Yara International ASA First quarter results April 2009

Transcription

1 Yara International ASA First quarter results April 29

2 1 Summary first quarter 29 Strong cash flow Significant on-going operating capital release Reduced margins despite lower energy costs Sales volumes down 22%, European market share maintained

3 2 Net income after non-controlling interests NOK millions 5, 4,354 4, 3, 2, 1, 853 2,44 1,43 1,422 1,487 1, ,85 2,88 3, (1,) (2,) (3,) (2,19) Accumulated NOK mill 4,188 6,37 8,

4 3 Earnings per share* NOK (5) (1) (7.27) Accumulated NOK * Average number of shares for 1Q 29: million (1Q 28: million).

5 Earnings per share adjusted for foreign exchange gain/loss and special items* 4 NOK (.1) (2) Accumulated NOK * After tax. Average number of shares for 1Q 29: million (1Q 28: million)

6 5 Fertilizer volumes 4% up from fourth quarter Kilo tons 7, 6, 4,883 5, 4,786 4,685 4,437 2,275 2,697 2,57 1,848 4, 3, 2,589 2,511 2, 2,178 2,186 Europe Outside Europe 6,284 6,14 2,575 2,835 5,256 5,179 2,388 2,827 4,763 2,629 3,71 3,269 2,868 2,352 2,135 6,17 3,15 3,2 4,742 2,18 2,562 3,496 1,54 1,956 4,882 2,29 2,592 1, Accumulated, kt Fin. fertilizer 18,791 21,33 2,54 4,882

7 6 Strong cash flow NOK millions 25, 24, ,346 23, 21, 1, ,611 19, 17, 15, Net interestbearing debt Jan9 Cash earnings* Dividends received** Net operating capital change Lifeco (Libya) Other investments (net) Foreign exchange gain/(loss) Other Net interestbearing debt Mar9 * Operating income plus depreciation and amortization, minus tax paid, net gain on disposals, net interest expense and bank charges ** Dividends received from equity-accounted investees

8 Overall fertilizer market development during quarter 7 Slow fertilizer demand, particularly for phosphate and potash Production curtailments on all nutrients, supporting prices through the quarter 25% decline in Western Europe nitrogen fertilizer sales Low Chinese urea exports, despite only 1% export tax in January Players throughout the distribution chain running down stocks to absolute minimum levels Farmers waiting for retail prices to reflect decline in global pricing

9 Historical drops in global grain consumption rare and linked to supply limitations 8 Million tons 2,5 2, 1,5-1.3% 3% drop in production, low stocks, -1.1% demand rationing and spiking prices 3% drop in production 1, -3.2% 4% drop in production, low stocks, demand rationing and spiking prices 5 6/61 63/64 66/67 69/7 72/73 75/76 78/79 81/82 84/85 87/88 9/91 93/94 96/97 99/ 2/3 5/6 8/9 Source: US Department of Agriculture

10 Lower fertilizer consumption and crops in Latin America 9 Brazil Argentina % -7% % 46 Million tonnes % Million tonnes % 2.6-5% -39% Nutrient application Corn Soybeans Nutrient application Wheat Corn Soybeans 27/8 28/9 27/8 28/9 Source: US Department of Agriculture

11 Agricultural commodity prices at 27 levels Wheat (HRW US Gulf) Rice (Thailand) USD/t , Dec 8 Mar 9 Dec 8 Mar 9 USD/t Sep 5 Dec 5 Mar 6 Jun 6 Sep 6 Dec 6 Mar 7 Jun 7 Sep 7 Dec 7 Mar 8 Jun 8 Sep 8 Dec 8 Mar 9 Sep 5 Dec 5 Mar 6 Jun 6 Sep 6 Dec 6 Mar 7 Jun 7 Sep 7 Dec 7 Mar 8 Jun 8 Sep 8 Corn (US Gulf) Soybeans (cif Rotterdam) USD/t USD/t Sep 5 Dec 5 Mar 6 Jun 6 Sep 6 Dec 6 Mar 7 Jun 7 Sep 7 Dec 7 Mar 8 Jun 8 Sep 8 Dec 8 Mar 9 Sep 5 Dec 5 Mar 6 Jun 6 Sep 6 Dec 6 Mar 7 Jun 7 Sep 7 Dec 7 Mar 8 Jun 8 Sep 8 Source: World Bank, March 29

12 11 Continued biofuel growth in US Source: PIRA

13 12 29 margin outlook for US corn farmers second only to record 28 USD/bu Corn price Corn price Corn price Corn price Logistics Other variable K P N Corn price: 2.6 (Dec 6) 3.9 (Dec 7) 5.2 (Dec 8) 4.1 (Dec 9) Source: Yara estimates, fertilizer prices from Green Markets (9 February 29), CBOT 17 April

14 European and US nitrogen deliveries lagging last season 13 Western Europe USA Domestic Imports Production Net imports Million tons of nitrogen % Million tons of nitrogen % Jul-Mar 7/8 Jul-Mar 8/9. Jul-Feb 7/8 Jul-Feb 8/9 Source: Yara estimate for fertilizer deliveries to selected West European countries. Total nitrogen deliveries estimate in USA based on TFI, US Trade Commission, Blue-Johnson

15 Yara NPK production planned at 5% in second quarter Planned second quarter utilization 14 Global production capacity* Million tons Increasing NPK curtailments with more severe P and K slow-down Prepared for further cuts if necessary, to reach normal inventory levels at end of season % Ammonia Urea Nitrate NPK Temporarily closed * Incl. share of joint venture plants

16 Yara s 3-year average return* significantly above cost of capital 15 Cash Return On Gross Investment** ROCE*** 3 % 28.7 % 25 % 2 % 15 % 1 % 14.1 % 2.5 % 16.1 % 22.4 % 22.8 % 19.1 % 22.7 % CROGI ROCE 5 % % Q9 * Target: Minimum 1% CROGI as an average over the business cycle. ** CROGI defined as gross cash flow divided by average gross investment, calculated on a 12-month rolling basis *** ROCE defined as EBIT after tax divided by capital employed, calculated on a 12-month rolling basis

17 Earnings before interest, tax, depreciation and amortization (EBITDA) 16 NOK millions 7, 6, 6,215 6,89 5, 4, 3,988 3, 2, 1,492 2,531 2,222 1,947 1,682 1,787 1,91 1,351 1,626 2,36 1, Accumulated NOK mill 6,472 8,441 17,917 2,36

18 17 EBITDA and operating income by segment EBITDA (NOK millions) 1Q 29 1Q 28 Downstream 826 2,49 Industrial Upstream 1,173 1,994 Other and eliminations (373) (194) Yara total 2,36 3,988 Operating income (NOK millions) 1Q 29 1Q 28 Downstream 711 1,773 Industrial Upstream 555 1,29 Other and eliminations (414) (211) Yara total 1,194 2,86

19 18 Variance analysis Yara group NOK millions EBITDA 29 1Q 29 2,36 EBITDA 28 3,988 Variance EBITDA (1,951) Volume & mix (862) Price/Margin (2,875) of which write-down on inventories (341) Energy cost in Europe 465 Special items 153 Non-recurring items 171 Contract derivatives (18) Other 15 Currency effect (NOK vs. USD) 1,153 Total variance explained (1,951) * Based on average NOK/USD rate for the quarter 29: 6.85 (28: 5.31)

20 19 Special items EBITDA effect (NOK millions) 1Q 29 1Q 28 Restructuring costs Kemira GrowHow (4) Downstream (4) Restructuring costs Kemira GrowHow (14) Contract derivatives (17) Industrial (31) Sale of gas Tertre (52) Restructuring costs Kemira GrowHow (56) Contract derivatives (6) (25) Upstream (6) (133) Restructuring costs Kemira GrowHow (9) Other and Eliminations (9) Yara (6) (213) Net income only effects (NOK millions) 1Q 29 1Q 28 Interest rate derivatives gain/(loss) 18 (9)

21 Significant ongoing reduction of net operating capital 2 NOK millions 35, 3, 25, 2, 15, 1, 5, -5, -1, -15, 1Q7 2Q7 3Q7 4Q7 1Q8 2Q8 3Q8 4Q8 1Q9 Receivables Raw materials Finished goods Payables Accumulated NOK mill 9,946 9,89 9,388 11,84 13,63 15,796 22,557 23,283 17,969

22 21 Satisfactory available funding Net interestbearing debt Available financing lines USD billions Norwegian bond issue in March (NOK 1.9 billion). 3, 5 and 7 year maturities Additional long-term funding when markets improve Credit ratings confirmed with stable outlook. 1Q9 1Q9 2Q9 E 3Q9E 4Q9E 4Q1E 4Q11E

23 22 Bonds issued in March give increased flexibility Debt maturity, USD millions 1, 8 4Q 3Q 2Q Gross debt end of first-quarter amounts to USD 3.5 billions. Total capacity is USD 5.5 billions 6 Maturing short term debt covered by undrawn long term committed facilities

24 23 Balance sheet strengthened during quarter Net interest-bearing debt / equity ratio (end of period)

25 24 Downstream segment Satisfactory earnings despite further inventory write-downs Sales volumes down 22%, but improving trend through the quarter European market share maintained despite increased imports Stocks reduced with 17% during quarter

26 25 Downstream EBITDA NOK millions 3, 2, 2,49 2,885 2,554 1, (1,) (2,) (3,) (2,84) Accumulated NOK mill 1,96 3,35 4,

27 European producer nitrate stocks in line with 6/7 26 Index, June 27= / /7 7/8.4.2 Jul Aug Sep Oct Nov Des Jan Feb Mar Apr May Jun Source: European Fertilizer Manufacturing Association

28 27 Yara stocks 17% down from fourth quarter Kilo tons of product 1,8 1,6 1,4 1,2 1, NPK Nitrates UREA UAN MAP/DAP OPP 1Q9 TPP 1Q9 Total 4Q8

29 28 Industrial segment Strong earnings despite demand slow-down Volumes down 1% from last year Strong margin improvements for TAN and environmental products, prices typically fixed for a longer period Margins this quarter benefit from contractual time lags

30 29 Industrial EBITDA NOK millions 1,2 1, 1, Accumulated NOK mill 736 1,

31 Timing of contract revisions impact Industrial margins positively in first-quarter 3 USD / t, Black sea Several contracts revised during thirdquarter of 28 Price reference usually to ammonia, urea or AN Monthly to long term pricing conditions jan-8 apr-8 jul-8 okt-8 jan-9 NH3 Urea AN

32 31 Upstream segment Satisfactory result despite lower prices Production curtailments at ammonia, urea and NPK plants Improved energy costs reflects more hub pricing in contracts and decision to stay spot exposed

33 32 Upstream EBITDA NOK millions 4,5 4, 3,5 3, 2,5 2, 1,5 1, ,169 3,165 3,44 1,994 1,168 1,22 1, Accumulated NOK mill 3,563 3,797 12,372 1,173

34 33 Benefits of spot based hub gas contracts Oil-linked prices vs hub Spot prices vs forward USD/MMBtu Oil linked USD/MMBtu Forward Jan 8 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hub based Jan 9 Feb Mar Jan 8 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 9 Feb Mar Hub Hub price on average USD 2.2 per MMBtu below oillinked price. Annual saving of USD 24 million Spot price on average USD 2.1 per MMBtu below forward price. Annual saving of USD 23 million

35 34 Spot natural gas versus Yara average* Yearly averages 2 26, quarterly averages for 27 and 28 with forward prices for 29** USD/MMBtu US spot gas price (Henry Hub) European spot gas price (Zeebrugge Hub) Yara global oil & gas cost (weighted average) Yara European oil & gas cost (weighted average) Q7 2Q7 3Q7 4Q7 1Q8 2Q8 3Q8 4Q8 1Q9 2Q9 3Q9 * Yara averages include Kemira GrowHow from 4Q 27 **Dotted lines denote forward prices as of 21 April 29 Source: Yara, World Bank, Platts

36 35 Estimated European energy cost NOK millions 2,5 2, Actual for quarter April 29 estimate* Cost change on previous year 1,5 1, 5 (5) (1,) (1,5) (2,) (2,5) 1, (465) (1,7) (2,1) 3Q8 4Q8 1Q9 2Q9 3Q9 * Based on forward prices as of 17 April 29

37 36 Share of net income in equity-accounted investees NOK millions 1Q 29 1Q 28 Qafco Tringen (9) 48 Rossosh GrowHow UK Ltd. (21) 68 Burrup (43) 45 Other 55 Total

38 37 Prospects second quarter 29 European and US nitrogen deliveries lagging last season by 18%, Yara April sales are still below last year Estimated plantings in Europe and US only down 2-4% Yara will cut production further if necessary and release operating capital Estimated European energy cost NOK 1.7 billion lower than 2Q8

39 38 Prospects next twelve months Farmer grain margins support strong fertilizer demand Part of the drop in fertilizer deliveries may be a pipeline effect Grain stocks-to-use remain at historical lows Grain production estimated to drop substantially in Latin-America following reduced fertilizer application Few signs today of a drop in global food consumption matching the likely grain production loss, indicating tighter grain market and fertilizer recovery

40 Additional information

41 Business model and global presence support profitability and growth 4 EBITDA, pro forma until 25 USD millions 4, 3,5 3, , 2,5 2, , , 1,5 1,45 1, , ,218 1, 2, L12M Upstream Downstream Industrial. Knowledge Margin. Local market knowledge Strong customer relations Agronomic and application competence Differentiation and branding Sourcing & logistics leverage. Scale in sourcing and distribution Long-standing partnerships Global presence and optimization World-scale production & trade Economies of scale Low-cost gas Strong product portfolio Competitive commodity player

42 41 Yara 1Q fertilizer sales by market and product 29: 4.9 million tons (28: 6.3 million tons) Million tons product 4, 3, 2, 1, 3,71 1Q9 1Q8 2, Europe Latin America Asia North America Africa Million tons product 4, 3, 2, 1, 1Q9 1Q8 2,457 1,621 1,474 1,598 1,38 1, NPK Nitrate Urea Other products UAN CN

43 42 Downstream net operating capital turnover* Downstream external operating revenues / external net operating capital * 12-month rolling average

44 43 Upstream production volume* Kt 5, Finished fertilizer Ammonia 4, 3, 4,27 3,247 3,312 3,175 3,256 3,357 3,437 3,443 2,615 2,1 1,983 1,914 1,994 1,999 2,53 2,51 4,589 4,362 4,42 4,139 2,895 2,738 2,579 2,753 3,937 2,569 2, 1, 1,237 1,329 1,262 1,262 1,358 1,384 1,392 1,412 1,694 1,624 1,463 1,386 1,368 Accumulated Ammonia 5,91 5,546 6,167 1,368 Fin. fertilizer 7,9 8,718 1,965 2,569 * Including share of equity accounted investees

45 44 Income statement NOK millions 1Q 29 1Q 28 Revenue and other income 17,118 2,781 Operating income 1,194 2,86 Share of net income in equity accounted investees Interest income and other financial income Interest expense and other financial items (268) (275) Foreign exchange gain (loss) Income before tax and non-controlling interests 1,215 3,783 Income tax expense (313) (941) Non-controlling interests (15) (34) Net income after non-controlling interests 887 2,88 Earnings per share* - NOK * Average number of shares for 1Q 29: million (1Q 28: million)

46 45 Consolidated balance sheet NOK millions Deferred tax assets 31 March 29 3,88 31 March 28 1,255 Property, plant and equipment 21,65 1,35 Other non-current assets 19,342 13,824 Inventories 14,72 1,511 Receivables 9,34 1,528 Other current assets 3,157 2,148 Cash and cash equivalents 4,22 1,422 Total assets 74,913 5,38 Total equity attributable to shareholders of the parent 29,43 23,222 Non-controlling interests Employee benefits 2,74 1,86 Deferred tax liabilities 5,481 2,77 Other long-term liabilities and provisions Long-term interest-bearing debt 2,26 6,658 Short-term interest-bearing debt 5,68 2,644 Other current liabilities 1,636 11,98 Total equity and liabilities 74,913 5,38

47 46 Currency gain/loss first quarter Average net US dollar debt position was reduced from USD 2.5 billion in fourth quarter 28 to around USD 2 billion in first quarter Net currency gain reported was due to following exposures: 1. The US dollar debt hedge of future earnings In Q1 29, hedge was reduced towards the middle of the USD billion range Approximately 35 % of the hedge was kept in units with EUR as base currency, remainder was kept towards the NOK 2. The US dollar debt in various emerging markets financing fertilizer inventories The exposure was reduced from USD 1 billion to USD.7 billion The exposure was mainly towards BRL (5%), ZAR and THB The debt level in emerging markets will fluctuate with fertilizer seasons 3. Net euro debt in the range of 15-3 million towards the NOK USD depreciated 3% vs. NOK during Q1 29, it appreciated about 5% vs. the EUR and up to 5% vs. Yara s main emerging market currencies giving a currency gain of NOK 55 million

48 Low Chinese exports in first quarter, despite low export tax in January 47 Urea exports Kt 6, USD/ton 9 Export tax 2 % 5, 4, 3, 2, Urea fob Black Sea Export tax 18 % 16 % 14 % 12 % 1 % 8 % 6 % 1, % 2 % Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 27 Apr Jul Oct Jan 28 Apr Jul Oct Jan 29 Apr Jul Oct % Source: BOABC

49 Indian domestic urea deficit stable compared to last year 48 Sales - Production Kt 8, 7, 8/9 6, 7/8 5, 6/7 4, 3, 2, 5/6 1, 4/5-1, -2, Kharif (July planting) imports Apr-Sep -3, Rabi (November planting) imports Oct-Jan Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Source: Indian Statistics

50 49 Non-commercials net long position in corn at CBOT (futures and options) Thousand contracts jan-7 apr-7 jul-7 okt-7 jan-8 apr-8 jul-8 okt-8 jan-9 apr-9 Source: US Commodity Futures Trading Commission

51 5 Current grain stocks up on last two years, but still low Million tons 2,3 35 % 115 days inventory 2, : 1.7% growth/year 3 % 2,1 25 % 73 days inventory 2, 2 % 1,9 Consumption Production 15 % 1 % 1, :.8% growth/year 1, F 5 % % F Source: USDA, April 29

52 51 Will new capacity come on stream as planned? Year Global urea capacity growth estimate Driving regions * Including announced closures only Excluding China % (2.5%) 2.% (1.9%) China 53% Iran 21% World World 7.% (8.%) 3.8% (5.5%) China 67% Iran 8% 5.6% (5.1%) 3.1% (3.5%) China 67% Pakistan 9% 4.8% (4.9%) 4.2% (4.3%) China 5% Qatar 12% 2.3% (2.9%) 2.% (3.2%) China 48% Russia 23% Average urea consumption growth has been 4.9% last 5 years, 4.1% excluding China Excluding China Iran 45% Egypt 22% Iran 25% Oman 17% Pakistan 27% Trinidad 16% Qatar 27% Algerie 25% Russia 43% Vietnam 43% Source: Fertecon update January 29

53 52 Key value drivers quarterly averages Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) Q 8 2Q 8 3Q 8 4Q 8 1Q Q 8 2Q 8 3Q 8 4Q 8 1Q Q 8 2Q 8 3Q 8 4Q 8 1Q 9 US gas price Henry Hub (USD/MMBtu) Oil Brent blend spot (USD/bbl) NOK/USD exchange rate Q 8 2Q 8 3Q 8 4Q 8 1Q Q 8 2Q 8 3Q 8 4Q 8 1Q Q 8 2Q 8 3Q 8 4Q 8 1Q 9 Source: The Market, CERA, World Bank, Norges Bank

54 53 Key value drivers 1-year history Ammonia fob Black Sea (USD/t) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) US gas price Henry Hub (USD/MMBtu) Oil Brent blend spot (USD/bbl) NOK/USD exchange rate Source: The Market, CERA, Hydro, World Bank, Norges Bank Average prices

55 54 1-year fertilizer prices monthly averages Ammonia fob Black Sea USD/t CAN cif Germany USD/t Urea prilled fob Black Sea USD/t Source: Average of international publications Average prices

56 55 1-year grain/oilseed prices yearly averages Wheat (HRW US Gulf) USD/t TD Rice (Thailand) USD/t TD Corn (US Gulf) USD/t TD Soybeans (cif Rotterdam) USD/t TD Source: World Bank, March 29 Average prices