Earnings per share adjusted for foreign exchange gain / loss* NOK 7.00 6.33 6.00 5.00 4.75 4.51 3.94 4.00 3.52 3.31 3.18 2.98 3.00 2.65 2.57 2.61 2.18 2.00 1.00 0.00 2005 2006 2007 ** Accumulated NOK 11.36 12.90 18.29 * After tax ** Average number of shares for 4Q 2007: 291.6 million (4Q 2006: 296
Slide 7: Overall fertilizer market development during quarter
6 Overall fertilizer market development during quarter Grain prices increase further Strong volume development Europe and North America Continued increase in Indian urea imports Very strong Chinese urea export needed to balance the market Phosphate availability not even close to matching increase in
Slide 8: Fertilizer price development during quarter
7 Fertilizer price development during quarter Strong urea price increase driven by increased import demand Increasing ammonia prices towards the end of the quarter, as production curtailments tightened the market considerably Nitrate prices in Western Europe increasing with higher urea prices and a
Slide 9: Grain stocks to drop further through June 2008
8 Grain stocks to drop further through June 2008 Million tons 2,200 35% 2,150 2001-2008: 1.7% growth/year 115 days inventory 30% 2,100 2,050 25% 2,000 20% 1,950 Consumption 15% 1,900 1,850 10% Production 53 days inventory 1,800 5% 1,750 1995-2001: 0.8% growth/year 1,700 0% 1995 1997 1999 2001 2003 2
Slide 10: Indian urea imports continue to grow
9 Indian urea imports continue to grow Kt 5,000 2007/08 Sales - Production 2006/07 4,000 3,000 2,000 2005/06 1,000 0 2004/05 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar -1,000 -2,000 Kharif (July planting) – imports Apr-Sep -3,000 Rabi (November planting) – imports Oct-Jan Source: Indian Statist
Slide 11: Higher urea prices attract Chinese exports
10 Higher urea prices attract Chinese exports Net urea exports Kt 6,000 2007 5,000 4,000 2004 3,000 2,000 2005 1,000 2006 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: BOABC IR - Date: 2008-02-14
Slide 12: Chinese export necessary to cover 12% increase in urea import demand
11 Chinese export necessary to cover 12% increase in urea import demand 1-3Q 2007 compared to 1-3Q 2006 4.0 1.0 1.1 1.1 0.6 Demand Gas destruction curtailment /delay /domestic 0.5 3.0 Africa & demand Million tons urea Asia 1.6 0.5 2.0 1.9 1.0 0.9 0.0 Latin India US Rest of Rest of Egypt Saudi Indone
Slide 13: Agricultural commodity prices strong…
12 Agricultural commodity prices strong… Corn Wheat Soybeans Rice Source: Chicago Board of Trade, 12 February 2008; November/December 2008 contracts IR - Date: 2008-02-14
Slide 14: …and strength extends beyond current harvest
13 …and strength extends beyond current harvest Forward prices USD/bu USD/bu 6.0 18 Rice (150 kg N/ha) 5.5 Corn (150 kg N/ha) 16 5.0 14 Soybeans (30 kg N/ha) 4.5 12 4.0 10 Wheat (75 kg N/ha) 3.5 8 3.0 6 May-08 Mar-08 May-08 Jul-08 Mar-08 Nov-08 Nov-09 Nov-10 Sep-08 Dec-08 Dec-09 Dec-10 Jul-08 Sep-08
Slide 15: Estimated European energy cost
14 Estimated European energy cost NOK millions Actual for quarter January 2008 estimate 1,200 1,200 1,000 1,000 Cost change on previous year 800 600 400 266 200 0 (23) (200) (104) (258) (400) 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 IR - Date: 2008-02-14
Slide 16: Further delays to new urea capacity
15 Further delays to new urea capacity Global urea capacity Year Driving regions growth estimate* World Excluding China World Ex. China 2007 4.3% (4.4%) 2.5% (2.7%) China 63% Egypt 50% Egypt 18% Iran 25% 2008 4.4% (4.6%) 3.8% (4.2%) China 45% Iran 45% Iran 25% Oman 27% 2009 4.7% (4.3%) 2.5% (1.9%) C
Slide 17: Strong increase in value of phosphate production
16 Strong increase in value of phosphate production* Value of phos.acid production Value of DAP production USD/ton USD/ton 1600 800 DAP price 1400 Phos.acid 700 price 1200 600 Value above raw materials 1000 500 800 400 600 300 400 200 Ammonia Value above raw materials Sulphur 200 100 Phos.acid Phos.
Slide 18: Siilinjärvi phosphate rock expansion
17 Siilinjärvi phosphate rock expansion Siilinjärvi annual capacity today 850 kt rock p.a. Phase 1 capacity increase 150 kt rock p.a. (to 1,000 kt) Modification of existing grinding and flotation Operational second half 2009 Phase 2 capacity increase 300 kt rock p.a. (to 1,300 kt) New crushers, grin
Slide 19: Yara signs HoA with Deepak Fertilisers
18 Yara signs HoA with Deepak Fertilisers HoA signed for JV: Yara 49%, Deepak Fertilisers 51% Deepak: Listed on Bombay Stock Exchange Only major domestic TAN producer with 160 kt capacity Indian TAN consumption is 400 kt, growing at 5-6% p.a. Today mostly supplied by fertilizer grade AN imports The
Slide 20: Earnings before interest, tax, depreciation and amortization (EBITDA)
19 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 3,000 2,531 2,500 2,222 1,947 1,901 2,000 1,866 1,868 1,787 1,682 1,505 1,492 1,500 1,379 1,351 1,000 500 0 2005 2006 2007 Accumulated NOK mill 6,618 6,472 8,441 USD mill 1,033 1,014 1,450 IR - Date: 2008-02-14
Slide 21: EBITDA and operating income by segment
20 EBITDA and operating income by segment EBITDA (NOK millions) 4Q 2007 4Q 2006 Downstream 847 511 Industrial 1,007 153 Upstream 728 673 Other and eliminations (51) 14 Yara total 2,531 1,351 Operating income (NOK millions) 4Q 2007 4Q 2006 Downstream 536 252 Industrial 952 95 Upstream 88 164 Other an
Slide 22: Kemira GrowHow consolidated in 4Q results
21 Kemira GrowHow consolidated in 4Q results Strong underlying EBITDA development Kemira GrowHow result impacted by non-recurring effects: Restructuring NOK (83) million Inventory fair value adjustment NOK (61) million Recurring purchase price allocation effect: NOK 21 million depreciation & amortiz
Slide 23: Variance analysis Yara group
22 Variance analysis Yara group Fourth quarter NOK millions USD millions* EBITDA 2007 2,531 464 EBITDA 2006 1,351 212 Variance EBITDA in NOK 1,180 Conversion (NOK vs. USD) 195 Variance EBITDA 1,375 252 Volume & mix 230 42 Price/Margin 965 177 Energy arbitrage (13) (2) Energy cost in Europe (267) (49
Slide 24: Special items
23 Special items EBITDA effect (NOK millions)* 4Q 2007 4Q 2006 SQM gain 62 UAN plant closure (17) (73) Terni plant closure** (79) Compensation Nitric Acid 22 Downstream (74) (11) Sale gas activity Yara Praxair 795 Compensation Nitric Acid 22 Contract derivatives (5) (32) Industrial 812 (32) Electric
Slide 25: Special items cont.
24 Special items cont. EBITDA effect (NOK millions) 4Q 2007 4Q 2006 Inventory fair value adjustment 2 Restructuring costs (13) Kemira GrowHow Downstream (11) Inventory fair value adjustment (63) Restructuring costs (70) Kemira GrowHow Upstream (133) Kemira GrowHow (144) Total Yara 687 108 *Special i
Slide 26: Strong balance sheet after Kemira GrowHow completion
25 Strong balance sheet after Kemira GrowHow completion Net interest-bearing debt / equity ratio (end of period) 0.45 0.42 0.41 0.39 0.40 0.38 0.37 0.36 0.35 0.35 0.34 0.34 0.35 0.33 0.31 0.30 0.27 0.25 0.20 0.15 0.10 0.05 0.00 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2004 2005 2005 2005 2005 2006 200
Slide 27: Net interest-bearing debt
26 Net interest-bearing debt NOK millions 11,000 10,000 1,141 982 323 8,924 9,000 1,675 8,000 7,000 5,869 6,000 5,350 4,406 5,000 4,000 3,000 2,000 1,340 556 830 1,000 0 Net Interest- Cash Dividends Net operating Proceeds Grow th Other Yara Foreign Other Net Interest- Bearing Debt earnings* received
Slide 28: Downstream segment
27 Downstream segment Strong results driven by margin and volume growth Global deliveries up 10% ex Kemira GrowHow Longer price lags in a fast rising market Improved performance in all regions IR - Date: 2008-02-14
Slide 29: Downstream – EBITDA
28 Downstream – EBITDA NOK millions 900 847 804 800 724 700 665 661 628 600 518 511 490 500 441 373 400 319 300 200 100 0 2005 2006 2007 Accumulated NOK mill 1,984 1,960 3,035 USD mill 311 305 521 IR - Date: 2008-02-14
Slide 30: Downstream – fertilizer sales volume
29 Downstream – fertilizer sales volume Europe Outside Europe Kt 6,104 6,000 2,835 5,257 5,179 5,002 4,883 4,763 5,000 4,640 2,559 4,507 4,605 4,437 4,786 4,685 2,389 2,827 2,275 2,697 2,629 2,094 2,130 2,507 2,324 1,848 4,000 3,000 3,269 2,868 2,546 2,475 2,589 2,511 2,443 2,352 2,000 2,183 2,178 2
Slide 31: Strong deliveries in Brazil
30 Strong deliveries in Brazil Accumulated volumes Million tons 25 2007 2007 season up 17% from 2004 2006 and 8% higher than 2006 previous record 2004 20 2005 Strong pick-up in volumes 15 started fourth quarter 2006 Significant early purchasing 10 in first half of 2007 5 Tight global grain balance c
Slide 32: Industrial segment
31 Industrial segment Strong underlying EBITDA growth Continued volume growth for all major products Yara Praxair joint venture established IR - Date: 2008-02-14
Slide 33: Industrial – EBITDA
32 Industrial – EBITDA NOK millions 1,200 1,007 1,000 800 600 400 252 258 207 195 205 173 146 166 165 153 174 200 0 2005 2006 2007 Accumulated NOK mill 720 736 1,645 USD mill 112 115 290 IR - Date: 2008-02-14
Slide 34: AdBlue growth on track
33 AdBlue growth on track Yara AdBlue sales Projected total market EU25 Kt product Kt product 140 4,000 2004 forecast 120 3,500 3,000 100 2,500 80 2,000 60 1,500 40 1,000 Kt urea 20 500 0 0 2005 2006 2007 2006 2007 2008 2009 2010 2011 2012 Source: Integer IR - Date: 2008-02-14
Slide 35: Upstream segment
34 Upstream segment Strong results driven by higher prices Energy cost in line with expectations Estimated GrowHow UK synergies NOK 140 million p.a. (Yara share) IR - Date: 2008-02-14
Slide 36: Upstream – EBITDA
35 Upstream – EBITDA NOK millions 1,400 1,168 1,202 1,200 1,004 988 987 1,000 944 926 956 911 797 800 673 728 600 400 200 0 2005 2006 2007 Accumulated NOK mill 3,922 3,563 3,797 USD mill 611 560 646 IR - Date: 2008-02-14
Slide 37: Upstream – production volume
36 Upstream – production volume* Kt Ammonia Finished fertilizer 4,500 4,027 4,000 2,615 3,357 3,437 3,443 3,500 3,180 3,253 3,286 3,246 3,247 3,312 3,175 3,256 1,999 2,053 2,051 1,915 1,940 1,889 2,010 1,983 1,994 3,000 1,965 1,914 2,500 2,000 1,500 1,339 1,346 1,356 1,329 1,358 1,384 1,392 1,412 1,
Slide 38: Kemira Grow How integration progressing well
37 Kemira Grow How integration progressing well GrowHow UK JV synergies estimated at approx. 140 MNOK (Yara share) Closure of Severnside Back office integration Product portfolio and logistical optimization Phosphate structure Previously communicated synergies verified and implementation started Org
Slide 39: Share of net income in non-consolidated investees
38 Share of net income in non-consolidated investees NOK millions 4Q 2007 4Q 2006 2007 2006 Qafco 186 239 787 793 Tringen 30 45 184 176 Rossosh 12 3 104 104 Burrup 56 26 151 (19) Other 135 75 399 409 Total 419 388 1,624 1,463 IR - Date: 2008-02-14
Slide 40: Prospects first quarter 2008
39 Prospects first quarter 2008 Ammonia, nitrate and phosphate prices continue to increase from fourth into first quarter Urea price weakened from end of fourth quarter, but ammonia price level now supporting urea prices Tight nitrate market in Europe has increased time lag from price setting to del
Slide 41: Prospects next twelve months
40 Prospects next twelve months Global food markets tight with increased grain prices High energy prices and increased focus on climate gas emissions support biofuel growth Increased Chinese urea export tax from second quarter, however Chinese exports may still cushion high urea prices in a tight ma
Slide 42: Additional information
cg YARA Additional information
Slide 43: Three segments mitigate cyclicality and create value for Yara
42 Three segments mitigate cyclicality and create value for Yara EBITDA, pro forma until 2005 . USD millions Knowledge Margin Local market knowledge 1,600 Strong customer relations 1,400 Agronomic and application 290 competence 1,200 . Differentiation and branding 1,000 112 Sourcing & logistics leve
Slide 44: Global optimization creates value
43 Global optimization creates value 2007 fertilizer and nitrogen chemicals volumes in million tonnes* Global Marketing and Sales Product source** optimization Fertilizer Europe Yara production 17.9 13.5 Europe Latin America 4.7 Yara production 2.9 outside Europe Sourcing Business Asia 28.2 2.5 Allo
Slide 45: Downstream – variance analysis
44 Downstream – variance analysis Fourth quarter NOK millions USD millions* USD/ton** EBITDA 2007 847 156 29 EBITDA 2006 511 80 15 Variance EBITDA in NOK 336 Conversion (NOK vs. USD) 80 Variance EBITDA 416 76 14 Volume & mix 176 32 6 Margin 420 77 15 Margin excluding ammonia effect 511 94 18 Ammonia
Slide 46: Industrial – variance analysis
45 Industrial – variance analysis Fourth quarter NOK millions USD millions* EBITDA 2007 1,007 183 EBITDA 2006 153 24 Variance EBITDA in NOK 854 Conversion (NOK vs. USD) 16 Variance EBITDA 870 160 Volume & mix 53 10 Margin 19 3 Margin excluding ammonia effect 38 7 Ammonia effect on margin (19) (3) Sp
Slide 47: Upstream – variance analysis
46 Upstream – variance analysis Fourth quarter NOK millions USD millions* USD/ton** EBITDA 2007 728 135 41 EBITDA 2006 673 106 32 Variance EBITDA in NOK 55 Conversion (NOK vs. USD) 100 Variance EBITDA 155 28 9 Volume & mix 1 - - Price/Margin 522 96 29 Energy arbitrage (13) (2) (1) Energy cost in Eur
Slide 48: Downstream net operating capital turnover
47 Downstream net operating capital turnover* Downstream external operating revenues / external net operating capital 5.0 4.9 4.8 4.8 4.6 4.5 4.5 4.5 4.4 4.4 4.4 4.3 4.3 4.3 4.0 3.5 3.0 2005 2006 2007 * 12-month rolling average IR - Date: 2008-02-14
Slide 49: Strong season in Brazil
48 Strong season in Brazil Accumulated urea import Kt 2,500 2007 2,000 2004 2005 1,500 2006 1,000 500 0 May Mar Jan Jun Nov Jul Aug Oct Apr Feb Sep Dec Source: GTIS IR - Date: 2008-02-14
Slide 50: US natural gas versus Yara average
49 US natural gas versus Yara average* Yearly averages 2000 – 2006, quarterly averages for 2007 and 2008 with forward prices for 2008** USD/MMBtu Yara European oil & gas cost 12 (weighted average) European spot gas price 11.4 11.2 (Zeebrugge Hub) 10 8.9 8.9 8.9 8 7.5 7.3 7.1 US spot gas price 6.6 6.
Slide 51: Key value drivers – quarterly averages
50 Key value drivers – quarterly averages Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 350 400 364 350 281 291 350 291 300 295 293 300 259 249 254 281 300 227 233 228 250 250 223 250 232 200 200 200 150 150 150 100 100 100 50 50 50 0 0 0 4Q 06 1Q 07 2Q 07
Slide 52: Key value drivers – 10-year history
51 Key value drivers – 10-year history Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 350 264 308 300 229 240 245 300 245 250 250 212 185 250 220 223 186 200 200 200 175 165 138 146 150 121 139 150 119 111 110 100 150 110 103 100 84 101 96 94 86 100 84 1
Slide 53: 10-year fertilizer prices – monthly averages
52 10-year fertilizer prices – monthly averages Ammonia fob Black Sea USD/t 400 350 300 250 200 150 CAN cif Germany 100 USD/t 50 250 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 200 150 100 Urea prilled fob Black Sea USD/t 50 450 0 400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 350 300
Slide 54: 10-year grain/oilseed prices – yearly averages
53 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/t USD/t 300 350 250 300 200 250 150 200 100 150 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Corn (US Gulf) USD/t Soybeans (cif Rotterdam) USD/t 400 170 35
Slide 55: Income statement
54 Income statement NOK millions 4Q 2007 4Q 2006 Revenue and other income 17,389 12,428 Operating income 1,494 521 Share of net income in non-consolidated investees 419 388 Interest income and other financial income 116 87 Interest expense and other financial items (188) (118) Foreign exchange gain
Slide 56: Consolidated balance sheet
55 Consolidated balance sheet NOK millions 31 Dec 2007 31 Dec 2006 Deferred tax assets 1,252 1,175 Property, plant and equipment 10,412 7,600 Other non-current assets 13,771 7,989 Inventories 9,291 6,689 Receivables 8,465 6,834 Other current assets 2,110 1,974 Cash and cash equivalents 2,325 1,003 T
Slide 57: Definition of EBITDA and CROGI
56 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