Yara International ASA Third Quarter results 212 19 October 212
1 Summary third quarter Strong results and cash flow Yara-produced NPK deliveries up 1% Strong production increase Cautious start to European nitrate season
2 Earnings per share* NOK EPS excluding currency and special items 14 12 1 12.86 1.2 12.42 11.84 1.58 9.86 9.3 8 6 4 3.6 3.88 4.93 5.27 6.68 5.42 7.73 2 1.21 29 21 211 212 Annual NOK 13.8 3.24 41.99 29.75 * Average number of shares for 3Q 212: 281.4 million (3Q 211: 287.2 million).
3 Strong production increase Kilotons 4,6 Finished fertilizer Kilotons 1,9 Ammonia 4,4 1,8 4,2 1,7 4, 1,6 1,5 3,8 1,4 3,6 1,3 3,4 1,2 3,2 1,1 3, 211 212 1, 211 212 * Including share of equity-accounted investees
4 Fertilizer market development Increased food prices support fertilizer demand Export price level for urea from China reduced, lower export tax the main reason Increased nitrogen supply from Qatar and Vietnam, in addition to China Western Europe nitrogen fertilizer deliveries at same level as last year Phosphate and potash markets negatively affected by reduced use in India, but Yara s main NPK markets running well
5 Fertilizer incentives remain strong Index 3 FAO price index 25 2 15 1 5 1/24 1/25 1/26 1/27 1/28 1/29 1/21 1/211 1/212 Source: FAO Cereals Price Index Food Price Index Annual average Food price index 5
6 Cautious buying in Europe, stronger in US Million tons USA Million tons West Europe 4.5 4. 3.5 % 2.5 2. % 3. 2.5 1.5 2. 1.5 1. 1..5.5. 3Q7 3Q8 3Q9 3Q1 3Q11 3Q12 Production Net imports. 3Q7 3Q8 3Q9 3Q1 3Q11 3Q12 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
7 Lower Chinese urea export price in 212 Chinese export tax 1 Jul 1 Nov Domestic urea price in China Fob China 7 RMB/t 2,5 65 211 2,4 6 2,3 55 5 45 212 2,2 2,1 2, 1,9 212 211 4 1,8 35 1,7 3 1,75 1,95 2,15 2,35 2,55 Domestic price ex works, RMB/t 1,6 Jan Apr Jul Oct * China Fertlizer Market Week
8 Continued project delays Million tons Additional urea capacity 8 7.5 7 6 5 5.2.4 1.2 Fertecon assumptions: 1 new site in Egypt from Jul 13 Startup in UAE in Jan 13 4 3 2.5 Startups in Algeria in Jul 12, Jan 13 and Jul 13 2 1 2.5 212 Oct 11 est. 212 Oct 12 est. 213 Oct 12 est. Source: Fertecon urea updates
Earnings before interest, tax, depreciation and amortization (EBITDA) 9 NOK millions 7, EBITDA excluding special items 6,587 6, 5, 4, 3, 2, 1, 2,36 1,259 86 1,394 3,251 2,992 2,486 4,281 3,455 5,444 4,982 4,312 4,968 4,15 Annual NOK millions 29 21 211 212 5,549 15,315 18,163 13,385
1 Variance analysis NOK millions 3Q 212 EBITDA 212 4,15 EBITDA 211 5,444 Variance EBITDA (1,339) Volume & mix 496 Price/Margin (633) Oil & gas costs in Europe 12 Special items (1,314) Other (22) Conversion (NOK vs. USD)* 31 Total variance explained (1,339) * Based on average NOK per USD rate for the quarter 212: 5.9 (211: 5.5)
11 Net debt development NOK millions 4,5 4, 3,971 3,5 99 219 3, 81 48 2,866 2,5 2,855 2, 1,116 1,5 1, 219 643 5 NIBD Jun 12* Cash earnings** Dividends received NOC change Investments (net) Share buy-backs Yara dividend FX gain Other NIBD Sep 12* * 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
12 EBITDA per segment NOK millions 4,5 4, 3,5 3, 2,5 2, EBITDA excluding special items 3,77 4,71 1,5 1, 5 767 1,32 239 323 Downstream Industrial Upstream 3Q12 3Q11
13 Downstream segment Strong results driven by 4% volume growth at healthy margins Yara produced NPK volumes 1% higher Increased ammonia input prices reduce margins
14 Strong NPK development Yara-produced compound NPK volumes Kilotons 7 6 +15% Realized prices on Yara -produced NPK compounds Index* 14 +3% 12 5 +8% 1-9% 4 8 3 6 2 4 1 2 - Europe Overseas Europe Overseas 3Q 211 3Q 212 3Q11 3Q12 * 1 = European price in 3Q11
15 Industrial segment Strong results Positive volume and margin development for TAN Continued growth in North American environmental segment European process chemical sales negatively impacted by economic conditions
16 Upstream segment Strong results Ammonia production 14% higher and finished fertilizer production 7% higher Higher ammonia prices offset negative urea price effect First ammonia line started up in Lifeco
17 Lower nitrogen upgrading margins Nitrogen upgrading margins Phosphate upgrading margins NPK blend premium USD/t USD/t USD/t 7 7 7 6 5 4 3 Nitrate premium above urea Value above ammonia Value above gas 6 5 4 3 Value above raw material NH3*.22 6 5 4 3 2 Margin above blend cost Urea MOP 2 Yara EU gas cost *2 2 Rock*1.4 1 DAP 1 3Q1 1Q11 3Q11 1Q12 3Q12 1 3Q1 1Q11 3Q11 1Q12 3Q12 3Q1 1Q11 3Q11 1Q12 3Q12 Urea CFR CAN (46% N) NH3 CFR (46% N) DAP DAP T17 del France
Share of net income in equity-accounted investees 18 NOK millions 3Q 212 3Q 211 Qafco 412 198 Tringen 85 55 Burrup - (24) GrowHow UK Ltd. 132 141 Lifeco (78) (57) Other 2 17 Total 571 329
19 Prospects Tight global grain outlook and strong grain prices support fertilizer demand Lower nitrogen fertilizer pipeline stocks at the beginning of the season while pre-buying incentives are stronger than a year ago Chinese urea export level next quarter linked to international urea price development and bonded warehouse stocks Second ammonia line and urea production in Lifeco scheduled to start up during fourth quarter Fertecon estimates for 213 capacity additions slightly above historical consumption growth but delays evident
2 Stronger pre-buying incentives Crop futures higher than a year ago Urea price, fob Black Sea USD/bu 9. USD/t 6 8. +16% 5-19% 7. 4 +4% 3 6. 2 5. 1 4. Corn Dec 12 Corn Dec 13 Wheat Dec 12 Wheat Dec 13 Oct 211 Oct 212
Continued strong price incentives necessary to avoid further inventory decline 21 Grain production and consumption Days of consumption in stocks Million tons 2,35 2,3 2,25 2,2 2,15 2,1 2,5 2, 1,95 6 7 8 9 1 11E 12F 13F Days 85 8 75 7 65 6 55 6 7 8 9 1 11E 12F 13F Consumption Production Source: USDA, October 212
Yara committed to developing African agriculture 22
23 Additional information
24 Net income after non-controlling interests NOK millions 4, 3,5 3,716 3,566 3,386 3, 2,5 2,889 2,225 3,2 2,8 2,616 2, 1,927 1,5 1,122 1,424 1,522 1,564 1, 887 5 349 Annual 29 21 211 212 NOK millions 3,782 8,729 12,66 8,436
25 Debt/equity ratio Net interest-bearing debt / equity ratio (end of period).8.75.7.63.6.57.56.5.49.4.3.2.1.38.32.27.2.22.12.12.7.8.6. 29 21 211 212
26 Fertilizer volumes Kilotons 7, 6, 5, 4, 4,882 2,29 5,21 5,216 2,658 2,765 4,791 2,355 5,129 2,146 4,759 2,412 5,474 2,91 4,914 2,514 5,481 2,543 4,97 4,834 2,715 2,617 4,239 2,28 5,433 5,247 5,8 2,553 2,993 2,739 3, 2, 2,592 2,551 2,451 2,436 2,983 2,347 2,564 2,4 2,937 2,256 2,216 1,96 2,88 2,254 2,27 1, 29 21 211 212 Europe Outside Europe Total Accumulated, Kilotons Fin. fertilizer 2,99 2,276 19,524 15,698
27 Yara 3Q fertilizer sales by market and product 212: 5. million tons (211: 4.8 million tons) Kilotons 2,5 2,214 2,27 3Q11 3Q12 2, 1,5 1,27 1,492 1, 5 66 469 527 461 284 316 Europe Latin America Asia North America Africa Kilotons 3, 3Q11 3Q12 2, 1, 1,79 1,81 1,423 1,334 873 987 4 446 198 216 234 225 NPK Nitrate Urea Other products UAN CN
28 Yara production volume* Kilotons 5, Finished fertilizer Kilotons 2,5 Ammonia 4,5 4, 2, 3,5 3, 1,5 2,5 2, 1, 1,5 1, 5 5 29 21 211 212 29 21 211 212 UAN CN NPK Nitrates Urea * Including share of equity-accounted investees
29 Yara s average gas costs Yearly averages 26 21, quarterly averages for 211-12 with forward prices* for 3Q12 and 4Q12 USD per MMBtu 14 12 1 12. 1.1 11.1 1.9 1.8 11. 11. 1.8 11.4 11.7 8 6 7. 9.6 6.6 7.6 7.6 8.3 8.3 8.6 7.9 7.7 8.1 8.2 8.4 4 5.6 5.7 4.8 2 27 28 29 21 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 US gas price (Henry Hub) Yara Global Zeebrugge day ahead Yara Europe *Dotted lines denote forward prices as of 9 October 212 Source: Yara, World Bank, Platts
3 Change in European energy cost NOK millions 1,4 1,2 1, 8 Actual for quarter October 212 estimate* 6 543 4 2 217 15 175-2 (24) (12) 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 * Based on forward prices as of 9 October 212
Projected nitrogen capacity additions outside China in line with historical consumption growth 31 Year 211 212 213 214 215 Driving regions Excluding China Pakistan 37% Iran 18% Qatar 34% Vietnam 2% Algeria 38% UAE 18% Egypt 25% Algeria 16% Saudi Arabia 15% Brazil 14% Urea capacity growth relative to nitrogen capacity Excluding China 1.2% (1.3%) 2.2% (2.1%) 2.6% (3.1%) 1.5% (1.2%) 2.5% (1.9%) Gross annual addition 211-215 ~2.% Assumed annual closures ~.5% Net annual addition 211-215 ~1.5% Trend consumption growth from 21 2.1% Source: Fertecon urea update October 212. Consumption data source is IFA. Previous update in brackets.
32 Non-commercials net long position in corn Thousand contracts 5 4 3 2 1-1 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Jul-11 Jan-12 Jul-12 Source: US Commodity Futures Trading Commission
33 Indian urea import requirement Kilotons 8, 7, 6, 5, 4, 3, 2, 1, -1, Sales minus production -2, Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 212/13 29/1 21/11 211/12 Source: Indian Statistics
34 Chinese export situation Accumulated urea exports Urea price and export tax Kilotons USD per ton Export tax 8, 6 12 % 7, 6, 21 5 1 % 5, 4, 3, 2, 27 211 29 4 3 2 8 % 6 % 4 % 1, 212 1 2 % % Source: BOABC * Export tax during low tariff period depends on price level with 7% representing the minimum tax level
35 Key value drivers quarterly averages Zeebrugge day ahead(usd/mmbtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 9.4 9.3 9.3 9.2 9.2 9.1 9.1 9. 9. 8.9 8.9 9.3 9.2 9.1 9.1 9. 3Q 11 4Q11 1Q12 2Q12 3Q12 6 5 4 3 2 1 484 446 471 389 383 3Q 11 4Q11 1Q12 2Q12 3Q12 4 35 3 25 2 15 1 5 376 378 361 331 314 3Q 11 4Q11 1Q12 2Q12 3Q12 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. 4.1 3.3 2.5 2.3 2.9 7 6 5 4 3 2 1 526 576 399 536 619 1 9 8 7 6 5 4 3 2 1 5.5 5.8 5.8 5.9 5.5 3Q 11 4Q11 1Q12 2Q12 3Q12 3Q11 4Q11 1Q12 2Q12 3Q12 3Q 11 4Q11 1Q12 2Q12 3Q12 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
36 1-year fertilizer prices monthly averages USD/t 1, Ammonia fob Black Sea USD/t 5 CAN cif Germany 8 4 6 3 4 2 2 1 21 22 23 24 25 26 27 28 29 21 211 212 21 22 23 24 25 26 27 28 29 21 211 212 USD/t 8 Urea prilled fob Black Sea USD/t 1,2 DAP fob US Gulf 6 1, 8 4 6 2 4 2 21 22 23 24 25 26 27 28 29 21 211 212 Source: Average of international publications 21 22 23 24 25 26 27 28 29 21 211 212 Average prices 21-211