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Presentation from Yara International's Capital Markets Day on 26 November 2013.

Presentation from Yara International's Capital Markets Day on 26 November 2013.

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  • 1. 0 Capital Markets Day 2013 26 November 2013 IR – Date: 2013-11-26
  • 2. 1 Content  Track record and strategy  Commodity market focus  Downstream focus  Supply & Trade focus  Upstream focus  Financial performance & scenarios IR – Date: 2013-11-26
  • 3. 2 Track record and strategy Jørgen Ole Haslestad, President & CEO IR – Date: 2013-11-26
  • 4. 3 Safety culture drives performance Zero is impossible Zero is a dream Zero by Chance Zero by Choice Natural Instincts Dependent Independent Inter-dependent self preservation management / rules & discipline / control / being cared for personal knowledge / individual ownership / care for my self team spirit / pride / collective ownership / care for others IR – Date: 2013-11-26
  • 5. 4 Safety in Yara and our way forward  It is a framework to develop a Yara Safety Culture that reduces exposure to injury  Where we all – – – Share the responsibility for safety Taking care of each other As well as ourselves   IR – Date: 2013-11-26 This development has to deliver a sustainable improvement Achieve a higher level of quality and consistency in all of us applying our procedures and tools
  • 6. 5 Global megatrends profoundly impact Yara’s businesses Global growth Urbanization Climate change Globalization Resource scarcity IR – Date: 2013-11-26
  • 7. 6 Creating Impact is Yara’s strategic ambition • Creating Impact is Yara’s strategic ambition, expressed through our mission of striving for better yield, delivering good returns to customers, owners and society at large. • Creating Impact provides focus and direction for Yara’s strategy processes, innovation, business development and everyday business conduct • Creating Impact means Yara will grow by delivering profitable business solutions to the human challenges of food security, resource scarcity and environmental degradation IR – Date: 2013-11-26
  • 8. 7 Huge amounts of value can be unlocked by optimizing value chains Raw material extraction Manufacturing Distribution Retail Logistics • • • Purcha sing/ Aggregation Food processing Farmer Distribution Logistics Retail Consumer Value chain partnerships, particularly with multinational food companies, show significant potential of unlocking value More sustainable value creation for farmers, higher yield with reduced loss and less use of resources Key to success is fair sharing of value created IR – Date: 2013-11-26 Yara’s positioning
  • 9. 8 Creating impact in practice Pollution from industry, municipalities and agriculture Solution: Yara commitment to improve farm performance Yara’s P-trap: Phosphorous leakage -60% from treated acreage Baltic Sea commitment Rollout of Yara NSensor precision tool Win-win: Farm profitability + environment + Yara sales Will be adapted to Yara fertigation systems +5% yields, -20% water consumption Expected sales of 50,000+ units next 10 years Acquiring of ZIM crop water sensor technology Additional 300,000 tons Yara value added product Water saving ~consumption of Norway Current market size 13 mill hectares IR – Date: 2013-11-26
  • 10. 9 Strong return on investment through the cycle Cash Return on Gross Investment (12-month rolling average) 25% 20% 15% 10% 5% 0% 2004 2005 2006 2007 Ex special items IR – Date: 2013-11-26 2008 2009 2010 2011 Long-term target 2012 L4Q
  • 11. 10 Reliability investments drive production increases Finished fertilizer Ammonia Kilotons Kilotons 5,000 2,000 4,500 1,900 4,000 1,800 3,500 1,700 3,000 1,600 2,500 1,500 2,000 1,400 1,500 1,300 1,000 1,200 500 1,100 0 1,000 2011 2012 * Including share of equity-accounted investees IR – Date: 2013-11-26 2013 2011 2012 2013
  • 12. 11 Long-term growth in NPK deliveries outside Europe Yara-produced NPK deliveries Kilotons 1,400 1,200 1,000 800 600 400 CAGR 18% 200 0 3Q09 3Q10 Overseas IR – Date: 2013-11-26 3Q11 3Q12 Europe 3Q13
  • 13. 12 Value-added products deliver an increasing share of Yara’s contribution Total Yara contribution NOK millions 9,000 8,000 Trade 7,000 6,000 Upgrade & distribution 5,000 4,000 3,000 Commodity overseas 2,000 1,000 Commodity Europe 0 1Q10 3Q10 1Q11 IR – Date: 2013-11-26 3Q11 1Q12 3Q12 1Q13 3Q13
  • 14. 13 Growth ambition remains firm Growth in own-produced and JV volumes  Ambition is based on identified Downstream market opportunity and capability  Capital discipline and opportunitydriven timing  Opportunities both within commodity and value-added products +8.0 32.5 24.5 2010 IR – Date: 2013-11-26 Target
  • 15. 14 Delivering growth in Latin America with Bunge acquisition How Bunge acquisition will change Yara 1,000 km Market position #5 USD/t ~60 #1 Employees ~1k ~2k 11 35 Industrial units Northeast Acquired Bunge plant Yara plant Mato Grosso West Bahia IR – Date: 2013-11-26 Paraná Minas Gerais Rio Grande do Sul Market size São Paulo
  • 16. 15 Delivering growth in Latin America: with Bunge acquisition – and OFD Group  Value-added N production in Colombia (Abocol)  Distribution companies across Latin America  FTEs 2012: 959 USD million 2010 2011 2012 540 820 796 47 64 35 K tons 2010 2011 2012 Total net volumes 1,030 1,261 1,131 Net Revenues EBITDA IR – Date: 2013-11-26
  • 17. 16 Yara Pilbara Nitrates project progressing well   Overall construction close to 60% completion*, excellent safety record  IR – Date: 2013-11-26 Plant ideally located in the world’s biggest iron ore mining region  * As of 21 November 2013 330ktpa capacity AN plant, JV with Orica and Apache (Yara share: 45%) Expected commissioning is mid to late 2015
  • 18. 17 Potential joint investment in world-scale ammonia plant on US Gulf coast  Attractive long-term partnership: – – BASF has strong existing presence in the United States and ammonia sourcing requirement for US downstream activities, investment would further strengthen backward integration Yara has a strong global ammonia production and trade network, investment would further strengthen this position, and increase its North American upstream presence  US Gulf location advantageous due to existing industry infrastructure, construction resources and natural gas  Location, capacity and other project parameters currently under discussion IR – Date: 2013-11-26
  • 19. 18 Growth is progressing and pipeline is strong Growth in own-produced and JV volumes  Executed & pipeline projects so far are mainly plant expansions  Bunge production tons are limited, but acquisition gives significant footprint for future upstream growth  Further investments under evaluation +8.0 32.5 24.5 2.4 Commodity: Qafco V & VI: 0.7 Sluiskil: 0.5 Bunge: 0.3 Value-added: OFD 0.5 Porsgrunn 0.3 Pilbara TAN 0.2 2010 Executed / in execution IR – Date: 2013-11-26 0.9 Commodity: BASF 0.4* Value-added: Porsgrunn 0.3 Uusikaupunki 0.2 Close to approval Pipeline / remaining Target
  • 20. Commodity market focus Dag Tore Mo, Head of Market Intelligence
  • 21. 20 Continued strong price incentives necessary to match consumption growth Grain consumption and production Days of consumption in stocks Million tons Days 2,500 85 2,450 80 2,400 2,350 75 2,300 2,250 70 2,200 2,150 65 2,100 2,050 60 2,000 55 1,950 06 07 08 09 10 Consumption Source: USDA, November 2013 IR – Date: 2013-11-26 11 12 13E Production 14F 06 07 08 09 10 11 12 13E 14F
  • 22. 21 Apparent urea consumption ex. China – up 3.4% in 2012 110 105 100 95 90 85 80 The trend from 2002-2012 shows a growth rate of 3.0%/year 75 70 2002 2003 Source: IFA IR – Date: 2013-11-26 2004 2005 2006 2007 2008 2009 2010 2011 2012
  • 23. 22 Urea supply outside China increased by 3.4% (3.5 million tons) in 2012, to 106.5 million tons Kilotons urea 4,000 2868 3,500 3,000 2,500 2,000 346 1,500 762 832 1,000 470 -556 -419 500 -773 Source: IFA Annual statistics IR – Date: 2013-11-26 China South Asia Rest of World Vietnam Egypt West Asia Latin America West Europe 0 3530
  • 24. 23 ..and global urea exports 1H2013 up 13% Kilotonnes urea 2,500 2,000 1,500 998 504 1340 -232 -195 22 1,000 -526 500 Source: IFA Quarterly Survey, Exports IR – Date: 2013-11-26 China Rest of World Iran Egypt Ukraine Russia West Asia 0 1911
  • 25. 24 India nitrogen consumption outpaces capacity Urea supply & demand 2005-2012 1,4% 4,6% 31,0 30,5 28,0 26,8 26,5 26,5 25,2 22,6 20,8 21,8 2005 2006 22,0 2007 22,0 2008 22,2 2009 22,6 2010 22,7 2011 23,0 2012 Production Consumption New subsidy policy aimed at increasing production – but limited gas available IR – Date: 2013-11-26
  • 26. 25 Projected nitrogen capacity additions outside China in line with historical consumption growth Year Driving regions Excluding China Qatar 19% Algeria 17% Iran 23% India 21% Algeria 25% Iran 13% USA 32% Indonesia 14% USA 31% Iraq 30% 2013 2014 2015 2016 2017 Urea capacity growth relative to nitrogen capacity Excluding China 1.4% (2.5%) 1.8% (1.8%) 3.5% (2.2%) 3.2% 1.5% Gross annual addition 2013-2017 ~2.3% Assumed annual closures ~0.5% Net annual addition 2011-2015 ~1.8% Trend consumption growth from 2002 2.1% Source: Fertecon urea update August 2013 (February update in brackets). Consumption data source is IFA. IR – Date: 2013-11-26
  • 27. 26 Chinese urea prices – the relevant floor prices? USD/mt 600 Urea fob Black Sea Urea price China (inland proxy price) 500 400 300 200 100 0 Source: China Fertilizer Market Week, International publications IR – Date: 2013-11-26
  • 28. 27 Production still gaining year on year, and ending up in the export markets Chinese urea production Domestic urea balance Million tons Million tons 7.0 30 13/14 6.0 12/13 11/12 25 24.2 23.2 -4.0% 5.0 19.7 20 19.0 3.5 4.0 5.2 15 3.0 10 2.0 5 1.0 Source: BOABC, CFMW IR – Date: 2013-11-26 Jul-Oct 12/13 Production Export Domestic Domestic Export Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Production 0 0.0 Jul-Oct 13/14
  • 29. 28 China swing scenario RMB/mt = 6.1 * USD/mt 301 1,650 200 + 50 1,900 = 311 X+10 X High export tax: 2185 (+15%) = 358 IR – Date: 2013-11-26
  • 30. 29 Downstream focus Egil Hogna, Head of Downstream IR – Date: 2013-11-26
  • 31. 30 Safety is first priority in Downstream, and goes hand-in-hand with productivity  Yara Downstream Productivity System promotes: – – Understanding of the link between safety and productivity – Exchange of best practice across sites – Operational team, Ghana Safety principles and tools at all levels, from business unit managers to operators Regular site audits  Bunge integration in Brazil: clear focus on Yara safety practices from Day 1  Major new terminal investments being completed now include Porto Alegre and Sumare (Brazil) and Dar Es Salaam (Tanzania), delivering significant productivity and safety benefits  Increased emphasis on “near miss” reporting to promote safety focus in Downstream. Improved blending and bagging, Guatemala New Sumare terminal, Brazil IR – Date: 2013-11-26
  • 32. Performance stabilizing last two years with growth compensating for tougher market Sales volumes (million tons) 19.5 20.7 22.5 EBITDA (USD millions) 912 674 2011 2012 Last 12M Gross operating capital days (12 months rolling) 93 92 92 2011 688 2012 Last 12M CROGI (cash return on gross investment) 20.9% 16.1% 2011 IR – Date: 2013-11-26 2012 Last 12M 2011 15.5% 2012 Last 12M 31
  • 33. 32 Portfolio is being driven towards greater product differentiation and profit Product portfolio (2012/13 season volume)  Differentiation improves margins and reduces exposure to commodity price volatility  On-going efforts to further increase differentiation through: 10% 35% 28% – Additional Nitrate+S and Urea+S – On-going optimization of NPK portfolio towards higher value segments – Innovation and market growth in high-value fertigation markets – Continued YaraVita growth 26% Standard products (Urea, UAN and Ammonia) Differentiated products (CAN, AN) Specialty (CN, Compound NPK, Fertigation) NPK blends IR – Date: 2013-11-26
  • 34. 33 Yara’s product portfolio is continuously improved to meet changing customer needs  Yara has over many years developed a wide, differentiated product offering  Continuous development of both new and improved differentiated products key to maintaining earnings in competitive global market  We will also seek out niche businesses for acquisition to help achieve this objective IR – Date: 2013-11-26
  • 35. 34 YaraVita: a specialty product success story YaraVita revenues, USD millions 110 CAGR +17% 78 81 2011/2012 2012/2013 68 58 2009/2010 2010/2011 IR – Date: 2013-11-26 BP 2014
  • 36. 35 Yara acquires ZIM crop sensor technology to increase water use efficiency  Agriculture consumes 70% of global freshwater resources; increased water scarcity drives demand for new agricultural solutions  Crop sensor technology can improve nutrient and water use efficiency in agriculture. The Yara N-sensor already has a leading role in precise nutrient application  ZIM Plant Technology GmbH water sensor technology: the most advanced and reliable crop measuring technology to monitor the water status of the crop  ZIM technology combined with Yara Crop Nutrition programs can deliver: – – IR – Date: 2013-11-26 Water use reduction of 20-30% –  Yield increase of 5-15% Crop quality improvement Yara’s ambition is to be the leading supplier of crop nutrition solutions for water scarce agriculture
  • 37. 36 YaraVita Procote: Cost effective vehicle for differentiation and better agronomic efficiency  Uses YaraVita micronutrient expertise in innovative new fertilizer coating products  Allows wider differentiation within Downstream with minimal complexity  Very strong agronomic and material handling feedback in test markets  Expect approximately 2% of Yara’s fertilizer with Procote in 2014 Fertilizer Micronutrient coating IR – Date: 2013-11-26
  • 38. 37 “Brazil will replace USA as the bread basket of the world in the 21st century” (Source: FAO) IR – Date: 2013-11-26
  • 39. Unprecedented scale and technology; world class productivity Fazenda Planalto IR – Date: 2013-11-26 Mato Grosso 38
  • 40. 39 Fertilizer consumption tripled in the last 20 years, contributing to almost double productivity Planted area (million ha) Grains production (million tn) Mill. hectares Fertilizer consumption (million tn) Mill. tons 200 30 +204% 180 27 160 24 140 21 120 +143% 100 18 15 80 12 60 9 40 6 +42% 20 0 3 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: ANDA and Conab IR – Date: 2013-11-26
  • 41. 40 Seasonality in deliveries: peak in second half Brazil fertilizer industry monthly deliveries as percent of full year (avg. 2012-13) 13%  The three crops soy, sugarcane and corn account for ~65% of fertilizer consumption in Brazil  Main planting and application for soy and corn first season is in third quarter 12% 11% 10% 9% 8% 7% 6% – 5% Sugarcane is relatively evenly distributed throughout the year 4% 3%  2% 1% 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec IR – Date: 2013-11-26 Second corn crop planting and application in first quarter
  • 42. 41 Being a major player in Brazil is of strategic importance to Yara Potential Brazil has by far the greatest reserve of potential arable land Fertilizer growth Brazilian fertilizer demand is expected to grow at >3.5% Global arable land (global top 14); M HA 100% 392 267 217 260 168 142 Global rank 2012 1st 80 1st Land used Soybean Exports 60 3rd 3rd Sugar cane 1st 1st Coffee 1st 1st Orange 1st 14 12 1st 40 8 6 P 4 20 2 0 Source: USDA, FAPRI K 10 Potential Maize (in million kt og nutrients) 18 16 Product Production Nutrients consumption Brazil EU USA RUS China India N 0 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Size Brazil already is one of the most important agricultural producers Source: FAO As a USD business, Brazilian agriculture represents a natural currency hedge IR – Date: 2013-11-26 Average annual growth all nutrition 6.4% over the period 1991-2011 (Source: IFA)
  • 43. 42 Brazil is an open import market with a de-regulated fertilizer distribution sector Brazil fertilizer deliveries 2006 2007 2008 Source: IFA Imp 2009 2010 Brazil fertilizer players by sales volume 2011 Prod Yara Bunge HeringerMosaic Fertipar ADM Others Source: Yara internal N and K are predominantly imported products. Petrobras is the main local producer of N and Vale the local producer of K. P is close to 50/50 local production/import. The biggest Pproducer is Vale followed by Anglo American IR – Date: 2013-11-26 Through the Bunge acquisition there has been a consolidation of the fertilizer distribution market ~100 local blenders and distributors, down from ~300 15 years ago
  • 44. 43 Significantly improved footprint in Brazil Acquired Bunge plant Yara plant Market size How Bunge acquisition will change Yara 1,000 km Market position #5 USD/t ~60 #1 Employees ~1k ~2k 11 35 Industrial units Northeast Mato Grosso Paraná West Bahia Minas Gerais São Paulo Rio Grande do Sul IR – Date: 2013-11-26
  • 45. 44 Integration and synergy harvest on track Total USD 50 million 35% • Operations: - Plant & overhead optimization - Storage cost reduction - Equipment leasing contracts • Local logistics & procurement : - Gains in scale - Optimization of product flows 20% • Supply: - Maritime freight: larger vessels, fewer stops, more FOB - Discounts / rebates 35% 10% • Other: - Commercial optimization - IT cost savings Legal merge effective 1 November; joint operation running well and minimum annual synergies of USD 50 million to be realised by 2014 IR – Date: 2013-11-26
  • 46. 45 Value-added products drive commercial synergies through increased footprint Brazil value-added product deliveries (kilotons) 900  Significant growth track record for Yara value-added fertilizer products exported from our European production facilities to Brazil  The enlarged scale of the operation will enable us to extend the reach of our valueadded portfolio 800 700 600 500 400 300 200 100 0 2007 2008 2009 2010 2011 2012 YaraBela YaraLiva YaraMila (T16) YaraMila (Other) IR – Date: 2013-11-26
  • 47. 46 Acquiring Bunge Fertilizer has positioned Yara as “THE” Downstream player in Brazil  Although the Bunge Fertilizer acquisition is a solid business case on a stand alone basis……  ……a further backwards integration with Upstream assets to capture the full market upside is being studied – Our assumption is that good opportunities will arise  The main focus will be on P (acquire or build) and N (acquire)  Timing is everything in asset positioning IR – Date: 2013-11-26
  • 48. 47 Overview of the OFD Group of companies   The OFD Group comprises value-added N production in Colombia (Abocol) and SSPproduction in Colombia (Fosfatos) in addition to distribution companies across Latin America: – OFD Comercial: Colombia – Omagro: Mexico – Misti: Peru – Norsa: Bolivia – Fertitec: Costa Rica and Panama FTEs 2012: 959 USD million 2010 2011 2012 540 820 796 47 64 35 K tons 2010 2011 2012 Total net volumes 1,030 1,261 1,131 Net Revenues EBITDA Note: above figures are based on actual ownership % in the various companies and are estimated net of intercompany sales IR – Date: 2013-11-26
  • 49. 48 Downstream infrastructure and sales volume Sales volume (kt) VERACRUZ (Storage: 60 k ton) (Blends: 264 k ton/y) 2012 264 297 241 CN 75 88 73 AN-Solution 34 54 61 76 151 145 556 642 581 1,030 1,261 1,131 Own Blends TOPOLOBAMPO (Storage: 42 k ton) TPP MANZANILLO (Storage: 40 k ton) 2011 OPP COATZACOALCOS (Storage: 30 k ton) LIMON (Storage: 19 k ton) 2010 NPK ALTAMIRA (Storage: 40 k ton) Straights Total1 CALDERA (Storage: 21 k ton) (Blends: 80 k ton/y) BUENAVENTURA (Storage: 32 k ton) PAITA (Storage: 31 k ton) SALAVERRY (Storage: 76 k ton) (Blends: 20 k ton/y) Warehouse type CARTAGENA (Storage: 109 k ton) (Blends: 42 k ton/y) MANZANILLO – CRISTOBALCOLON (Storage: 3 k ton) CHIRIQUI (Storage: 10 k ton) (Blends: 43 k ton/y) CALLAO (Storage: 38 k ton) OWNED PISCO (Pisco: 31 k ton) LEASED MATARANI (Storage: 35 k ton) (Blends: 20 k ton/y) THIRD-PARTY 1 IR – Date: 2013-11-26 Total includes other being small volumes of SSP and Liquids
  • 50. 49 Upstream infrastructure and capacities Site overview in Cartagena, Colombia Port and South Plant, Cartagena North Plant 8 Ha. Expansion 8 Ha. Port 6 Ha. South Plant 21 Ha. Production capacity kt 117 241 NPK 320 CN CN plant Ammonia Nitric Acid NPK plant 100 AN-Solution IR – Date: 2013-11-26 70
  • 51. 50 Transaction rationale  Secure value-added fertilizer production facility in Latin America with NPK, CN and nitrate capacity  Strong foothold in attractive and growing Latin American cash-crop focused fertilizer markets  Platform for further growth in the region, complementary to strong position in Brazil with Bunge acquisition  Improve value offering to farmers with increased yields  Yearly synergy potential of USD 20m by optimizing logistics and sourcing, and substituting third-party sourced products with value-added Yara products IR – Date: 2013-11-26
  • 52. 51 Downstream focus and priorities Our goal 2014 focus Safe and productive operations Be the crop nutrition provider adding the most value after own costs to any fertilizer product from plant gate to customer Our priorities Further improved safety and productivity Knowledge leadership in sustainable agriculture and crop nutrition Creating pull for Yara solutions working with food companies and other stakeholders Farmer and distributor preference for Yara solutions driven by engaging tools Innovation a clear market differentiator: adapting to a water scarce world IR – Date: 2013-11-26 Integrate new acquisitions and pursue further growth Innovation and agronomy leadership to sustain premium margins
  • 53. 52 Supply and Trade focus Alvin Rosvoll, Head of Supply and Trade IR – Date: 2013-11-26
  • 54. 53 Supply & Trade – global optimization Biggest industrial buyer of natural gas in Europe Third single biggest buyer of P&K globally Gas consumption, MMBtu 2012 raw material purchases (mt) 5.3 185 Significant market share on trade 2012 annual trade volumes (mt) 43 21.3 115 2.8 3.0 19 11 3.3 25 23% Europe Canada RoW China = BASF JV IR – Date: 2013-11-26 Potash, MOP *72 BPL Phosphate rock* India Yara incl. Bunge 9% 30% Ammonia Urea NPK Yara share
  • 55. 54 Leading global position in ammonia trade Europe 6.1 4.9 5.1 Available • Yara-operated ammonia fleet Demand unrivalled giving scale and flexibility Americas 2.5 2.3 Middle East / Africa 1.5 Available 1.1 Demand 0.7 Available Available • Operate 18 ships Asia Demand Demand Australia 0.8 BASF JV 0.3 Marketing agreement Yara production External sales Upgrade IR – Date: 2013-11-26 Available Demand • Total shipping capacity of ~260 kilotons
  • 56. 55 Yara is short on ammonia in Europe Million tons Consumption 4.9 Available Integrated Flexible 1.6 0.3 2.1 1.5 0.5 NH3 production Urea/UAN IR – Date: 2013-11-26 Tertre Nitrates Nitrates NPKs -1.1 IND off-take Short position
  • 57. 56 High sourcing flexibility for European nitrate and NPK plants Yara European ammonia production Available Integrated Flexible NH3 Urea/UAN Tertre Nitrates production Nitrates IR – Date: 2013-11-26 NPKs IND Short off-take position Nitrate and NPK plant locations
  • 58. 57 New ammonia vessels required to replace existing tonnage Remaining time charter – as of Nov 2013   IR – Date: 2013-11-26 Access latest design, lowering operating cost and meeting increasing regulations  Replacement period 2016 - > New build rates currently attractive  (Small vessels excluded) On-going need to secure medium/long term capacity Maintain global sourcing and trade flexibility
  • 59. 58 Bunge: increased scale drives maritime logistics savings 1 USD/t improvement on shipping = 6 MUSD Other Nitrates 6 million tons NPK Urea Phosphate MOP Pre Bunge IR – Date: 2013-11-26 Post Bunge
  • 60. 59 Upstream focus Gerd Löbbert, Head of Upstream IR – Date: 2013-11-26
  • 61. Getting tangible benefits from scale and know-how 16 7 23 12 8 3 Ammonia units Urea units Nitric Acid units (T)AN/CAN units NPK units SSP units IR – Date: 2013-11-26 + 61 Yara technology network
  • 62. 62 Where to focus in plant operations? Safety first non-negotiable Reliability is the best productivity investment Safety Reliability Cost IR – Date: 2013-11-26
  • 63. 63 Safe by Choice 20.0 18.0 16.0 TRI LTI 14.0 12.0 10.0 “Safe by Choice” The road to zero recordables 8.0 6.0 4.0 2.0 0.0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Recordable Injuries per million hours worked Evolution of the TRI Rate (Yara employees + Contractors) IR – Date: 2013-11-26
  • 64. 64 The road to an injury free working place Strong centralised safety system Building a common safety culture IR – Date: 2013-11-26 Reduce exposure to injuries Standardisation
  • 65. 65 Reliability program driving organic growth Volume development for NPK plants Production volumes improved via systematic company-wide approach IR – Date: 2013-11-26
  • 66. 66 Investing in Key Assets Strong focus on category A sites Capex distribution over asset base    47% 50% 2013 BP 2014 IR – Date: 2013-11-26 Approximately 1/3 of investments in 3 key sites Less than 10% in lower category  Strongly influenced by major turnarounds 41% 43% Cat A (7 sites) Strong focus on category A sites 9% 10% Cat B (10 sites) Cat C (6 sites)
  • 67. 67 External benchmarking Total Maintenance Cost (% of PRV) FOCUS 5.0 4.0 3.0 5.29 2.0 5.06 3.95 2.96 1.0 0.0 Total Study W-Europe (Chemicals & Refinery) (Chemicals & Refinery) # of Plants 339 61 Chemicals (Worldwide) Yara (Weighted Average) 189 Solomon benchmarking RAM effectiveness Index 8 Total Maintenance Cost = Sum of CRC Maintenance & OCO / SHE Investments Energy efficiency Bernchmarking (EFMA, PSI, etc) Global average = 36.9 EFMA average = 34.7 BAT existing plants = 31.8 IR – Date: 2013-11-26
  • 68. 68 Internal benchmarking Reliability benchmarking Site Personel Index (TPAI) IR – Date: 2013-11-26
  • 69. 69 Project Engineering Office Focusing on project development phase Multiple Purpose Gasification project Equipment additions to expand NPK capacity In Porsgrunn (+300 kT/y) IR – Date: 2013-11-26
  • 70. 70 Soaring construction cost in North America, but significant regional differences Industrial building cost index – based on USD/m2 US shale gas driving re-start of industrial sites and new builds, putting pressure on the construction market. Regional differences in construction cost: I A IR – Date: 2013-11-26 Canada: Foreign labour restrictions and Alberta tar sand projects drive tight labour markets. Modular plant assembly not possible for inland locations.  US North/Coastal: Tight labour markets, lower work force flexibility / mobility. Modular plant assembly not possible for inland locations.  A R  US South: Open shop labour market with higher work force mobility including skilled labour and engineers. Modular plant assemply option for coastal projects.
  • 71. 71 Upstream growth: plant expansions and new builds with competitive capex and feedstock Reconfiguration/expansion at existing sites, potential for increased NPKs, nitrates and CN Secure longer term partnerships with access to low cost raw materials for potential new builds IR – Date: 2013-11-26
  • 72. Financial update Torgeir Kvidal, CFO
  • 73. 73 Financial highlights  CROGI Strong results 25%  Increase in deliveries from completion of Bunge acquisition 20% 15%  Declining commodity fertilizer prices but robust value-added product premiums 10% 5%  Improved production regularity 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 L4Q  Record cash distribution IR – Date: 2013-11-26 Ex special items Long-term target
  • 74. 74 Financial scenarios are not forecasts, but illustrate potential earnings in given situations Model assumptions • Based on last 4 quarters EBITDA excluding special items • Bunge Fertilizer included on full-year basis • Production assumed at 95% of stated capacity 1. China “low swing” Scenarios 2. China “high swing” 3. Average prices last five years 4. USD 150 urea margin per ton above average of Chinese scenarios IR – Date: 2013-11-26
  • 75. 75 Yara sensitivities Operating Income USD million EBITDA USD million EPS* USD Urea sensitivity +100 USD/t 937 1,103 3.1 …of which pure Urea 285 416 1.2 …of which Nitrates 367 393 1.1 …of which NPK 211 220 0.6 Nitrate premium +50 USD/t 468 498 1.4 …of which pure Nitrates 289 311 0.9 (145) (162) (0.4) Ammonia + 100 USD/t 30 86 0.2 Phos rock + 50 USD/t 50 50 0.1 Hub gas North Am + 1 USD/MMBtu (26) (26) (0.1) Crude oil + 10 USD/brl (15) (15) (0.0) Currency NOK per USD +10%** 30 25 0.1 Currency EUR per USD +10% 115 95 0.2 Currency BRL per USD +10% 30 25 0.1 Hub gas Europe + 1 USD/MMBtu *Assuming 25% marginal tax rate on underlying business and 277.6 million shares ** *e.g. If NOK per USD depreciate 10% from 6 to 6.60 NOK Sensitivities assume stable value-added margins and no inter-correlation between factors IR – Date: 2013-11-26
  • 76. 76 Yara currency exposure updated USD millions 250 250 NOK 950 EUR and NOK BRL EUR 550 Previous currency exposure IR – Date: 2013-11-26 New currency exposure
  • 77. 77 Summary of Chinese swing scenario price assumptions USD/t Urea price fob China 440 420 USD/RMB 6.23 USD/RMB 6.23 USD/RMB 6.10 USD/RMB 6.10 400 380 360 360 340 335 320 22 300 24 56 320 7 24 310 7 33 280 260 33 289 289 270 270 CMD 12 Assumed cost CMD 12 Realized export tax CMD 13 Assumed cost CMD 13 High tax 0 Tax IR – Date: 2013-11-26 Logistics Cost
  • 78. 78 Price and currency assumptions in scenarios Last 4 quarters 5-year avg. to 30 Sep 13 Chinese swing* Low High Demanddriven** Ammonia fob Black Sea (USD/t) 546 424 400 400 475 Urea prilled fob Black Sea (USD/t) 365 340 300 350 475 Nitrate premium, USD/t 84 85 85 85 85 Phos rock fob North Africa (USD/t) 162 160 125 125 125 DAP fob USG (USD/t) 496 499 360 360 360 Zeebrugge natural gas (USD/MMBtu) 10.3 8.0 10.4 10.4 10.4 Henry hub natural gas (USD/MMBtu) 3.6 3.9 3.7 3.7 3.7 Yara’s European energy price (USD/MMBtu) 11.0 9.5 10.7 10.7 10.7 Brent blend crude oil price (USD/bbl) 103 88 105 105 105 NOK/USD 5.8 6.0 6.10 6.10 6.10 EUR/USD 1.31 1.34 1.35 1.35 1.35 BRL/USD 2.08 1.91 2.30 2.30 2.30 *Energy prices are forward prices as of 9 November ** Given example to illustrate effect of urea price USD 150 per ton above average of the two swing scenarios IR – Date: 2013-11-26
  • 79. 79 Nitrate premium increased to 85 USD/t in scenarios, in line with 5-year average CAN USD/t 160  Lower urea prices increase farm margins and make room for stronger nitrate premiums  A situation with continued strong food prices and supply-driven urea pricing allows for higher nitrate premiums than previously assumed  Nitrate premium of 85 USD/t assumed in scenarios, in line with 5-year average 140 120 100 80 60 40 20 0 Nitrate premium, USD/t IR – Date: 2013-11-26 5-year average
  • 80. 80 Simplified P&Ls for scenarios NOK millions Last 4 quarters 5-year avg. to 30 Sep 132) Chinese swing Low High Demanddriven EBITDA1) 14,800 14,800 11,300 14,700 23,500 Depreciation -3,400 -3,600 -3,600 -3,600 -3,600 -900 -800 -800 -800 -800 Income before tax 10,500 10,400 6,900 10,300 19,100 Tax -2,000 -2,200 -1,400 -2,100 -4,000 Minorities -250 -250 -200 -200 -300 Net income 8,250 7,950 5,300 8,000 14,800 Number of shares (millions) 279.7 276.6 276.6 276.6 276.6 Earnings per share (NOK) 29 29 19 29 54 Interest expense 1) 2) Including interest income, assumed in line with last 4 quarters in all scenarios. Not historical earnings, but estimated earnings for today’s Yara business, using 5-year average price conditions. IR – Date: 2013-11-26
  • 81. 81 Higher value-added margins and growth offset by lower commodity margins NOK per share 3 10 29 Price/Margin Swing CMD 13 assumed high tax -2 -7 20 1 19 Currency Swing CMD 13 assumed cost 3 Swing CMD12 Volume IR – Date: 2013-11-26 Phosphate margins Commodity N margins Value-added margins
  • 82. 82 Upside potential for urea USD/mt 600 Urea fob Black Sea Urea price China (inland proxy price) 500 400 300 200 100 0 Source: China Fertilizer Market Week, International publications IR – Date: 2013-11-26
  • 83. 83 Demand-driven USD 150 per ton on urea improves EPS by 25 NOK per share 25 54 25 10 3 -2 20 -7 3 Swing CMD12 Volume 1 Phosphate Commodity Value-added Currency margins N margins margins IR – Date: 2013-11-26 29 19 Swing CMD Price/Margin Swing CMD Price/margin 13 assumed 13 assumed cost high tax Demand driven
  • 84. 84 Risk factors Downside risks Negative risks  Crops: strong incentives to maximize productivity even at lower food price levels  increased emphasis on energy efficiency and/or emissions Food consumption has historically seen limited impact from economic slowdowns. Record crops are needed to meet growing consumption  increased cost of capital Increased global LNG export & import capacity  Yara’s global arbitrage ability and financial strength -> can to take advantage of negative short-term developments  Bumper crops / decline in food prices  Crop failure / increased food prices  Severe downturn in global economy, impacting food consumption growth  Increased global LNG trade / lower European natural gas prices China:  Increase in European natural gas prices  - China:  - reduction or removal of export tariffs - fall in anthracite coal prices IR – Date: 2013-11-26 Downside protection factors Upside risks - - increased export tariffs - increase in anthracite coal prices
  • 85. 85 Yara’s flexible cost structure gives downside protection Total cost base L4Q, NOK bn Ammonia sourcing flexibility Available 72 Fixed Variable Non flexible 7 65 Flexible L4Q 1. Excluding depreciation, amortization and impairment IR – Date: 2013-11-26 NH3 Urea/UAN Tertre Nitrates production Nitrates NPKs IND Short off-take position
  • 86. 86 Strong financial position supports growth Net interest-bearing debt / equity ratio (end of period) 0.75 0.63 0.57 0.56 0.49 0.38 0.32 0.27 0.20 0.22 0.05 OFD 0.12 0.12 0.07 0.08 0.06 0.02 IR – Date: 2013-11-26 0.01 0.06 -0.04
  • 87. 87 Cash returns to owners stepped up Annual dividends and buy-backs, NOK per share* 16.7 13.2 8.1 5.4 6.2 5.4 5.3 13.0 4.9 3.9 2.3 2.4 2.5 2005 2006 2007 4.0 4.5 4.5 2008 2009 2010 Buy-back 5.5 2011 7.0 2012 2013 Dividend Numbers reflect cash returns executed in a calendar year relative to net income the year before. 2005 number reflects buy-backs and redemptions carried out in 2004 and 2005. IR – Date: 2013-11-26
  • 88. 88 Cash return policy 40-45% of net income, minimum 30% dividend 37% 28% Overall target including buy-backs 40-45% 10% 3% Minimum 30% dividend 10% 25% 34% 34% 9% 7% 11% 23% 18% 2005 2006 2007 19% 3% 18% 16% 2008 2009 2010 2011 17% 2012 2013 Numbers reflect cash returns executed in a calendar year relative to net income the year before. 2005 number reflects buy-backs and redemptions carried out in 2004 and 2005. IR – Date: 2013-11-26
  • 89. 89 Maintaining BBB credit rating and ability to execute medium-size M&A Debt / EBITDA at “low swing“ earnings  Maintaining BBB credit rating is key to growth financing ability  Yara wants ability to execute medium-size M&A (up to ~USD 2 bn targets)  3.0 Ability to execute M&A during cyclical lows is of high importance  More cash to shareholders in the event of stronger earnings and / or limited growth execution 2.5 BBB rating requirement: 2x 2.0 1.5 1.0 0.5 0.0 -0.5 2014 2015 2016 USD 2 billion M&A USD 1 billion M&A 2013 investment level ex Bunge IR – Date: 2013-11-26 2017
  • 90. Conclusions and outlook
  • 91. 91 Prospects 2014  Continued strong demand fundamentals and value-added premiums  Chinese domestic urea and coal price development likely to influence commodity nitrogen fertilizer markets  Limited nitrogen capacity growth outside China IR – Date: 2013-11-26
  • 92. 92 Well positioned for further profitable growth  Increasing need for sustainable improvements in agricultural productivity  Yara’s value-added products and differentiated business create impact and provide sustainable strong returns  Yara is committed to delivering sustained shareholder value, through profitable growth and cash returns IR – Date: 2013-11-26

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