Yara International ASA · OSL:YAR
Yara International ASA — Q2 2007 Earnings Presentation
55 slides from Yara International ASA's earnings presentation, Jul 17, 2007
Slide 1: Yara International ASA Second quarter results
Yara International ASA Second quarter results 17 July 2007
Slide 2: Summary second quarter 2007
1 Summary second quarter 2007 Strong financial results Higher fertilizer prices Further market growth in Brazil Lower energy cost and reduced oil exposure New growth initiatives: Kemira GrowHow, Libya, and Praxair JV IR - Date: 2007-07-17
Slide 3: Net income after minority interest
2 Net income after minority interest NOK millions 1,600 1,403 1,422 1,400 1,200 1,085 1,041 1,000 917 891 846 846 853 800 588 600 400 200 0 2005 2006 2007 Accumulated NOK mill 3,198 4,188 2,507 USD mill 500 657 411 IR - Date: 2007-07-17
Slide 4: Earnings per share
3 Earnings per share* NOK 6.00 4.85 5.00 4.68 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 8.51 * Average number of shares for 2Q 2007: 293.4 million (2Q 2006: 304.7 million) IR - Date: 2007-07-17
Slide 5: Earnings per share adjusted for foreign exchange gain / loss
4 Earnings per share adjusted for foreign exchange gain / loss* NOK 4.75 4.51 4.50 4.00 3.52 3.50 3.31 3.18 2.98 3.00 2.57 2.61 2.65 2.50 2.18 2.00 1.50 1.00 0.50 0.00 2005 2006 2007 ** Accumulated NOK 11.36 12.90 8.02 * After tax ** Average number of shares for 2Q 2007: 293.4 million (2Q 2006: 304.
Slide 6: Overall fertilizer market development during quarter
5 Overall fertilizer market development during quarter Higher Indian urea imports, implying further growth in consumption US fertilizer demand strong amid increased corn and wheat acreage Strong development in the Latin American agricultural sector, and increased Brazilian urea imports outside the m
Slide 7: Fertilizer price development during quarter
6 Fertilizer price development during quarter Overall stable urea prices through the quarter, with some softening towards the end. Average price unchanged from the first quarter Declining ammonia prices through the quarter Nitrate prices in Western Europe stayed at the same level as for the first qu
Slide 8: Grain stocks forecast to drop further through June 2008
7 Grain stocks forecast to drop further through June 2008 Million tonnes 2,200 35% 115 days inventory 30% 2,100 25% Consumption 2,000 20% 1,900 15% 57 days inventory 10% 1,800 Production 5% 1,700 0% 1995 1997 1999 2001 2003 2005 2007E 1995 1997 1999 2001 2003 2005 2007E Source: USDA, update July 200
Slide 9: Strong start to season in Brazil
8 Strong start to season in Brazil Accumulated urea import Kt 2,000 2004 1,800 1,600 1,400 2005 1,200 1,000 2007 800 600 400 200 2006 0 May Mar Jun Jan Nov Jul Aug Apr Oct Feb Sep Dec IR - Date: 2007-07-17
Slide 10: Continued growth in Indian imports
9 Continued growth in Indian imports Kt 5,000 Sales - Production 2006/07 4,000 3,000 2,000 2005/06 1,000 2007/08 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 Statistic
Slide 11: Higher urea prices attract Chinese exports
10 Higher urea prices attract Chinese exports Net urea exports Kt 4,500 4,000 2004 3,500 3,000 2,500 2,000 2005 1,500 2007 2006 1,000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec IR - Date: 2007-07-17
Slide 12: Strong rebound in US demand
11 Strong rebound in US demand Million tonnes nitrogen Million acres Season to date: 16 3% ahead of last year 100 +19% 14 90 80 12 70 -15% 10 +6% 60 8 50 6 40 30 4 20 2 -28% 10 0 0 Jul'05-May'06 Jul'06-May'07 Corn Soybeans Wheat Cotton Production Net imports 2006 2007 Source: TFI, US Trade Commissio
Slide 13: Agricultural commodity prices strong…
12 Agricultural commodity prices strong… Corn Wheat Soybeans Rice Source: Chicago Board of Trade, 12 July 2007; September contracts IR - Date: 2007-07-17
Slide 14: …and strength extends beyond current harvest
13 …and strength extends beyond current harvest Forward prices USD/bu USD/bu Wheat (75 kg N/ha) 13 Rice (150 kg N/ha) 6 12 11 5 10 Soybeans (30 kg N/ha) Corn (150 kg N/ha) 9 4 8 7 3 6 May-08 Mar-08 May-08 Jul-07 Jul-08 Nov-07 Jan-08 Mar-08 Nov-08 Sep-07 Dec-07 Sep-08 Dec-08 Jul-07 Jul-08 Sep-07 Sep-
Slide 15: Energy sourcing: Development favours gas vs. crude oil exposure
14 Energy sourcing: Development favours gas vs. crude oil exposure World power generation Hydro 21% 1973 Crude is linked to transport Coal 38% Nuclear 3% Natural gas is linked to power and Gas heat production 12% Other 1% Fuel demand for transport increasing Oil 25% more than power Hydro 16% 2004 Ch
Slide 16: Improved energy sourcing flexibility in Europe
15 Improved energy sourcing flexibility in Europe USD/MMBtu LSFO 1% 8 Increased competition in European natural gas markets due to new 7 supply and increased trading hub liquidity 6 Several gas contracts revised in Natural gas 5 (Zeebrugge) recent months, increasing Yara’s overall exposure to hub ga
Slide 17: Improved energy sourcing flexibility in Europe
16 Improved energy sourcing flexibility in Europe Yara’s European gas contract links (previous in brackets): Hub Gas ~35% (~5%) LSFO 1% ~30% (~50%) Gasoil 0.2% ~15% (~20%) HFO ~10% (~15%) Naphtha ~10% (~10%) New Yara sensitivities: EBITDA EBITDA EPS USD mill. NOK mill. NOK Crude oil + 1 $/boe -11 -6
Slide 18: Estimated European energy cost
17 Estimated European energy cost NOK millions 500 Actual for quarter July 2007 estimate 400 Cost change on previous year 300 250 200 100 0 0 (23) (100) (200) (300) (258) 1Q07 2Q07 3Q07 4Q07 IR - Date: 2007-07-17
Slide 19: Further delays to new urea capacity
18 Further delays to new urea capacity Global urea capacity Year Driving regions growth estimate* World Excluding China World Ex. China 2006 4.9% (4.5%) 2.6% (3.0%) China 65% Oman 27% Oman 10% S. Arabia 21% 2007 5.0% (4.7%) 3.0% (3.8%) China 62% Egypt 42% Egypt 16% Iran 32% 2008 4.6% (4.9%) 3.6% (4.
Slide 20: Financial results
19 Financial results Sven Ombudstvedt, CFO IR - Date: 2007-07-17
Slide 21: Earnings before interest, tax, depreciation and amortization (EBITDA)
20 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 2,222 1,947 2,000 1,866 1,868 1,787 1,800 1,682 1,600 1,505 1,492 1,379 1,351 1,400 1,200 1,000 800 600 400 200 0 2005 2006 2007 Accumulated NOK mill 6,618 6,472 4,009 USD mill 1,033 1,014 657 IR - Date: 2007-07-17
Slide 22: EBITDA and operating income
21 EBITDA and operating income Individual operating segments EBITDA (NOK millions) 2Q 2007 2Q 2006 Downstream 804 441 Industrial 205 165 Upstream 1,202 926 Other and eliminations 12 149 Yara total 2,222 1,682 Operating income (NOK millions) 2Q 2007 2Q 2006 Downstream 496 224 Industrial 158 119 Upstr
Slide 23: Net interest-bearing debt / equity ratio
22 Net interest-bearing debt / equity ratio End of quarter 0.50 0.46 0.45 0.45 0.41 0.39 0.40 0.38 0.36 0.37 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 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 IR - Date: 2007-0
Slide 24: Net interest-bearing debt
23 Net interest-bearing debt NOK millions 8,000 739 208 7,000 82 6,674 529 6,000 2,226 5,350 2,509 5,000 4,000 1,287 657 3,000 2,000 Net Interest- Cash Dividends Net operating Grow th Other Yara dividend Foreign Other Net Interest- Bearing Debt earnings* received** capital change investments investm
Slide 25: Improved net operating capital turnover
24 Improved net operating capital turnover* Downstream external operating revenues / external net operating capital Brazilian growth at below average credit terms, including a significant level of prepayments Low inventories at end of European and US seasons 5.0 4.8 4.6 4.5 4.5 4.5 4.4 4.4 4.3 4.3 4
Slide 26: Variance analysis Yara group
25 Variance analysis Yara group Second quarter NOK millions USD millions* EBITDA 2007 2,222 370 EBITDA 2006 1,682 270 Variance EBITDA in NOK 541 Conversion (NOK vs. USD) 59 Variance EBITDA 600 100 Volume & mix 221 37 Price/Margin 646 107 Energy arbitrage (262) (44) Energy cost in Europe 281 47 Oil a
Slide 27: Special items
26 Special items EBITDA effect (NOK millions) 2Q 2007 2Q 2006 Köping restructuring (4) Downstream - (4) Köping restructuring (38) Startup Argon plant (47) Contract derivatives 32 28 Industrial (16) (10) Contract derivatives (5) 8 Upstream (5) 8 Total (21) (7) *Special items in NOK using monthly acco
Slide 28: Downstream – second quarter
27 Downstream – second quarter Strong sales and earnings growth Brazil deliveries up more than 60% Strong US margins IR - Date: 2007-07-17
Slide 29: Downstream – EBITDA
28 Downstream – EBITDA NOK millions 900 804 800 724 700 665 628 600 518 511 490 500 441 373 400 319 300 200 100 0 2005 2006 2007 Accumulated NOK mill 1,984 1,960 1,528 USD mill 311 305 250 IR - Date: 2007-07-17
Slide 30: Downstream – fertilizer sales volume
29 Downstream – fertilizer sales volume Europe Outside Europe Kt 6,000 5,257 5,179 5,002 5,000 4,640 4,783 4,692 4,868 2,389 2,559 4,507 4,605 4,441 2,827 2,275 2,683 2,094 2,130 2,514 2,324 1,847 4,000 3,000 2,868 2,546 2,475 2,594 2,511 2,443 2,352 2,000 2,183 2,178 2,185 1,000 0 2005 2006 2007 Ac
Slide 31: Continued growth in Brazil
30 Continued growth in Brazil Million Million hectares Corn in Brazil tonnes 16 60 Strong improvement 14 compared with difficult 2nd 50 quarter 2006 12 40 10 Increased deliveries to corn 8 30 growers amid acreage and production expansion 6 20 4 Significant early purchasing 10 2 Continued demand grow
Slide 32: Industrial – second quarter
31 Industrial – second quarter Continued strong results Solid volume growth for environmental products and industrial gases Margin improvement for all product groups IR - Date: 2007-07-17
Slide 33: Industrial – EBITDA
32 Industrial – EBITDA NOK millions 300 252 250 207 205 195 200 174 173 166 165 146 153 150 100 50 0 2005 2006 2007 Accumulated NOK mill 720 736 380 USD mill 112 115 62 IR - Date: 2007-07-17
Slide 34: Substantial growth potential for NOx abatement applications
33 Substantial growth potential for NOx abatement applications for trucks and stationary installations Estimated potential based on external and internal Yara sources Kt product Yara sales Kt product Potential 400 12,000 Marine Europe 10,000 300 8,000 Stationary US Stationary 200 6,000 Europe AdBlue
Slide 35: Upstream – second quarter
34 Upstream – second quarter Strong results driven by higher urea prices Lower energy cost Production up 4% IR - Date: 2007-07-17
Slide 36: Upstream – EBITDA
35 Upstream – EBITDA NOK millions 1,400 1,168 1,202 1,200 1,004 988 987 1,000 944 926 911 797 800 673 600 400 200 0 2005 2006 2007 Accumulated NOK mill 3,922 3,563 2,113 USD mill 611 560 346 IR - Date: 2007-07-17
Slide 37: Upstream – production volume
36 Upstream – production volume* Kt Ammonia Finished fertilizer 4,000 3,357 3,437 3,500 3,180 3,253 3,286 3,246 3,247 3,312 3,175 3,256 1,999 2,053 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 1,215 1,237 1,262 1,262 1,000 500 0 2005 200
Slide 38: Burrup plant performance is strong
37 Burrup plant performance is strong Kt 250 Production has developed positively, Design running at design capacity last 6 200 capacity months 150 2Q EBITDA margin 65 % 100 Good health & safety performance 50 Production sold by Yara Ammonia Trade and Shipping 0 3Q06 4Q06 1Q07 2Q07 IR - Date: 2007-07
Slide 39: Share of net income in non-consolidated investees
38 Share of net income in non-consolidated investees NOK millions 2Q 2007 2Q 2006 YTD 2007 YTD 2006 Qafco 205 187 382 377 Tringen 56 38 114 90 Rossosh 40 44 75 87 Other 174 60 225 102 Total 475 329 796 656 IR - Date: 2007-07-17
Slide 40: Prospects third quarter 2007
39 Prospects third quarter 2007 Start of season in Europe and US supported by lower fertilizer inventories than last year European nitrate start prices in line with last season, with improved nitrate competitiveness vs. urea Sales in Brazil may slow down in last part of the season due to strong earl
Slide 41: Prospects next twelve months
40 Prospects next twelve months Further drop in global grain inventories expected, despite strong increase in grain production Grain prices expected to remain at high levels Fundamentals in place for continued increase in Indian fertilizer import Chinese producers have shown greater willingness to e
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 1,400 Strong customer relations 1,200 Agronomic and application 125 competence Differentiation and branding . 1,000 112 104 115 407 Logistics Leverage
Slide 44: Downstream – variance analysis
43 Downstream – variance analysis Second quarter NOK millions USD millions* USD/tonne** EBITDA 2007 804 134 26 EBITDA 2006 441 71 14 Variance EBITDA in NOK 363 Conversion (NOK vs. USD) 16 Variance EBITDA 379 63 12 Volume & mix 146 24 5 Margin 264 44 8 Margin excluding ammonia effect 269 45 9 Ammonia
Slide 45: Industrial – variance analysis
44 Industrial – variance analysis Second quarter NOK millions USD millions* EBITDA 2007 205 34 EBITDA 2006 165 26 Variance EBITDA in NOK 40 Conversion (NOK vs. USD) 7 Variance EBITDA 47 8 Volume & mix 28 5 Margin 40 7 Margin excluding ammonia effect 39 6 Ammonia effect on margin 1 - Special items (6
Slide 46: Upstream – variance analysis
45 Upstream – variance analysis Second quarter NOK millions USD millions* USD/tonne** EBITDA 2007 1,202 200 58 EBITDA 2006 926 149 43 Variance EBITDA in NOK 275 Conversion (NOK vs. USD) 30 Variance EBITDA 305 51 15 Volume & mix 69 12 3 Price/Margin 391 65 19 Energy arbitrage (262) (44) (13) Energy c
Slide 47: US natural gas versus Yara average
46 US natural gas versus Yara average Yearly averages 2000 – 2005, quarterly averages for 2006 and 2007 with forward prices for 2007* USD/MMBtu 14 European spot gas price (Zeebrugge Hub) 12 European long-term 10 gas contracts (Heren index) 8 US spot gas price (Henry Hub) 6 6.3 6.0 5.7 5.6 5.5 5.3 5.
Slide 48: Another 30-year low for grain stocks-to-use supports high demand for fertilizer
47 Another 30-year low for grain stocks-to-use supports high demand for fertilizer Million tonnes Stocks 700 40% Percent 600 35% 30% 500 25% 400 20% 300 15% 200 10% 100 5% 0 0% 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Sou
Slide 49: Key value drivers – quarterly averages
48 Key value drivers – quarterly averages Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 281 350 250 227 233 259 295 293 214 223 241 249 209 250 300 217 200 250 229 232 200 212 200 150 150 150 100 100 100 50 50 50 0 0 0 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 2Q 0
Slide 50: Key value drivers – 10-year history
49 Key value drivers – 10-year history Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 300 250 220 223 250 240 245 212 250 229 200 186 175 200 185 165 200 139 146 150 150 140 138 117 124 119 111 150 121 101 96 110 103 110 84 94 100 100 100 86 100 84 67 50 50
Slide 51: 10-year fertilizer prices – monthly averages
50 10-year fertilizer prices – monthly averages Ammonia fob Black Sea USD/t 350 300 250 200 150 CAN cif Germany 100 USD/t 50 250 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 200 150 100 Urea prilled fob Black Sea USD/t 50 350 0 300 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2
Slide 52: 10-year grain/oilseed prices – yearly averages
51 10-year grain/oilseed prices – yearly averages Wheat (HRW US Gulf) Rice (Thailand) USD/t USD/t 220 350 200 300 180 160 250 140 200 120 100 150 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1H07 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1H07 Corn (US Gulf) USD/t Soybeans (cif Rotterdam
Slide 53: Income statement
52 Income statement NOK millions 2Q 2007 2Q 2006 Revenue and other income 13,775 12,200 Operating income 1,329 924 Share of net income in non-consolidated 475 329 investees Interest income and other financial income 66 61 Interest expense and other financial items (125) (101) Foreign exchange gain (
Slide 54: Consolidated balance sheets
53 Consolidated balance sheets NOK millions 31 Jun 2007 30 Jun 2006 Deferred tax assets 1,009 1,323 Property, plant and equipment 7,520 7,435 Other non-current assets 9,366 4,882 Inventories 6,886 5,806 Receivables 7,215 7,133 Other current assets 1,746 2,020 Cash and cash equivalents 932 754 Total
Slide 55: Definition of EBITDA and CROGI
54 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