2014 07-18 2Q web presentation

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yara International's 2014 second quarter web presentation

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2014 07-18 2Q web presentation

  1. 1. IR-Date: 2014-07-18 0 18 July 2014 Yara International ASA Second quarter results 2014
  2. 2. IR-Date: 2014-07-18 1  Strong result  Lower nitrate deliveries amid early end to season in Europe  Continued strong NPK deliveries and value-added premiums  Improved European commodity margins due to lower gas price  Continued Industrial segment growth Summary second quarter
  3. 3. IR-Date: 2014-07-18 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 Earnings per share* • Average number of shares for 2Q 2014: 276.5 million (2Q 2013: 279.3 million). NOK 41.99 37.31 20.67 14.66 Annual 2011 2012 2013 EPS excluding currency and special items 2014
  4. 4. IR-Date: 2014-07-18 3  Continued robust fertilizer demand  Stable urea prices, production curtailed in China and Ukraine  Western Europe nitrogen fertilizer industry deliveries 8% lower, season to date 2% higher  Tight phosphate markets, following a short-lived correction in April and May  Strong demand for value-added fertilizer products Fertilizer market development
  5. 5. IR-Date: 2014-07-18 4 Farm economics strong overall, despite grain price decline Source: FAO
  6. 6. IR-Date: 2014-07-18 5 Lower US nitrogen deliveries, stable in Europe 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 09/10 10/11 11/12 12/13 13/14 Domestic Imports 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 09/10 10/11 11/12 12/13 13/14 Production Net imports West EuropeUSA +2% Million tons N Million tons N -8% 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
  7. 7. IR-Date: 2014-07-18 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: strong export volume increase, limited production increase 11/12 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 Black Sea USD/t Chinese exports (kilotons) Chinese production (kilotons) Season-to-date 65.7 mt (64.6 mt season-to-date last year) Year-to-date 29.7 mt (29.6 mt year-to-date last year) Season-to-date 10.8 mt (7.9 mt season-to-date last year) Year-to-date 3.8 mt (1.3 mt year-to-date last year)
  8. 8. IR-Date: 2014-07-18 7 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 09/10 10/11 11/12 12/13 13/14 CAGR 7% Strong NPK quarter and season, with continued growth outside Europe Kilotons Yara-produced compound NPK deliveries (by season) Europe Overseas Kilotons 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 2Q10 2Q11 2Q12 2Q13 2Q14 Yara-produced compound NPK deliveries (by quarter)
  9. 9. IR-Date: 2014-07-18 8 Brazil: Yara benefiting both from Bunge acquisition and increase in industry deliveries Brazil 1H fertilizer industry deliveries 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2011 2012 2013 2014 +7% Kilotons Yara Brazil 1H fertilizer deliveries1 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2011 2012 2013 2014 Kilotons Source: ANDA, Yara 1) Excluding trade
  10. 10. IR-Date: 2014-07-18 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 2011 20132012 2014 NOK millions 18,163 16,970 13,399 7,818 Annual EBITDA excluding special items NOK millions
  11. 11. IR-Date: 2014-07-18 10 EBITDA development 512 287 660 105 459 107 EBITDA 2Q13 Volume & mix Price/margin Gas & oil costs in Europe 4,039 4,227 Special items CurrencyOther EBITDA 2Q14 NOK millions
  12. 12. IR-Date: 2014-07-18 11 Improved Downstream and Industrial earnings 1,196 1,525 306 365 2,493 2,498 Downstream Industrial Upstream EBITDA excluding special items 2Q13 2Q14 EBITDA (NOK millions)
  13. 13. IR-Date: 2014-07-18 12 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 Europe North America ROW % of total Industrial deliveries Strong growth in Air1 deliveries Kilotons > 1 million tons of product sold L12M
  14. 14. IR-Date: 2014-07-18 13 0 100 200 300 400 500 600 700 800 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 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 Strong nitrate premium at season close 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 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
  15. 15. IR-Date: 2014-07-18 14 0 100 200 300 400 500 600 700 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 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 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 USD/t NPK premium over blend1 NH3, fob Black Sea *0.22 DAP, fob Morocco MOP, cfr NWE Urea, fob Black sea Improved 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
  16. 16. IR-Date: 2014-07-18 15 Lower natural gas cost in Europe Source: Yara, World Bank, Platts *Dotted lines denote forward prices as of 10 July 2014 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 USD/ MMBtu Zeebrugge (1-month lag) Yara Europe Yara European gas & oil cost 1 (51) (36) (660) (950) (700) (1,000) (800) (600) (400) (200) 0 200 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 NOK millions Actual for quarter July 2014 estimate** ** Based on forward prices as of 10 July 2014 Change in European energy cost
  17. 17. IR-Date: 2014-07-18 16 1,551 1,119 1,211 1,114 607 1,360 1,672 1,331 469 407 518 865 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 2Q13 2Q14 Yara-produced deliveries Joint venture & third party sourced Total Fertilizer deliveries by product and source Nitrate NPK compounds NPK blends Urea UAN Kilotons Other
  18. 18. IR-Date: 2014-07-18 17 - 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
  19. 19. IR-Date: 2014-07-18 18 Net interest-bearing debt development 3,347 860 2,606 2,591 Net debt Jun 14* OtherFX gain/(loss) 124 Yara DividendInvestments net 1,580 Net operating capital change 1,382 Dividends received from equity- accounted investees 26 Cash earnings** 2,758 Net debt Mar 14* * 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
  20. 20. IR-Date: 2014-07-18 19 Prospects
  21. 21. IR-Date: 2014-07-18 20  Farm economics strong overall, despite grain price decline  Break-even urea export price from China; domestic coal price and export tax regime are key for global commodity nitrogen pricing going forward  Capacity outside China: limited greenfield additions next 2 years, and curtailments currently in Ukraine  Yara European 3Q deliveries in line so far, and improved commodity-N margins with lower gas cost Prospects
  22. 22. IR-Date: 2014-07-18 21 250 kt NPK expansion in Uusikaupunki, Finland 250 1,250 1,000 Current Expansion End 2015  Strong NPK demand growth outside Europe presents solid business case  Project to install new granulator adds ~250 kt annual capacity  Competitive capex at ~200 EUR/t capacity addition  Completion end 2015 Annual NPK production capacity (kt)
  23. 23. IR-Date: 2014-07-18 22 Additional information
  24. 24. IR-Date: 2014-07-18 23 NOK millions Total Yara contribution Value-added upgrading and distribution make up larger part of Yara’s contribution 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Commodity overseas Commodity Europe Fertilizer upgrade & distribution Trade 4Q13 2Q142Q134Q122Q122Q10 4Q112Q114Q10
  25. 25. IR-Date: 2014-07-18 24 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 0.56 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)
  26. 26. IR-Date: 2014-07-18 25 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 4.1 4.2 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 6.9 5.9 6.4 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 7.8 6.2 8.6 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 7.3 8.5 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 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 2011-14 with forward prices* for 3Q14 and 4Q14 *Dotted lines denote forward prices as of 10 July 2014
  27. 27. IR-Date: 2014-07-18 26 Currency exposure affecting P&L At the beginning of the third quarter 2014 1. The US dollar debt generating p&l exposure was USD 950 million • Kept as hedge of future earnings and to finance inventories in emerging markets • Around 80% towards EUR and BRL, the rest towards NOK and emerging market currencies • The debt level in emerging markets will fluctuate with fertilizer seasons 2. Additional p&l exposure from internal currency positions vs. NOK • Payables mainly CAD (200 million) • Receivables mainly EUR (165 million), GBP (25 million) and AUD (45 million)
  28. 28. IR-Date: 2014-07-18 27 5,2565,179 4,763 6,104 6,284 6,017 4,742 3,496 4,882 5,2105,216 4,791 5,129 4,759 5,474 4,914 5,296 4,970 4,834 4,239 5,437 5,253 5,0135,044 5,297 6,342 5,884 6,146 6,405 6,491 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Europe Outside Europe Total Fertilizer deliveries Kilotons 20102007 2008 2009 2011 2012 2013 2014
  29. 29. IR-Date: 2014-07-18 28 Yara 2Q fertilizer sales by market and product 2,771 1,448 644 1,118 361 2,183 2,487 537 954 329 Europe Latin America Asia North America Africa 2Q13 2Q14 1,211 607 1,551 1,672 518 469 314 1,114 1,360 1,119 1,331 865 407 295 NPK compounds NPK blends Nitrate Urea Other products UAN CN Kilotons
  30. 30. IR-Date: 2014-07-18 29 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 2Q10 2Q11 2Q12 2Q13 2Q14 NPK and nitrate deliveries Kilotons 500 700 900 1,100 1,300 1,500 1,700 2Q10 2Q11 2Q12 2Q13 2Q14 Yara-produced nitrate deliveries Kilotons Yara-produced compound NPK deliveries
  31. 31. IR-Date: 2014-07-18 30 Industrial deliveries 867 843 896 837860 816 455 382 432 374368 343 342 313337346342 304 4Q13 2Q141Q143Q132Q131Q13 Industrial N-chemicals OtherEnvironmental products Kilotons
  32. 32. IR-Date: 2014-07-18 31 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 20132010 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 20132010 2011 2012
  33. 33. IR-Date: 2014-07-18 32 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. Farm economics support fertilizer demand Source: FAO
  34. 34. IR-Date: 2014-07-18 33 Source: USDA July 2014 For 2014/15, global grain production and consumption close to balanced 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
  35. 35. IR-Date: 2014-07-18 34 64.6 7.9 56.8 54.9 10.8 65.7 0 10 20 30 40 50 60 70 Production Export Domestic Domestic Export Production Million tons 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 Million tons 13/14 Source: BOABC, CFMW 12/13 Production stable, reduced domestic supply due to more exports Chinese urea production Domestic urea balance Jul-May 12/13 Jul-May 13/14 -3% 11/12
  36. 36. IR-Date: 2014-07-18 35 Source: CRU urea update July 2014 . Consumption data source is IFA. Year Driving regions Urea capacity growth relative to nitrogen capacity Excluding China Excluding China 2013 Qatar 23% Algeria 16% 1.6% 2014 Algeria 16% UAE 15% 1.5% 2015 Saudi Arabia 22% USA 20% 1.9% 2016 USA 48% Malaysia 12% 2.0% 2017 Nigeria 34% USA 26% 2.1% Gross annual addition 2013-2017 ~1.8% Assumed annual closures ~0.5% Net annual addition 2011-2015 ~1.3% Trend consumption growth from 2002 2.1% Projected nitrogen capacity additions outside China
  37. 37. IR-Date: 2014-07-18 36 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 Source: Fertilizers Europe, Yara estimate for June European producer nitrate stocks ending the season close to average
  38. 38. IR-Date: 2014-07-18 37 -200 -100 0 100 200 300 400 500 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Thousand contracts Source: US Commodity Futures Trading Commission Non-commercials’ net long position in corn
  39. 39. IR-Date: 2014-07-18 38 Key value drivers – quarterly averages 342 308 314 338 299 379 336 354 414 358 2Q13 3Q13 4Q13 1Q14 2Q14 Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (USD/t) 322 294 291 345 354 2Q13 3Q13 4Q13 1Q14 2Q14 CAN cif Germany (USD/t) 4.0 3.6 3.8 5.2 4.6 2Q13 3Q13 4Q13 1Q14 2Q14 US gas price Henry Hub (USD/MMBtu) 10.3 10.1 10.7 9.7 7.6 2Q13 3Q13 4Q13 1Q14 2Q14 Zeebrugge day ahead (USD/MMBtu) 5.8 6.0 6.1 6.1 6.0 2Q13 3Q13 4Q13 1Q14 2Q14 NOK/USD exchange rate 500 430 417 438 485 2Q13 3Q13 4Q13 1Q14 2Q14 Ammonia fob Black Sea (USD/t) Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
  40. 40. IR-Date: 2014-07-18 39 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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