Yara International ASA 2019 first quarter results
26 April 2019
0
5
Jan'16 Mar'19
1.4
Safety is our first priority TRI1 (12-month rolling)
1 TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours. 2
4.5
L12M EBITDA excl. special items (MUSD)
Improved first-quarter results
- EBITDA excluding special items and IFRS 16
increased by 17%1 - Improved margins and positive currency effects
more than offset lower deliveries
- Production performance hit by technical issues in three plants
- Return on invested capital (ROIC) at 4.1%
Earnings improvement continuing Improved but not satisfactory profitability
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
1Q17 1Q16 1Q18 1Q19
3 1 IFRS 16 EBITDA effect is USD 24 million
Unsatisfactory production performance, impacted by technical issues
Ammonia production down 3% Finished fertilizer production up 3%
Production volume (mill. tonnes)
Improved production in March
Monthly production volume
Technical issues in three of our largest plants
0.1
1Q18 1Q19 1Q18
0.2
1Q19
5.3
2.1 2.1
5.5
-3%
+3%
Portfolio
• Mixed production performance
• Technical issues after turnarounds
in Pilbara, Sluiskil and Tertre account for losses of:
• ~200 kt ammonia • ~100 kt of finished fertilizer
• Increased production in other plants
• Improved production towards the
end of the quarter
-9%
-1%
Jan Feb Mar
Ammonia Finished products
4
355 375
320 55
4Q18 1Q Improvements
1Q19 incl. Pilbara,
Sluiskil, Tertre
1Q19 ex. Pilbara,
Sluiskil, Tertre
Pilbara, Sluiskil, Tertre
20
Yara Improvement Program affected by production issues
5
1Q development • Continued high activity, but unsatisfactory
results as accumulated improvements were affected by production issues
• Underlying improvements adjusted for
these issues were 375 MUSD, driven by strong performance in the rest of the production operations
• 2020 improvement target of 500 MUSD maintained
USD millions
Capex reducing in 2019, growth projects ramping up
Capex plan1
USD Billions
Status Growth projects2
1 Committed investments as of end 4Q18 2 Growth portfolio = M&As (Babrala and Cubatão) and expansions/new builds (Uusikaupunki, Porsgrunn/Glomfjord, Sluiskil, Rio Grande, Freeport, Pilbara TAN, Köping, Salitre) 6
• Freeport and Köping projects completed and integrated into regular production operations; both running at full capacity as of end April
• Sluiskil expansion: further work needed to reach 100% delivery, to be achieved 2H 2019
• Brazil projects under construction:
• Salitre: phosphate rock production ramping up, chemical production by 1H 2020
• Rio Grande consolidation and expansion to be completed end 2020
• Tracking methodology update at Capital Markets Day
2017
0.0
0.6
0.2
1.3
0.7
0.7
2019
0.7
2.2
0.5
0.2
0.8
2018
0.6
0.1
0.1
0.6
0.2
2020
1.6
1.0
Cost&capacity improvements
Growth - M&As
Growth - expansions
Maintenance
Improving earnings and profitability trend
LTM ROIC Quarterly EBITDA excl. special items % USD millions
377
321
402 424
464
1Q18 4Q18 2Q18 3Q18 1Q19
3.7
2Q18 1Q18 3Q18 4Q18 1Q19
3.8 3.7
3.1
4.1
7
Performance overview
1Q 2018 1Q 2019
EBITDA ex. special items (USD millions)
377 464
EPS excl. currency and special items (USD per share)
0.42 0.59
Cash from operations (USD millions)
234 254
Investments (USD millions)
736 243
ROIC (12-month rolling)
3.7% 4.1%
8
Improved European nitrogen upgrading margins
Higher realized nitrate and NPK prices
Higher urea prices outside China
Lower European natural gas prices
Spot gas prices1 (USD/Mmbtu)
7.2
3.1
7.0
3.2
Europe US
-3%
+3%
Urea price development1 (USD/t) Yara’s realized CAN and NPK price2 (USD/t)
242
414
247
420
CAN 27 NPK 19-10-13
+2%
+1%
1 Source: BOABC, CFMW, Argus. 1 month lag applied, as proxy for realized prices (delivery assumed to be 1 month after order taking). 2 Yara’s realized European nitrate price in CAN 27 equivalents ex. Sulphur, Yara’s realized global NPK price (average grade) at German proxy CIF
257
304
275 287
Urea granular FOB Egypt Urea inland China proxy
+7% -6%
1Q 18 1Q 19
9
377
464
37 40
1Q18 Price/ Margin Currency
4
Energy costs
17
Volume
11
Other 1Q19
EBITDA improvement, mainly driven by nitrogen margins and currency
10
EBITDA ex. SI USD millions
IFRS 16 +24 MUSD Insurance +6 MUSD Portfolio +6 MUSD Other -17 MUSD
Higher production margins, commercial margins in line EBITDA excluding special items (MUSD)
160 177
22
263
170
44
Production Sales & Marketing New Business
• Higher nitrogen upgrading margins in Europe
• Pilbara ammonia outage effect ~ USD 10 million
1Q18 1Q19
• Margins in line with a year earlier • Lower NPK deliveries in Asia
• Positive contribution from Cubatão acquisition (completed May 2018)
• Deliveries up 3% excluding Cubatão
11
Net interest-bearing debt in line with end 2018
409 401 195
243
Net debt Mar 19
35
Other Investments (net)
3,794
Net debt Dec 18
Cash earnings¹ Net operating capital change
4,203 4,205
USD millions
1 Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges
IFRS 16 impact
12
Sales & Marketing performance
177 170
1Q18 1Q19
-4%
Slightly lower EBITDA due to lower deliveries
EBITDA ex. SI (MUSD)
Lower commodity deliveries, premium product deliveries in line with a year earlier
Volumes (Mt)
Higher realized prices
Revenues (MUSD)
3.2 3.2
3.6
1Q18
3.3
1Q19
6.9 6.8
-1%
1Q19
1.2
1.3
1Q18
2.4
1.3
1.2
2.5
+4%
*Premium defined as Differentiated N, NPK, CN, fertigation products and YaraVita. YaraVita only included in revenues as measured in units. 13
Portfolio Commodity Premium*
European fertilizer deliveries up 3% on last year, further increase in Brazilian premium deliveries
1.6
0.8 0.7
Premium
2.4
Commodity
0.2
0.2
2.4
1.4
0.8 0.8
0.4 0.4 0.2
+3%
+16%
+2% -12%
-16% +1%
Total fertilizer deliveries Mill. tonnes
1Q18 1Q19 Portfolio
Europe North America
Brazil Latin America
Asia Africa
*Premium = NPK, Differentiated N, CN, fertigation products and YaraVita. OPP = Own Produced Products
0.2 2.1 2.0 0.2 0.3 0.6 0.5 0.6 0.5 0.4 0.1 0.1 OPP
14
Yara and IBM join forces to transform the future of farming
• Partnership agreement to build the world’s leading digital farming platform, combining Yara’s unrivalled agronomic knowledge and market presence with IBM’s digital platforms, services and expertise in data analytics
• Yara and IBM will develop digital solutions for both professional and smallholder farmers to sustainably increase yields, crop quality, and incomes
• The joint platform will apply artificial intelligence, machine learning and in-field data to achieve worldwide coverage, aiming to reach 100 million hectares of farmland
• Yara and IBM will establish joint innovation teams, collaborating at digital hubs in Europe, Singapore, the US and Brazil
• The teams will work to develop new capabilities, such as visual analytics, machine learning techniques for crop identification and validation as well as field boundary digitization
• The first services are planned for end 2019
15
Attractive Yara prospects
Focused long-term strategy Attractive industry fundamentals and
supply-demand outlook
Operating cash flow improvement with strict
capital allocation
• Operating cash flow improving with cycle and Yara actions
• Committed capex almost halved from 2018 to 2019
• Strict capital allocation
• Active portfolio management
• Growing population and dietary improvement drives demand
• Resource and environment challenges require strong agri productivity improvement
• Tightening global grain balance and slow-down in nitrogen supply growth
• Crop nutrition focus; #1 market presence and #1 premium fertilizer producer
• Strengthening position with digital farming services and food chain partnerships
16
Yara Capital Markets Day 26 June: venue and agenda
Strategy update Our long-term market outlook and how the Yara business model and strategy will create further value
Driving value growth in our markets How we will drive further value growth in the market, and optimize our market positions Improving operations How Yara will realize the full value potential of projects under execution, and how Yara will drive further operational improvement, beyond the current targets Capital allocation & returns How Yara will allocate capital to drive further value growth
Format and timing
Main topics
17
Venue: Tate Modern, London
08:30 – 11:30 Plenary presentations
11:30 – 12:30 Lunch
12:30 – 15:30 Group meetings with management
Appendix
Yara Improvement Program impacted by reliability in production
EBITDA benefits at the end of Q1 lower than year end 2018:
Continued high activity, but unsatisfactory results as accumulated improvements are affected by the mentioned reliability hits in Pilbara, Sluiskil and Tertre
• Focus increasingly shifting towards ensuring the sustainability including further focus on excellence in our main functions
84
242 355 320
450 500
Annual impact, USD million, vs. 2015 baseline, at 2015 margins
Today
Start: 2016 End: 2020 2017 2018 2019 2020
60 69 28 9 15 15
500
69 116 91 9
90 0
2020 target Q1 2019 2016 2017 2018 2019 target
14 49 24 6 13 11
1 One-off benefits are related to working capital improvements and white certificates
One-off
Sustained EBITDA improvement
Benefits1
Cost
Investments
19
Key sensitivities (based on 2018 production capacities)
Operating income EBITDA EPS USD million USD million USD Urea sensitivity +10 USD/t 45 54 0.16 …of which pure Urea 38 47 0.14
…of which UAN 7 7 0.02
Nitrate sensitivity CAN +10 USD/t 101 101 0.28 …of which pure Nitrates 61 61 0.17
…of which NPKs 40 40 0.11
Compound NPK premium over nitrate +10 USD/t 54 54 0.15
Hub gas Europe + 0.1 USD/MMBtu -16 -16 -0.04
Hub gas North Am + 0.1 USD/MMBtu -2.6 -2.6 -0.01
Ammonia + 10 USD/t 3 4 0.01
Currency sensitivity
10%-points EUR appreciation versus USD -120 -95 -0.30
10%-points NOK appreciation versus USD -50 -35 -0.10
10%-points BRL appreciation versus USD -40 -25 -0.10
20
0
450
1Q17 1Q18 1Q19
Higher nitrogen upgrading margin, global NPK premium slightly below last year
Source: Fertilizer Market Publications
0
500
1Q17 1Q18 1Q19
Urea Egypt CFR proxy
Ammonia CFR
CAN
287
267
1 Upgrading margin from gas to nitrates in 46% N (USD/t): All prices in urea equivalents, with 1 month time lag
Weighted average global premium above blend cost
2 Export NPK plants, average grade 19-10-13, net of transport and handling cost.
DAP, CIF inland Germany
MOP, CIF inland Germany
Urea, CIF inland Germany
Nitrate premium, CIF inland Germany
Yara’s NPK price
111 113
NPK premium over blend2 Nitrogen upgrading margins1
USD/t USD/t (monthly publication prices)
Yara EU gas cost *20
21
Energy cost
4.4 4.0
2.8 3.7
4.4
2.6 2.3 3.0 3.1 2.9 2.9
3.8 2.9 2.9 2.7 2.8
5.7
8.2 8.0 8.0 6.9
5.5
4.0 4.9
5.9 6.1 6.3 6.6 5.9
4.8 4.9
6.6
9.2 9.4 10.5
8.1
6.4
4.5
5.7
7.7 7.4
8.4 8.2 6.1
4.9 5.0
7.6
10.7 11.0 11.4
9.1
7.1
5.0 6.1
7.7 8.1 8.2
9.4
7.8
5.7 5.6
2010 2011 2012 2013 2014 2015 2016 2017 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge 2010-2012) Yara Europe
Yearly averages 2010-2017, quarterly averages for 2018-2019 with forward prices* for 2Q19 and 3Q19
*Dotted lines denote forward prices as of 4 April 2019 Source: Yara, World Bank, Argus/ICIS Heren
22
0
8,000
Yara stocks
Kilotons Finished fertilizer
Urea
Nitrates
Compound NPK
Other
23
Improving industry fundamentals
Nitrogen supply growth set to reduce significantly
Declining grains stocks excluding China
Lower expected European natural gas prices
Spot gas prices1 (USD/Mmbtu)
7.7 7.7
5.0 4.9
3Q 2Q
-35% -36%
Grain stocks ex China and grain prices Global urea capacity additions excl. China
1 Source: Argus, dotted bars represent forward prices as of 15 April 2019. 1 month lag applied. 24
2018
2019
4.1
1.4 1.2
2019 2020 2021
2.8% consumption growth
100
120
140
160
180
200
220
240
260
280
290
300
310
320
330
340
350
360
09 10 11 12 13 14 15 16 17 18E 19F
Index Mill. tonnes
Grain stocks FAO grain price index
European producers’ nitrate stocks
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
18/19 12/13 13/14 14/15 15/16 16/17 17/18
Source: Fertilizers Europe, Yara estimate for March
Index June 2007 = 1
25
Nitrogen supply growth is forecast to reduce significantly
2014 2019 2015 2016 2017 2020 2018 2021 2022 2023
1.1
3.4
4.7
3.1
6.7
4.2 4.1
1.4 1.2
2.7
USA Nigeria
India Algeria Iran
Russia Others
2.8% consumption growth
Global urea capacity additions excl. China (mill. tonnes)
Source: CRU March 2019
26
Modest improvement in urea pricing, but no need for Chinese exports
170
350
Apr-16 Mar-19
Urea inland proxy China
Urea granular fob Egypt
Urea price development1 (USD/t)
1 Source: BOABC, CFMW 27