2014-10-22 - 3q 2014 web presentation
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IR-Date: 2014-10-22
0
22 October 2014
Yara International ASA
Third quarter results 2014
IR-Date: 2014-10-22
1
Strong result with record deliveries
Continued margin benefit from lower European gas prices
Strong fertilizer production; lower ammonia production in Pilbara and Lifeco
Record Industrial result
Summary third quarter
IR-Date: 2014-10-22
2
10.02
7.73
12.42 11.84
10.54 9.82
9.25
7.67
8.04 6.69
5.66
0.23
6.40
8.26
6.18
Earnings per share*
• Average number of shares for 3Q 2014: 276.2 million (3Q 2013: 277.6 million).
NOK 41.99 37.31 20.67 20.84
Annual 2011 2012 2013
EPS excluding currency and
special items
2014
IR-Date: 2014-10-22
3
Continued robust fertilizer demand
Higher urea prices; continued curtailments in China, Ukraine and Egypt
Western Europe nitrogen fertilizer industry deliveries 5% higher
Higher phosphate prices and upgrading margins than last year
Strong demand for value-added fertilizer products
Fertilizer market development
IR-Date: 2014-10-22
4
Food prices below 5-year average
Source: FAO
0
50
100
150
200
250
300
1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014
Index
FAO price index
Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg.
IR-Date: 2014-10-22
5 Nitrogen deliveries in Europe and USA close
to normal
0.0
0.5
1.0
1.5
2.0
2.5
3Q10 3Q11 3Q12 3Q13 3Q14
Domestic Imports
Source: Yara estimate for fertilizer deliveries to selected West European countries.
Total nitrogen deliveries based on TFI, US Trade Commission, Blue-Johnson and Yara estimates
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
3Q10 3Q11 3Q12 3Q13 3Q14
Production Net imports
West Europe USA
+12%
+5%
Million tons N Million tons N
IR-Date: 2014-10-22
6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
13/14
Source: BOABC, CFMW
12/13
Chinese urea: production decline despite
significant capacity increase
14/15
0
50
100
150
200
250
300
350
400
450
500
550
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2 200
2 400
Black Sea
USD/t
Chinese exports
(kilotons)
Chinese production
(kilotons)
Jul-Aug 11.7 mt
(12.1 mt Jul-Aug last year)
Year-to-date 47.5 mt
(48.2 mt year-to-date last year)
Jul-Aug 2.4 mt
(2.8 mt Jul-Aug last year)
Year-to-date 6.6 mt
(4.1 mt year-to-date last year)
IR-Date: 2014-10-22
7
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
3Q10 3Q11 3Q12 3Q13 3Q14
CAGR 12%
Long-term growth in deliveries outside Europe
Kilotons
Yara fertilizer deliveries (by quarter)
Europe Overseas
IR-Date: 2014-10-22
8
Brazil: Yara benefiting both from Bunge
acquisition and increase in industry deliveries
Brazil fertilizer industry deliveries (Jan-Sep)
0
5 000
10 000
15 000
20 000
25 000
2011 2012 2013 2014
+7%
Kilotons
Yara Brazil fertilizer deliveries1 (Jan-Sep)
Kilotons
Source: ANDA, Yara 1) Excluding trade
0
1 000
2 000
3 000
4 000
5 000
6 000
2011 2012 2013 2014
Th
ou
san
ds
IR-Date: 2014-10-22
9
Earnings before interest, tax, depreciation and
amortization (EBITDA)
4 281
3 455
5 444
4 982
4 310
4 966
4 103
3 591
4 184 4 039
3 318
1 858
3 591
4 227
3 964
2011 2013 2012 2014
NOK
millions 18,163 16,970 13,399 11,782
Annual
EBITDA excluding special
items
NOK millions
IR-Date: 2014-10-22
10
EBITDA development
68 109
891
132
222151
EBITDA
3Q14
3,964
Currency Other EBITDA
3Q13
Special
items
Volume & mix Gas & oil
costs in
Europe
Price/margin
3,318
NOK millions
IR-Date: 2014-10-22
11
Improved earnings for all segments
1 094
1 463
304 420
1 797
2 293
Downstream Industrial Upstream
EBITDA excluding special items
3Q13 3Q14
EBITDA
(NOK millions)
IR-Date: 2014-10-22
12
0
100
200
300
400
500
600
700
3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
USD/t
Nitrogen upgrading margins1 (monthly publication prices)
Urea CFR CAN (46% N) NH3 CFR (46% N)
Value
above gas
Value above
ammonia
Nitrate premium
above urea
Yara EU gas cost *20
Improved European nitrogen margins; nitrate
premium in line
0
20
40
60
80
100
120
140
160
180
3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
European nitrate premium2 (quarterly Yara realized)
2) Yara European realized nitrate prices compared with urea
publication prices with one month time lag. All numbers in USD
per ton of CAN equivalents. 1) All prices in urea equivalents
IR-Date: 2014-10-22
13
0
100
200
300
400
500
600
700
3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
USD/t
Phosphate upgrading margins
DAP, fob USG
Rock, fob NA *1.4
Value above
raw material
0
100
200
300
400
500
600
700
3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
USD/t
NPK premium over blend1
NH3, fob Black Sea *0.22
DAP, fob Morocco
MOP, cfr NWE
Urea, fob Black sea
Solid commodity phosphate margins and NPK
premiums
Weighted average global
premium above blend cost
1) Export NPK plants, average grade 19-10-13, net of
transport and handling cost.
Nitrate premium
IR-Date: 2014-10-22
14
(51) (36)
(660)
(891)
(650)
(500)
(1 000)
(900)
(800)
(700)
(600)
(500)
(400)
(300)
(200)
(100)
0
4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
NOK millions
October 2014 estimate**
** Based on forward prices as of 14 October 2014
Lower natural gas cost in Europe
Source: Yara, World Bank, Platts
*Dotted lines denote forward prices as of 14 October 2014
Yara European gas & oil cost
Actual for quarter
Change in European energy cost
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
USD/ MMBtu
Zeebrugge (1-month lag) Yara Europe
IR-Date: 2014-10-22
15
1 305 1 390
1 009 1 009
1 402
1 713
1 112
1 296
258 274
569
941
3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14
Yara-produced deliveries Joint venture & third party sourced Total
Fertilizer deliveries by product and source
Nitrate NPK compounds NPK blends Urea UAN
Kilotons
Other
IR-Date: 2014-10-22
16
Net interest-bearing debt development
308549
248
4,963
Other Yara dividend Net debt
Sep 14*
Net operating
capital
change
Dividends
from equity-
accounted
investees
447
Investments
net
1,860
Cash
earnings**
3,194
Net debt
Jun 14*
3,347
FX loss
164
Share buy
backs &
redemption
2,743
* Included in net interest-bearing debt are external bank time deposits (4-12 months), this is part of other current assets in balance sheet
** Operating income plus depreciation and amortization, minus tax paid, net gain/loss on disposals, net interest expense and bank charges
NOK millions
IR-Date: 2014-10-22
17
Prospects
IR-Date: 2014-10-22
18
Incentives for nitrogen application remain supportive despite recent decline
in grain prices
Continued nitrogen curtailments in China, Ukraine and other export regions
Capacity outside China: limited greenfield additions next two years; and
gas availability uncertain for some locations
Strong European order book at start of fourth quarter
Expected further gas cost reduction of NOK 1.15 billion in Europe next two
quarters
OFD acquisition completed in October, and Galvani completion due in
fourth quarter
Prospects
IR-Date: 2014-10-22
19
Galvani acquisition (Brazil) improves raw
material and production integration
Current assets:
– Three mining operations with a total
production of ~500kt phosphate rock
– Two industrial sites with a total
granulation capacity ~1,000kt
Future additions (partly
replacement):
– ~2 million tons phosphate rock from
two new mines.
• Serra do Salitre (greenfield) 1,200 kt
• Santa Quiteria (greenfield) 800 kt
• Angico (brownfield) additional 150 kt
2013 Galvani EBITDA USD 48
million
Two existing fertilizer production sites
Three existing mining operations
Two new mining projects under development
Distribution terminal/Port import terminal
IR-Date: 2014-10-22
20
250 kt NPK and Calcium Nitrate expansion in
Porsgrunn, Norway
Strong Downstream demand for
additional value-added fertilizer
volumes
Brownfield investment of NOK
2,250 million
Project adds 200 kt calcium nitrate
and 50 kt compound NPK annual
capacity
Enables further 150 kt NPK and 35
kt calcium nitrate annual capacity
in Glomfjord and Uusikaupunki
through optimization
Completion during 2017
IR-Date: 2014-10-22
21
YaraLiva benefits cash crops in particular
YaraLiva provides soluble and
strength-building calcium,
alongside nitrate-N (15.5%)
Products containing calcium
nitrate as the key component
are sold under YaraLiva brand
Calcium used for good rooting,
stress-free growth, strong cell
walls, improved fruit quality and
better storage.
Stable pricing, typical range 400
– 600 USD/t1
Yara’s current annual capacity
approximately 1.1 million tons2
1) Prices are before freight, and other handling cost. Products sold
at different points in value chain, and reflects different types of product.
2) Dry product equivalents
IR-Date: 2014-10-22
22
IR-Date: 2014-10-22
23
Additional information
IR-Date: 2014-10-22
24
NOK millions
Total Yara contribution
Value-added upgrading and distribution make
up larger part of Yara’s contribution
9,000
8,000
5,000
7,000
6,000
4,000
3,000
2,000
1,000
0
3Q14 1Q14 1Q10
Commodity Europe
Commodity overseas
Upgrade & distribution
Trade
1Q13 3Q13 3Q12 3Q11 1Q11 1Q12 3Q10
IR-Date: 2014-10-22
25
0.75
0.49
0.20
0.07
-0.04
0.05
0.63
0.38
0.22
0.08
0.01
0.06
0.57
0.32
0.12 0.06 0.06
0.08
0.56
0.27
0.12
0.02
0.06
2009 2010 2011 2012 2013 2014
Debt/equity ratio
Net interest-bearing debt / equity ratio (end of period)
IR-Date: 2014-10-22
26
4.0 4.4 4.2 4.4
4.1
3.3
2.5 2.3 2.9
3.4 3.5 4.0
3.6 3.9
5.2 4.6
3.9 3.9 3.9 4.0
4.8
5.7
7.6
8.3 8.3 8.6
7.9 7.7
8.1 8.3 8.3
8.5
7.5
7.8 8.1
6.1 6.7 7.1
4.7
6.6
9.0
9.5 9.2 9.0 9.3 9.1
9.1
10.3 11.1
10.3 10.1 10.7 9.7
7.6
7.0
8.39
8.99
6.6
7.6
10.1
11.1 10.9 10.8 11.0 11.0 10.8
11.4 11.5 11.9
10.8 11.2 11.3
9.2 7.5
8.7
9.5
0
2
4
6
8
10
12
14
2009 2010 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
US gas price (Henry Hub) Yara Global Zeebrugge day ahead Yara Europe
Gas & oil cost
USD per MMBtu
Source: Yara, World Bank, Platts
Yearly averages 2009 – 2010, quarterly averages for 2011-15 with forward prices* for 4Q14 and 1Q15
*Dotted lines denote forward prices as of 14 October 2014
IR-Date: 2014-10-22
27
Currency exposure affecting Profit & Loss
At the beginning of the fourth quarter 2014
1. The US dollar debt generating profit & loss exposure was USD 1,400
million
• Kept as hedge of future earnings and to finance inventories in emerging markets
• Around 60% towards BRL with the rest towards other emerging market currencies,
NOK and EUR
• The debt level in emerging markets will fluctuate with fertilizer seasons
2. Additional profit & loss exposure from internal currency positions vs.
NOK
• Payables mainly CAD (200 million)
• Receivables mainly EUR (320 million)
IR-Date: 2014-10-22
28
5 256 5 179
4 763
6 104 6 284
6 017
4 742
3 496
4 882
5 210 5 216
4 791
5 129
4 759
5 474
4 914
5,296
4 970 4 834
4 239
5 437 5 253
5 013 5 044
5 297
6 342
5 884
6 146
6 389 6 496
6 848
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
Europe Outside Europe Total
Fertilizer deliveries
Kilotons
2010 2007 2008 2009 2011 2012 2013 2014
IR-Date: 2014-10-22
29
Yara 3Q fertilizer sales by market and product
2 138 2 377
544 573 252
2 195
3 120
515 673
345
Europe Latin America Asia North America Africa
3Q13 3Q14
1 009
1 402 1 305 1 112
569
258 229
1 009
1 713
1 390 1 296
941
274 225
NPK compounds NPK blends Nitrate Urea Other products UAN CN
Kilotons
IR-Date: 2014-10-22
30
500
600
700
800
900
1 000
1 100
1 200
1 300
1 400
3Q10 3Q11 3Q12 3Q13 3Q14
NPK and nitrate deliveries
Kilotons
500
700
900
1 100
1 300
1 500
1 700
3Q10 3Q11 3Q12 3Q13 3Q14
Yara-produced nitrate deliveries
Kilotons
Yara-produced compound NPK deliveries
IR-Date: 2014-10-22
31
Industrial deliveries
876867843
896
837860
816
438455
382432
374368343 356342
313337346342
304
2Q14 1Q14 4Q13 3Q13 2Q13 1Q13 3Q14
Other Environmental products Industrial N-chemicals
Kilotons
IR-Date: 2014-10-22
32
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
50
100
150
200
250
300
350
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14
Europe North America ROW % of total Industrial deliveries
Strong growth in Air1 deliveries
Kilotons
> 1 million tons of
product sold L12M
IR-Date: 2014-10-22
33
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
Kilotons
Urea Nitrates NPK CN UAN SSP - based fertilizer
2013 2010 2011 2012 2014
Yara production volume*
0
500
1 000
1 500
2 000
2 500
Kilotons
2014
* Including share of equity-accounted investees
Finished fertilizer and industrial products Ammonia
2013 2010 2011 2012
IR-Date: 2014-10-22
34
Production curtailments in Ukraine and Egypt
Ukraine urea exports (Jan-Jun)
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
2013 2014
-60%
Kilotons
Egypt urea exports (Jan-Jun)
Kilotons
Source: IFA
0
100
200
300
400
500
600
700
800
900
1 000
2013 2014
-17%
IR-Date: 2014-10-22
35
Farm economics supportive, despite grain price
decline
Source: FAO
IR-Date: 2014-10-22
36
Source: USDA October 2014
For 2014/15, global grain production expected
to moderately exceed consumption
1 950
2 000
2 050
2 100
2 150
2 200
2 250
2 300
2 350
2 400
2 450
2 500
06 07 08 09 10 11 12 13 14E 15F
Million tons
Consumption Production
Grain consumption and production Days of consumption in stocks
55
60
65
70
75
80
85
06 07 08 09 10 11 12 13 14E 15F
Days
IR-Date: 2014-10-22
37
12.1
2.4 9.7 9.3
2.4
11.7
0
2
4
6
8
10
12
14
Pro
du
ctio
n
Expo
rt
Dom
estic
Dom
estic
Expo
rt
Pro
du
ctio
n
Million tons
4.8
5.0
5.2
5.4
5.6
5.8
6.0
6.2
6.4
6.6
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Million tons
13/14
Source: BOABC, CFMW
12/13
Production not increasing
Chinese urea production Domestic urea balance
Jul-Aug 13/14 Jul-Aug 14/15
-5%
14/15
IR-Date: 2014-10-22
38
Source: CRU urea update September 2014 . Consumption data source is IFA.
Year Driving regions Urea capacity growth relative
to nitrogen capacity
Excluding China Excluding China
2014 Algeria 16%
Egypt 15% 1.5%
2015 Saudi Arabia 20%
USA 19% 2.1%
2016 USA 42%
India 11% 2.3%
2017 Nigeria 32%
USA 24% 2.2%
2018 Nigeria 55%
Russia 17% 1.3%
Gross annual addition 2014-2018 ~1.9%
Assumed annual closures ~0.5%
Net annual addition 2014-2018 ~1.4%
Trend consumption growth from 2002 2.1%
Projected nitrogen capacity additions outside
China
IR-Date: 2014-10-22
39
-
1 000
2 000
3 000
4 000
5 000
6 000
Kilotons Finished fertilizer
Urea Nitrates Compound NPK Other
Yara stocks: normal level, adjusted for Bunge
Bunge Fertilizer
included from 3Q 2013
IR-Date: 2014-10-22
40
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Index June 2007=1
13/14 08/09 09/10 10/11 11/12 12/13 14/15
Source: Fertilizers Europe, Yara estimate for September
European producer nitrate stocks ending the
season close to average
IR-Date: 2014-10-22
41
-200
-100
0
100
200
300
400
500
Jan-07Jul-07 Jan-08Jul-08 Jan-09Jul-09 Jan-10Jul-10 Jan-11Jul-11 Jan-12Jul-12 Jan-13Jul-13 Jan-14Jul-14
Thousand contracts
Source: US Commodity Futures Trading Commission
Non-commercials’ net long position in corn
IR-Date: 2014-10-22
42
Key value drivers – quarterly averages
308 314 338
299 320 336 354
414
358 358
3Q13 4Q13 1Q14 2Q14 3Q14
Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (USD/t)
294 291
345 354
309
3Q13 4Q13 1Q14 2Q14 3Q14
CAN cif Germany (USD/t)
3.6 3.8
5.2
4.6
3.9
3Q13 4Q13 1Q14 2Q14 3Q14
US gas price Henry Hub (USD/MMBtu)
10.1 10.7
9.7
7.6 7.0
3Q13 4Q13 1Q14 2Q14 3Q14
Zeebrugge day ahead (USD/MMBtu)
6.0
6.1 6.1
6.0
6.3
3Q13 4Q13 1Q14 2Q14 3Q14
NOK/USD exchange rate
430 417 438 485 488
3Q13 4Q13 1Q14 2Q14 3Q14
Ammonia fob Black Sea (USD/t)
Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
IR-Date: 2014-10-22
43
10-year fertilizer prices – monthly averages
Source: Average of international publications
0
200
400
600
800
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD/t Urea prilled fob Black Sea/Urea granular fob Egypt
Average prices 2004 - 2013
0
200
400
600
800
1 000
1 200
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD/t DAP fob US Gulf/MOP granular fob Vancouver
0
100
200
300
400
500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD/t CAN cif Germany
0
200
400
600
800
1 000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD/t Ammonia fob Black Sea
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