Yara International ASA Fourth quarter results 211 7 February 212
1 Summary fourth quarter Strong quarter and best full-year results so far Good farm profitability drove improved margins, more than offsetting weaker fertilizer deliveries Continued strong demand for premium products, especially outside Europe Divestment of 16% in Yara Praxair at attractive terms Proposed dividend NOK 7 per share
2 Earnings per share* NOK 2 EPS excluding currency and special items 15 1 5 9.63 14.93 1.91 3.6 3.88 1.21 4.93 5.27 12.86 6.68 5.42 1.2 7.73 12.42 11.84-5 -1-7.27 28 29 21 211 Annual NOK 28.27 13.8 3.24 41.99 * Average number of shares for 4Q 211: 286. million (4Q 21: 288.4 million).
3 211 earnings per share highest so far NOK per share 45 4 35 41.99 Healthy grain fundamentals and farm margins led to strong demand for all nutrients 3 25 2 2.63 28.27 3.24 Supply constraints as China halved exports due to a tighter domestic market and higher coal prices 15 1 11.9 1.2 13.88 13.8 Rossosh and 16% in Yara Praxair divested at attractive terms 5 24PF 25 26 27 28 29 21 211
4 Yara growth strategy on track Yara Pilbara (Burrup) Important to secure control Intensify work on the TAN project Renamed to Yara Pilbara, quickly establish Yara standards of corporate governance Yara Belle Plaine expansion Evaluating a world-scale ammonia/urea expansion Excellent location large consumption area with logistical advantage Utilizing existing infrastructure
5 Fertilizer market development Continued strong prices for agricultural commodities support fertilizer demand Average urea price for the quarter 25% above last year Volatile buying pattern for urea, sharp correction in December followed by rebound in January 21% decrease in Western Europe nitrogen fertilizer sales for the quarter Global phosphate and potash demand hurting from reduced use in India, price effects mitigated by production curtailments Lower Chinese urea exports
6 Food prices at high levels despite drop in fourth quarter Index 25 FAO price index 2 15 1 5 1/24 1/25 1/26 1/27 1/28 1/29 1/21 1/211 Cereals Price Index Food Price Index Yearly avg Food price index Source: FAO
7 European deliveries lagging last season Million tons USA Million tons West Europe 9. 8. 7. 4.5 4. 3.5-18% 6. 3. 5. 2.5 4. 2. 3. 1.5 2. 1. 1..5. 2H7 2H8 2H9 2H1 2H11 Production Net imports. 2H7 2H8 2H9 2H1 2H11 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
8 Strong European 2Q deliveries despite drought Kilotons 2,5 European nitrogen deliveries 2, 1,5 1, 5-3Q8 4Q8 1Q9 2Q9 3Q9 4Q9 1Q1 2Q1 3Q1 4Q1 1Q11 2Q11 3Q11 4Q11 Average
9 Chinese domestic urea price remains strong RMB/t 2,4 2,2 2, 1,8 1,6 1,4 1,2 1, 8 Urea price ex works Anthracite price Higher coal prices, increased focus on emission control and energy efficiency has led to higher domestic urea prices Source: China Fertilizer Market Week
Current domestic price and 212 tariff implies swing price of USD 385 fob China 1 USD/t 8 7 722 6 5 4 37 335 385 3 2 1 CMD 211 Anthracite price & 212 system Domestic price & 212 system Domestic price & 11% tax Cash cost Inland transport Tax Producer margin Series5
11 Projected nitrogen capacity additions outside China in line with historical consumption growth Year 211 China 46% Pakistan 18% 212 China 64% Driving regions Urea capacity growth relative to nitrogen capacity World Excluding China World Excluding China Qatar 1% 213 China 28% Algeria 22% 214 Algeria 23% Saudi Arabia 23% 215 Brazil 18% Indonesia 15% Pakistan 34% Iran 17% Qatar 27% Algeria 23% Algeria 3% India 19% Algeria 25% Saudi Arabia 25% Brazil 19% Indonesia 16% 1.6% (2.%) 1.4% (1.5%) 4.2% (4.2%) 2.4% (3.1%) 2.3% (2.%) 2.7% (2.2%).3% (.9%).5% (1.4%) 2.1% (-) 3.2% (-) Gross annual addition 211-215 ~2.% Assumed annual closures ~.5% Net annual addition 211-215 ~1.5% Trend consumption growth from 21 2.5% 2.% Source: Fertecon urea update January 212. Consumption data source is IFA. Previous update in paranthesis
12 Near-term capacity delays continue New urea capacity Million tons 8. 7. 6. 7.5 5.9 5.6 6.7 Lead time for a new greenfield project 4-5 years 5. 4. Good visibility on projects short to medium term 3. 2. 1. Potential delays could impact phasing. 212 213 Oct-1 Jan-12 Source: Fertecon urea updates
13 Earnings before interest, tax, depreciation and amortization (EBITDA) NOK millions 7, 6, 5, 4, 3, 2, 6,215 6,89 3,988 1,626 2,36 EBITDA excluding special items 1,259 86 1,394 3,251 6,587 2,992 2,486 4,281 3,455 5,444 4,982 1, 28 29 211 21 Annual NOK millions 17,917 5,549 15,315 18,163
14 Variance analysis Yara group NOK millions 4Q 211 EBITDA 211 4,982 EBITDA 21 2,992 Variance EBITDA 1,99 Volume & mix (392) Price/Margin 2,146 Oil & gas costs in Europe (543) Special items 1134 Other (245) Conversion (NOK vs. USD)* (19) Total variance explained 1,99 * Based on average NOK per USD rate for the quarter 211: 5.76 (21: 5.92)
15 Net debt development NOK millions 6, 5,5 5, 4,961 786 297 175 441 5,539 4,5 2,39 4, 3,5 329 3, 2,5 2, Net interestbearing debt Sep 11* 2,523 34 Cash earnings** Dividends received from equity accounted investees Net operating capital change Yara Praxair divestment Investments (net) Share buybacks Foreign exchange loss Other Net interestbearing debt Dec 11 * 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
16 Stable debt/equity ratio Net interest-bearing debt / equity ratio (end of period).9.84.8.75.7.6.5.4.3.2.1.34.28.4.63.57.56.49.38.32.27.2.22.12.12. 28 29 21 211
17 Proposed dividend of NOK 7 per share NOK per share 8. 7. 7. 6. 5.5 5. 4. 4. 4.5 4.5 3. 2. 2.25 2.35 2.5 1.. 24 25 26 27 28 29 21 211
18 EBITDA per segment NOK millions 4, 3, EBITDA excluding special items 3,221 2, 1,735 1, 74 1,98 1129 168 Downstream Industrial Upstream 4Q11 4Q1
19 Downstream segment Strong full year, but lower quarter result compared with 21 European sales down 18%, satisfactory sales outside Europe Healthy margins for premium products despite 3% urea price drop during the quarter Low third-party stock levels limit write-downs
2 Good NPK quarter Kilotons NPK volumes USD/t NPK margins* 2, 18 1,8 1,6 1,4 1,2 1, 8 6 4 2 16 14 12 1 8 6 4 2 1Q 2Q 3Q 4Q 4Q Full year 21 211 21 211 * Product from Porsgrunn, Glomfjord, Ravenna and Montoir sold in Europe
European producer nitrate stocks increased in 4Q 21 Index, June 27=1 1.8 1.6 1.4 1.2 1..8.6.4.2. Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 11/12 7/8 8/9 9/1 1/11 Source: Fertilizers Europe
22 Industrial segment Strong full year, but quarter result below normal level due to higher commodity prices Economic uncertainty impacts sales to European process industry TAN recovery due to higher mining activity in main markets Continued improvement in the environmental segment
23 Upstream segment Strong result Higher prices more than offset increased energy costs Fertilizer production running close to full capacity Qafco 5 and 6 starting production
24 Share of net income in equity-accounted investees NOK millions 4Q 211 4Q 21 Qafco 278 196 Tringen 84 73 Burrup 55 (112) GrowHow UK Ltd. 64 87 Lifeco (31) 43 Other 8 119 Total 459 46
Cost change on previous year 25 Estimated European energy cost NOK millions 1,4 1,2 Actual for quarter January 211 estimate* 1, 915 8 6 746 68 543 4 2 15-2 -4-15 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 * Based on forward prices as of 26 January
26 Prospects first quarter 212 Good farm margins indicate normal spring nitrogen consumption in Northern Hemisphere Pick-up in nitrogen markets in January, but total 211/12 European industry deliveries could end lower year-over-year Yara targeting stable European nitrate market share for the season Yara s first-quarter energy costs expected NOK 15 million higher, based on forward prices as of 26 January
27 Continued strong price incentives necessary to avoid inventory decline Grain production and consumption Million tons 2,4 2,3 2,2 2,1 2, 1,9 1,8 2 4 6 8 1 12F Consumption Production Days of consumption in stocks Days 12 11 1 9 8 7 6 5 4 2 4 6 8 1 12F Source: USDA, January 212
28 Prospects next twelve months Continued healthy crop prices and farm margins required to avoid decline in global grain inventories Chinese urea export swing level at approx. USD 385 per ton fob, based on official information and today s domestic price Significant near-term capacity delays: Fertecon estimates for 212 ex China revised down from 3.1% to 2.4% of consumption Lifeco: Yara targeting start-up in third quarter
Additional Information
3 Net income after non-controlling interests NOK millions 5, 4,354 4, 3, 2, 1, 2,88 3,175 887 1,122 349 3,716 1,927 1,424 1,522 1,564 2,889 2,225 3,566 3,386-1, -2, -3, -2,19 28 29 21 211 Annual NOK millions 8,228 3,782 8,729 12,66
31 Fertilizer volumes Kilotons 7, Outside Europe Europe 6, 5, 4, 3, 2, 6,284 6,17 2,575 3,15 3,71 3,2 4,742 2,18 2,562 3,496 1,54 1,956 5,21 5,216 5,129 4,882 4,791 2,658 2,765 2,146 2,29 2,355 2,983 2,592 2,551 2,451 2,436 5,474 4,759 2,91 4,914 2,514 2,412 2,347 2,564 2,4 5,481 2,543 2,937 4,97 4,834 2,715 2,617 4,239 2,28 2,256 2,216 1,96 1, 28 29 21 211 Accumulated, Kt Fin. fertilizer 2,54 2,99 2,276 19,522
32 Yara 4Q fertilizer sales by market and product 211: 4.2 million tons (21: 4.9 million tons) Kilotons 3, 2,5 2, 1,5 1, 5 4Q1 4Q11 2,41 1,96 997 949 516 631 487 611 37 233 Europe Latin America Asia North America Africa Kilotons 3, 4Q1 4Q11 2, 1, 1,685 1,547 1,287 1,86 1,17 852 434 35 166 241 173 165 NPK Nitrate Urea Other products UAN CN
33 Yara production volume* Finished fertilizer Ammonia Kilotons 5, Kilotons 2,5 4,5 4, 2, 3,5 3, 1,5 2,5 2, 1, 1,5 1, 5 5 28 29 21 211 28 29 21 211 UAN CN NPK Nitrates Urea * Including share of equity-accounted investees
34 Spot natural gas versus Yara average Yearly averages 25 21, quarterly averages for 211-12 with forward prices* for 1Q12 and 2Q12 USD per MMBtu 14 12. 12 1 8 6 5.4 7.5 7. 9.6 6.6 7.6 1.1 7.6 11.1 1.9 1.8 1.6 1.5 8.3 8.3 8.6 7.8 7.8 4 4.4 5.6 5.6 4.8 5.7 2 25 26 27 28 29 21 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 US gas price (Henry Hub) Yara Global Zeebrugge day ahead Yara Europe *Dotted lines denote forward prices as of 26 January 212 Source: Yara, World Bank, Platts
35 Chinese exports needed to balance the global market Accumulated urea exports Urea price and export tax Kilotons USD per ton Export tax 8, 9 2 % 7, 21 8 18 % 6, 5, 4, 3, 2, 1, 27 28 29 211 7 6 5 4 3 2 1 Urea fob Black Sea Export tax 16 % 14 % 12 % 1 % 8 % 6 % 4 % 2 % % Source: BOABC
36 Key value drivers quarterly averages Zeebrugge day ahead(usd/mmbtu) Urea prilled fob Black Sea (USD/t) CAN cif Germany (USD/t) 9.6 9.4 9.2 9. 8.8 8.6 8.4 8.2 8. 7.8 7.6 9.5 9.2 9. 9. 8.3 4Q 1 1Q 11 2Q 11 3Q 11 4Q11 6 5 4 3 2 1 484 48 446 359 354 4Q 1 1Q 11 2Q 11 3Q 11 4Q11 45 4 35 3 25 2 15 1 5 318 377 384 376 378 4Q 1 1Q 11 2Q 11 3Q 11 4Q11 US gas price Henry Hub (USD/MMBtu) Ammonia fob Black Sea (USD/t) NOK/USD exchange rate 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. 4.4 4.2 3.8 4.1 3.3 4Q 1 1Q 11 2Q 11 3Q 11 4Q11 7 6 5 4 3 2 1 576 47 499 526 43 4Q 1 1Q 11 2Q 11 3Q11 4Q11 1 9 8 7 6 5 4 3 2 1 5.9 5.7 5.4 5.5 5.8 4Q 1 1Q 11 2Q 11 3Q 11 4Q11 Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
37 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 21 22 23 24 25 26 27 28 29 21 211 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 Source: Average of international publications 21 22 23 24 25 26 27 28 29 21 211 Average prices 21-211