Yara International ASA · OSL:YAR
Yara International ASA — Q1 2007 Earnings Presentation
56 slides from Yara International ASA's earnings presentation, Apr 20, 2007
Slide 1: Yara International ASA First quarter results
Yara International ASA First quarter results 20 April 2007
Slide 2: Summary first quarter 2007
2 Summary first quarter 2007 Strong financial results Increased sales in Europe as season picks up Growth in Brazil due to industry recovery and Fertibras acquisition Improved margins as fertilizer prices increase and energy costs decline IR - Date: 2007-04-20
Slide 3: Net income after minority interest
3 Net income after minority interest NOK millions 1,600 1,403 1,400 1,200 1,041 1,085 1,000 917 846 846 853 891 800 588 600 400 200 0 2005 2006 2007 Accumulated NOK mill 3,198 4,188 1,085 USD mill 500 657 175 IR - Date: 2007-04-20
Slide 4: Earnings per share
4 Earnings per share* NOK 5.00 4.68 4.50 4.00 3.67 3.42 3.50 2.90 3.01 3.00 2.68 2.70 2.77 2.50 1.90 2.00 1.50 1.00 0.50 0.00 2005 2006 2007 Accumulated NOK 10.20 13.86 3.67 * Average number of shares for 1Q 2007: 295.7 million (1Q 2006: 307.8 million) IR - Date: 2007-04-20
Slide 5: Earnings per share adjusted for foreign exchange gain / loss
5 Earnings per share adjusted for foreign exchange gain / loss* NOK 4.75 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 3.52 * After tax ** Average number of shares for 1Q 2007: 295.7 million (1Q 2006: 307.8 mil
Slide 6: Overall fertilizer market development during quarter
6 Overall fertilizer market development during quarter Further tightening of the global supply/demand balance for nitrogen fertilizer West European industry nitrogen fertilizer volumes up 12% North American nitrogen deliveries up 5% through February, due to high domestic production Strong fertilizer
Slide 7: Fertilizer price development during quarter
7 Fertilizer price development during quarter Urea prices peaked in mid-March, average price up 33% versus last year Average ammonia price 6% higher than last year. Price increases were limited due to increased supply from Russia and other key exporting regions CAN price in Germany fairly flat throu
Slide 8: Yara 1Q stocks lower than in recent years
8 Yara 1Q stocks lower than in recent years Yara N-stocks (end 1Q) Index (100 = 2007) 140 Higher deliveries in first quarter 127 2007, especially in March 120 113 112 100 100 Increased Yara exports out of Europe 80 60 Lower third-party purchases 40 Reductions mainly NPK, nitrates 20 slightly lower 0
Slide 9: Accumulated urea import – Brazil
9 Accumulated urea import – Brazil Kt 2,000 2004 1,800 1,600 1,400 2005 1,200 1,000 800 600 2007 400 200 2006 0 May Mar Jun Jan Nov Jul Aug Apr Oct Feb Sep Dec IR - Date: 2007-04-20
Slide 10: Accumulated Indian urea deficit
10 Accumulated Indian urea deficit Kt 5,000 Sales - Production 2006/07 4,000 2.3 mill tonnes 3,000 increase 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 May-Jul -3,000 Rabi (November planting) – imports Sep-Nov Source: I
Slide 11: Net urea export from China
11 Net urea export from China Kt 4,500 4,000 2004 3,500 3,000 2,500 2,000 2005 1,500 2006 1,000 2007 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec IR - Date: 2007-04-20
Slide 12: US nitrogen supply in line with last season
12 US nitrogen supply in line with last season Mill. tonnes nitrogen Production Net imports 12.0 USD/tonne Season to date: 400 3.5% behind last year 10.0 380 Fob US Gulf (granular) 360 8.0 340 320 6.0 300 280 Fob Black Sea 4.0 260 240 2.0 220 0.0 200 6-Apr 9-Mar 23-Mar 12-Jan 26-Jan 9-Feb 23-Feb 3-N
Slide 13: Agricultural commodity prices strong…
13 Agricultural commodity prices strong… Corn Wheat Soybeans Rice Source: Chicago Board of Trade, 13 April 2007; May contracts IR - Date: 2007-04-20
Slide 14: Grain prices have improved farm profitability
14 Grain prices have improved farm profitability Average US farmer net returns Net return CORN Net return SOYBEANS $ per acre $ per acre 350.0 324 250.0 300.0 200 200.0 250.0 159% 150.0 167% 200.0 150.0 125 100.0 75 100.0 50.0 50.0 0.0 0.0 2006 2007e 2006 2007e Source: USDA estimates IR - Date: 2007
Slide 15: US natural gas versus Yara average
15 US natural gas versus Yara average Yearly averages 2000 – 2005, quarterly averages for 2006 and 2007 with forward prices for 2007* USD/MMBtu 14 12 European long-term 10 gas contracts US spot gas price (Heren index) (Henry Hub) 8 Yara global oil & gas cost 6 (weighted average) 6.0 5.7 5.6 5.5 5.3
Slide 16: Lower estimated European energy cost
16 Lower estimated European energy cost Actual for quarter February 2007 estimate April 2007 estimate NOK millions 700 600 616 600 Cost change on previous year 500 445 400 300 200 162 100 0 (23) (100) (50) (200) (200) (200) (300) 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 IR - Date: 2007-04-20
Slide 17: Further delays to urea capacity
17 Further delays to urea capacity Global urea capacity Year Driving regions growth estimate* World Excluding China World Ex. China 2006 4.5% (4.5%) 3.0% (2.9%) China 61% Oman 29% Oman 11% S. Arabia 22% 2007 4.7% (5.3%) 3.8% (4.7%) China 46% Egypt 30% Egypt 16% Iran 27% 2008 4.9% (4.2%) 4.1% (3.0%)
Slide 18: Yara is part of the solution
18 Yara is part of the solution Feeding the world Environmental Care Bioenergy Crops • Balanced fertilization • Higher yields reduce land • Adding biomass essential for global food use production security • Energy-efficient plants • Energy crop productivity • High-tech tools optimize with low emissi
Slide 19: Yara greenhouse gas emissions
19 Yara greenhouse gas emissions 2005 data Mill. tonnes . CO2-e 12 2 main sources: Ammonia plants – CO2 Nitric Acid plants – N2O 10 . 8 N2O emissions’ greenhouse effect is 300 times that of CO2 per unit of 6 weight . 4 Reducing emissions: CO2 – energy efficiency 2 N2O – catalyst technology 0 CO2 N2O
Slide 20: New technology from Yara (nitric acid plants)
20 New technology from Yara (nitric acid plants) Potential reduction: Yara Potential reduction: Industry Mill. tonnes Mill. tonnes CO2-e CO2-e 75 12 60 54 10 10 50 8 40 30 6 30 5 4 20 3 2 10 0 0 N2O Target Further Europe Global Norway emissions 2008 potential 100 potential CO2-e Yara plants 2005 200
Slide 21: Operational excellence in Yara ammonia plants
21 Operational excellence in Yara ammonia plants Energy consumption per tonne ammonia (relative index) China’s coal-fired ammonia plants use 140 70% more energy 122 and emit 2.5 times 118 120 more CO2 108 109 100 100 80 60 40 20 0 Yara Europe US Romania Russia Europe ex Yara & Bulgaria IR - Date: 20
Slide 22: Financial results
22 Financial results Sven Ombudstvedt, CFO IR - Date: 2007-04-20
Slide 23: Earnings before interest, tax, depreciation and amortization (EBITDA)
23 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 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 1,787 USD mill 1,033 1,014 287 IR - Date: 2007-04-20
Slide 24: EBITDA and operating income
24 EBITDA and operating income Individual operating segments EBITDA (NOK millions) 1Q 2007 1Q 2006 Downstream 724 518 Industrial 174 166 Upstream 911 797 Other and eliminations (23) 11 Yara total 1,787 1,492 Operating income (NOK millions) 1Q 2007 1Q 2006 Downstream 527 336 Industrial 125 120 Upstre
Slide 25: Net interest-bearing debt / equity ratio
25 Net interest-bearing debt / equity ratio End of quarter 0.80 0.69 0.70 0.60 0.50 0.45 0.46 0.38 0.37 0.39 0.40 0.36 0.35 0.34 0.34 0.31 0.33 0.30 0.27 0.20 0.10 0.00 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 IR - Date: 2007-04-20
Slide 26: Net interest-bearing debt
26 Net interest-bearing debt NOK millions 6,000 59 64 190 530 5,493 5,350 1,183 1,320 5,000 328 4,000 3,000 Net Interest- Cash earnings* Dividends Net operating Investment Other Foreign Other Net Interest- Bearing Debt received** capital Fertibras investments exchange Bearing Debt Dec06 (net) gain/(
Slide 27: Variance analysis Yara group
27 Variance analysis Yara group First quarter NOK millions USD millions* EBITDA 2007 1,787 287 EBITDA 2006 1,492 224 Variance EBITDA in NOK 295 Conversion (NOK vs. USD) 101 Variance EBITDA 396 64 Volume & mix 295 47 Price/Margin 339 55 Energy arbitrage (38) (6) Energy cost in Europe 23 4 Oil and gas
Slide 28: Special items
28 Special items EBITDA effect (NOK millions) 1Q 2007 1Q 2006 Brazil restructuring (24) - Downstream (24) - Contract derivatives (7) (9) Industrial (7) (9) Le Havre costs - (25) Contract derivatives - (16) Upstream - (41) Total (31) (51) *Special items in NOK using monthly accounting exchange rates
Slide 29: Downstream – first quarter
29 Downstream – first quarter Strong earnings and sales volume Significant recovery in Europe Market up 45% in Brazil Fertibras integration on track IR - Date: 2007-04-20
Slide 30: Downstream – EBITDA
30 Downstream – EBITDA NOK millions 800 724 665 700 628 600 518 511 490 500 441 373 400 319 300 200 100 0 2005 2006 2007 Accumulated NOK mill 1,984 1,960 724 USD mill 311 305 116 IR - Date: 2007-04-20
Slide 31: Downstream – fertilizer sales volume
31 Downstream – fertilizer sales volume Europe Outside Europe Kt 6,000 5,257 5,098 4,990 4,742 4,879 4,765 5,000 2,559 4,588 4,688 4,441 2,389 2,279 2,683 2,094 2,130 2,514 2,324 1,847 4,000 3,000 2,868 2,648 2,539 2,558 2,594 2,600 2,000 2,264 2,251 2,307 1,000 0 2005 2006 2007 Accumulated Fin. fer
Slide 32: Downstream Premium Offerings add value
32 Downstream Premium Offerings add value Approx. 20% of Downstream Approx. 40% of Downstream volume EBITDA Premium Premium Standard Standard Premium Offerings are mainly CN, nitrophosphate NPK and SQM & Phosyn products IR - Date: 2007-04-20
Slide 33: Industrial – first quarter
33 Industrial – first quarter Continued strong results Solid volume growth for TAN and environmental applications Scandinavian gas activities with sales growth IR - Date: 2007-04-20
Slide 34: Industrial – EBITDA
34 Industrial – EBITDA NOK millions 300 252 250 207 195 200 173 174 166 165 146 153 150 100 50 0 2005 2006 2007 Accumulated NOK mill 720 736 174 USD mill 112 115 28 IR - Date: 2007-04-20
Slide 35: Continued growth in technical ammonium nitrate sales
35 Continued growth in technical ammonium nitrate sales Sales volume (Kt) Volume growth due to strong global demand for minerals and metals, End users mainly driven by China 700 Explosive companies 600 Yara sales growth in Latin America, 500 Africa and the Arabian peninsula 400 Production to increas
Slide 36: Upstream – first quarter
36 Upstream – first quarter Strong results driven by higher urea prices Energy cost slightly lower Ammonia production up 10% IR - Date: 2007-04-20
Slide 37: Upstream – EBITDA
37 Upstream – EBITDA NOK millions 1,400 1,168 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 3,563 911 USD mill 611 560 147 IR - Date: 2007-04-20
Slide 38: Upstream – production volume
38 Upstream – production volume* Kt Ammonia Finished fertilizer 4,000 3,500 3,286 3,312 3,357 3,180 3,253 3,246 3,247 3,175 3,256 1,940 1,983 1,999 1,915 1,889 2,010 1,994 3,000 1,965 1,914 2,500 2,000 1,500 1,339 1,346 1,356 1,329 1,358 1,215 1,237 1,262 1,262 1,000 500 0 2005 2006 2007 Accumulated
Slide 39: Yara Brunsbüttel: solid earnings and high productivity
39 Yara Brunsbüttel: solid earnings and high productivity EBITDA EUR mill. Annual production capacity ammonia 25 750 kt, urea 520 kt New daily production record for 20 ammonia in the quarter 15 HVR* feedstock cost 35% lower than Yara Europe average in 1Q 10 1Q uptime was 95% 5 50% of 1Q urea product
Slide 40: Share of net income in non-consolidated investees
40 Share of net income in non-consolidated investees NOK millions 1Q 2007 1Q 2006 Qafco 177 190 Tringen 58 52 Rossosh 35 43 Other 51 42 Total 321 327 IR - Date: 2007-04-20
Slide 41: Yara has a unique business model
41 Yara has a unique business model Business concepts that Downstream / Industrial exploit Upstream combined strength ”Added-value market pull” ”Low cost product push” Scale advantage Favourable gas cost Balanced fertilization Scale advantage Unique market position Change mgmt skills Ammonia market
Slide 42: 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 1,200 Strong customer relations Agronomic and application 1,000 112 118 competence 104 115 Differentiation and branding . 800 311 305 344 Logistics Lev
Slide 43: Prospects second quarter 2007
43 Prospects second quarter 2007 Strong grain prices point to increased fertilizer consumption Europe and US: healthy deliveries expected in second quarter Lower inventories support price levels in final phase of European season Fundamentals in place for increased Indian import, but short-term uncer
Slide 44: Prospects next twelve months
44 Prospects next twelve months Grain prices have softened recently, but continued high price levels support strong farm profitability and fertilizer demand Market rebound and strengthened position in Brazil New Middle East urea capacity delayed Growth in Chinese production could limit price increas
Slide 45: Additional information
cg YARA Additional information
Slide 46: Downstream – variance analysis
46 Downstream – variance analysis First quarter NOK millions USD millions* USD/tonne** EBITDA 2007 724 116 22 EBITDA 2006 518 78 15 Variance EBITDA in NOK 206 Conversion (NOK vs. USD) 35 Variance EBITDA 240 39 7 Volume & mix 115 18 4 Margin 184 30 6 Margin excluding ammonia effect 204 33 6 Ammonia e
Slide 47: Industrial – variance analysis
47 Industrial – variance analysis First quarter NOK millions USD millions* EBITDA 2007 174 28 EBITDA 2006 166 25 Variance EBITDA in NOK 8 Conversion (NOK vs. USD) 11 Variance EBITDA 19 3 Volume & mix 55 9 Margin (8) (1) Margin excluding ammonia effect (9) (1) Ammonia effect on margin 1 - Special ite
Slide 48: Upstream – variance analysis
48 Upstream – variance analysis First quarter NOK millions USD millions* USD/tonne** EBITDA 2007 911 147 44 EBITDA 2006 797 119 36 Variance EBITDA in NOK 115 Conversion (NOK vs. USD) 55 Variance EBITDA 170 27 8 Volume & mix 35 6 2 Price/Margin 267 43 13 Energy arbitrage (38) (6) (2) Energy cost in E
Slide 49: Another 30-year low for grain stocks-to-use supports high demand for fertilizer
49 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% 2007F 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 So
Slide 50: 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) 300 281 350 250 227 264 259 295 214 223 241 209 250 300 196 217 200 250 221 229 232 200 212 200 150 150 150 100 100 100 50 50 50 0 0 0 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 1Q 0
Slide 51: 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) 300 250 220 223 250 240 245 212 250 229 200 186 175 200 185 165 200 139 146 150 150 140 138 117 124 119 111 150 121 101 96 110 103 110 84 94 100 100 100 86 100 84 67 50 50
Slide 52: 10-year fertilizer prices – monthly averages
52 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 53: 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 220 350 200 300 180 160 250 140 200 120 100 150 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1Q07 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1Q07 Corn (US Gulf) USD/t Soybeans (cif Rotterdam
Slide 54: Income statement
54 Income statement NOK millions 1Q 2007 1Q 2006 Revenue and other income 13,494 11,736 Operating income 1,063 758 Share of net income in non-consolidated 321 327 investees Interest income and other financial income 76 71 Interest expense and other financial items (121) (110) Foreign exchange gain (
Slide 55: Consolidated balance sheets
55 Consolidated balance sheets NOK millions 31 Mar 2007 31 Mar 2006 Deferred tax assets 1,164 1,368 Property, plant and equipment 7,451 7,305 Other non-current assets 7,413 4,802 Inventories 6,395 6,534 Receivables 8,213 6,670 Other current assets 1,785 1,487 Cash and cash equivalents 624 557 Total
Slide 56: 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