yara international asa · 2018-06-13 · yara’s 1q results reflect the business environment food...
TRANSCRIPT
Yara International ASA
Terje Tollefsen, EVP Strategy &
Business Development
Thor Giæver, SVP Investor Relations
J.P. Morgan Materials Conference
13 June 2018
0
5
Jan'16 Mar May Jul Sep Nov Jan '17 Mar May July Sep Nov Jan'18 Mar'18
TRI (Total recordable injuries 12-month rolling)1
Safe operations is our first priority
1) TRI: Total recordable injuries, lost time (absence from work), restricted work and medical treatment cases per one million work hours.
IR – June 2018 2
6.2
3.3 2.7 2.7 2.2
Yara C. mandel Gresik Iffco Acron
7.7
4.2 3.0 2.9
2.3
Yara Eurochem Ostchem Uraichem Borealis
Yara’s leading global position and differentiated product portfolio
represent key sources of competitive edge Global #1 in Nitrates1
1) Including TAN and CN – Including companies’ share of JVs 2016YE
2) Compound NPK, excluding blends
3) 2016/2017 season volume
4) Ammonia trade not included in chart above
Global #1 in NPK2
0.3
1.3
Africa 4.8%
1.1
3.0
North America12.0%
0.2
2.2
Asia 7.1%
0.3
2.4
LatAm ex. Brazil7.9%
0.5
9.0
Brazil 27.9%
Industrial products & solutions Fertilizers 2017 sales figures in mill. tonnes, % = total 2017 Yara sales4
Fertilizer product portfolio3
Standard
products (Urea,
UAN, Ammonia)
34%
Differentiated
Products
(CAN, AN)
21%
Specialty
(CN,
Compound
NPK,
Fertigation)
26%
NPK blends
19%
4.7
9.2
Europe 40.4%
3
Yara’s integrated business model is unique within the fertilizer
industry
IR – June 2018 4
Yara’s 1Q results reflect the business environment
Food prices increasing
recently, but nitrogen demand
still muted
Urea supply increases in 2018,
higher than trend demand
growth
European nitrogen deliveries
and gas prices impacted by
cold weather
0
120
1/2014 10/2014 7/2015 4/2016 1/2017 10/2017
Urea fob Egypt USD/t
FAO food price index
Global capacity additions ex China
4.9
5.9
5.0 5.2
6.2
7.1 5.3
6.5
5.6 5.7
6.6
7.7
0
8
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
USD/ MMBtu
Yara European natural gas cost
3/2018
2.5
2020 2019
6.6
3.8
2017
3.4
2018
Trend
consumption
growth
5
Yara Europe
TTF
(1-month
lag)
IR – June 2018
0
600
1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18
USD/t
Nitrogen upgrading margins1 (monthly publication prices)
Yara EU gas cost *20
Urea Egypt
CFR proxy
Improved margins offset by lower European deliveries
1) All prices in urea equivalents and 1 month’s lag
2) Upgrading margin from gas to nitrates in 46% N (USD/t)
Source: Fertilizer Market Publications
0
7
13/14 14/15 15/16 16/17 17/18
Western Europe industry deliveries
(first nine months of season)
-7%
Source:
Yara estimate for fertilizer deliveries to selected West European countries
Million
tonnes N
Ammonia CFR
(46% N)
CAN
(46% N)
Domestic
Imports
2672 2502
6 IR – June 2018
0
500
14 15 16 17 18
0
8,000
2014 2015 2016 2017 2018
Th
ou
san
ds
Kilotons Kilotons
0
2,000
2014 2015 2016 2017 2018
Kilotons
Yara first-quarter premium product deliveries First-quarter industry deliveries (ANDA)
Lower deliveries in Brazil; Yara focused on premium growth, and
chose not to compete in lowest margin segments
-1%
-12%
First-quarter Yara deliveries
7
+2%
IR – June 2018
Strong ammonia production performance
1) Including share of equity-accounted investees
0
2,200 +13%
Ammonia1
Kilotons
5,500
0
+2%
Finished fertilizer & industrial products1
Kilotons
Urea
Nitrates
NPK
CN
UAN
SSP
2015 2016 2017 2015 2016 2017
8
Ammonia1
IR – June 2018
Earnings per share impacted by lower deliveries and higher
depreciation
0.36
1.36
1.36
0.15
1.19 1.35
0.36
-0.14
0.73
0.30 0.33 0.38 0.42
1.36
1.23
0.90
0.41
1.06
0.77
0.42
0.19
0.59
0.34 0.41
0.47 0.42
USD 3.25 2.78 1.75 0.42
Annual 2015 2016 2017 2018
*Average number of shares for 1Q 2018: 273.2 million (1Q 2017: 273.2 million).
EPS excluding currency and
special items
9
x.xx
IR – June 2018
IR – June 2018
EBITDA: Stronger margins more than offset by lower deliveries,
higher energy cost and weaker US dollar
3179
50
35370381
EBITDA 1Q18 Other
19
Special
items
7
Currency Energy costs Price/Margin Volume EBITDA 1Q17
USD millions
10
IR – June 2018
Higher net interest-bearing debt as investments and net operating
capital change more than offset cash earnings
736
175
296
2,879
Other
23
FX
translation
gain
8
Net debt
Mar 18
Investments
(net)
Net
operating
capital
change
Dividends
received
equity
acc. Inv.
72
Cash
earnings*
Net debt
Dec 17
2,367
* Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges
USD millions
2019
1.2
0.7
0.4
0.2
2020
0.9
0.7
0.0 0.2
2018
2.2
0.8
0.6
0.7
0.0
0.2
0.1
2017
1.6
0.7
0.6
Maintenance
Cost&capacity improvements 2)
M&A
Committed growth
USD bn
Capex plan1 Net interest-bearing debt
11
Ramp-up of digital solutions
• We are quickly building a strong pipeline of
digital solutions
• Every 3 months launch of 1-2 digital
solution teams
• Commercial pilots in coming season
• Examples
− Sensor-aided N-application
− Nutrient optimization tailored to specific
fields
− Crop advisory platforms
12
https://www.youtube.com/watch?v=ficvfTrMHno&feature=youtu.be
IR – June 2018
Yara is delivering on its growth pipeline;
multiple plant expansions and M&A coming on stream in 2018 Production growth 2015 - 2020
Finished products Ammonia Mill.tonnes (mt)
0.5
0.8
1.2
1.2
1.6
Est. 2020
25.1
Rio Grande
(2Q 2020)
Salitre
(2Q
2019)
Köping
(3Q 2018)
0.1
Cubatão
(3Q 2018)
Sluiskil
(2Q 2018)
0.2
Por/Glo
(1Q 2018)
0.4
Babrala
(1Q 2018)
TAN
Pilbara
(2Q 2017)
0.2
Uusikaupunki
(3Q 2016)
0.3
20151
20.6
18.7
0.3
0.3
0.7
0.5
1.1
Est. 2020
9.2
Cubatão
(3Q 2018)
0.2
Freeport
(2Q 2018)
Babrala
(1Q 2018)
Pilbara4 20151
7.7
6.4
0.2
Yara-operated plants
GrowHow UK (divested mid-2015)
Yara share of Qafco & Lifeco
13
5 2 3
IR – June 2018
IR – June 2018
Yara Improvement Program on track
2018 EBITDA benefits on track
(in 2015 terms):
Yara Productivity System
rolled out to 15 out of 30
sites.
Good reliability
improvements in ammonia
production
Energy efficiency
improvements ahead of full
target for 2018
Focus for this year is to reach
target but also to enable the
organization to sustain already
achieved benefits.
500450
350
242
84
275
Annual impact, USD million, vs. 2015 baseline, at 2015 margins
Today
Start: 2016 End: 2020 2017 2018 2019 2020
151536960
15
0
909
11669
500
2016
1402
1Q 2018 2017 2019 target 2018 target 2020 target
11133954914
1 One-off benefits are related to working capital improvements and white certificates
2Target One-off investments reduced as effect of Capex reduction program (total ~50mUSD less for 2018)
One-off
Sustained
EBITDA
improvement
Benefits1
Cost
Investments
14
IR – June 2018 15
2020 2019
0.5
0.4
0.1
2018
1.4
1.3
0.1
2017
0.8
0.6
0.1
2016
0.9
0.9
0.1
Committed expansions + M&A
Improvement program
2020
1,100
600
500
2019
950
500
450
2018
550
200
350
2017
282
40
242
2016
104
40
2020
2.1
0.9
1.2
2019
1.6
0.5
1.1
2018
0.9
0.0
0.9
2017
0.6
0.6
2016
0.2
0.2
1 Currency assumptions for 2018 onwards: USD/NOK 7.80, EUR/USD: 1.20 , USD/BRL: 3.30 2.Excluding maintenance capex on existing assets . Yara’s share of capex. Fully consolidated entities presented at 100% basis 3 Measured at 2015 conditions. Main average market prices: Ammonia fob Yuzhny 390 USD/t, Urea fob Yuzhny 275 USD/t, DAP fob Morocco 495 USD/t
Improvement program:
+ 350 MUSD cost improvement
+150 MUSD volume improvement:
-> 0.4 mill. tonnes ammonia
-> 0.7 mill. tonnes fertilizer
Committed expansions + M&A:
+ 1.4 mill. tonnes ammonia
+ 4.7 mill. tonnes fertilizer
Major improvement and growth investments in 2018;
main earnings improvement from 2019 onwards1
EBITDA improvement3 (MUSD)
Earnings improvement3 (USD per share)
Improvement and growth capex2 (BUSD)
IR – June 2018
Yara has expected commodity nitrogen oversupply, and has
focused its growth pipeline on premium & industrial products
Uusikaupunki NPK
Porsgrunn/Glomfjord CN/NPK
Sluiskil urea+S
Rio Grande NPK/NPK blends
Expand premium products
sales and supply
Freeport ammonia JV
Babrala urea acquisition
Expand commodity scale
based on attractive full-cost
growth opportunities
Act on attractive
opportunities to grow
industrial sales and supply
Galvani / Salitre Structurally secure P and K
supply
Pilbara – TAN
Köping – TAN
Cubatão – N and P
Growth focused on premium & industrial
1) Including Yara’s share of volume in non-consolidated investees. Fully consolidated entities presented at 100% basis 2) Plant started up in 2Q 2017, but has been down for technical reasons since 3Q 2017. Expected re-start 2Q 2018.
Pipeline EBITDA (2015 prices, USDm)1
70
170 180 190
2018 2019 2020 2021
110 140 140 150
2018 2019 2020 2021
0 30
170 170
2018 2019 2020 2021
Expected start up
3Q 2016
1Q 2018
2Q 2018
2H 2020
2Q 2018
1Q 2018
mining 2Q18, chemical 1H19
2Q 20172
3Q 2018
3Q 2018
Sum 230 460 640 660
50 120 150 150
2018 2019 2020 2021
17 IR – June 2018
7 growth projects starting up during 2018 (1)
Babrala (India)
Acquisition of urea plant and
distribution assets
Porsgrunn (Norway)
NPK and calcium nitrate
expansion
Freeport (US)
Hydrogen-based ammonia new-
build JV with BASF (Yara 68%)
- Start-up in progress
- 550 ktpa and approx. 100 MUSD EBITDA p.a. (Yara share)
- Strengthens Yara’s global ammonia position
- Start-up in 1Q
- Adds 250 ktpa and approx.
- Record nitric acid production in March (5,127 tpd)
- Take-over 12 January
- 1.2 mt urea and approx 40 MUSD EBITDA p.a.
- Provides footprint to accelerate premium product growth
18 IR – June 2018
7 growth projects starting up during 2018 (2)
Sluiskil (NL)
Revamp and urea+S expansion
Salitre (Brazil)
Phosphate mine
Cubatao (Brazil)
N and P production facility
acquisition
- Closing expected mid-2018
- 1.4 mtpa and approx. 60 MUSD EBITDA p.a.
- Strengthens production and industrial footprint in Brazil
- Start-up in 2Q (rock production only)
- Adds approx. 1.1 mtpa SSP equivalents by 2020
- Limited earnings until chemical production starts mid-2019
- Start-up in 2Q
- Adds approx. 210 ktpa and 30 MUSD EBITDA p.a.
- Improved product mix - from urea prills to nitrates and urea+S
Köping (Sweden)
Nitric acid revamp and TAN
expansion
- Start-up in 3Q
- 90 ktpa and approx. 50 MUSD EBITDA p.a.
- Strong long-term fundamentals for civil explosives industry
19 IR – June 2018
2020
1,100
600
500
2019
950
500
450
2018
550
200
350
2017
282
40
242
2016
124
40
Improvement and growth investments; earnings and sensitivities1
EBITDA improvement2 (MUSD)
Earnings improvement2 (USD per share)
0.10
0.19
0.30
Ammonia Urea DAP
Growth: Impact3 of +100 USD/t price change (USD/share)
1 Currencies for all amounts from 2018: USD/NOK 7.80, EUR/USD: 1.20, USD/BRL: 3.3
2 Measured at 2015 conditions. Main average market prices: Ammonia fob Yuzhny 390 USD/t, Urea fob
Yuzhny 275 USD/t, DAP fob Morocco 495 USD/t. 3 Improvement: 2020 numbers. Growth: At full capacity (2019 for urea and ammonia, 2020 for DAP). 4 Phosphate-driven price change, equivalent to 138 USD/t phosphate rock (72 bpl)
Improvement program: Impact3 of +100 USD/t price change
(USD/share)
0.06
0.09
Ammonia Urea
4
2020
2.1
0.9
1.2
2019
1.6
0.5
1.1
2018
0.9
0.0
0.9
2017
0.6
0.6
2016
0.2
0.2
20 IR – June 2018
IR – June 2018
Weighted average global
premium above blend cost
0
700
1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18
USD/t NPK premium over blend1
Value above
raw material
0
600
1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18
USD/t Phosphate upgrading margins
DAP FOB US Gulf
Solid commodity phosphate margins and compound NPK premiums
21
1) Export NPK plants, average grade 19-10-13, net of transport
and handling cost.
Rock, fob North Africa *1.4
NH3, fob Black Sea *0.22
Source: Fertilizer Market Publications
DAP, CIF inland Germany
MOP, CIF inland Germany
Urea, CIF inland Germany
Nitrate premium, CIF inland Germany
IR – June 2018
64
45
27
42 46
90
70
18
20
20
12
0
10
20
30
40
50
60
70
80
90
100
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
USD millions
EU/US estimate* EU/US actual
Higher natural gas cost expected for the next two quarters
22
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
USD/ MMBtu
TTF (1-month lag) Yara Europe
Yara European natural gas cost Change in global natural gas cost
Source: Yara, World Bank, Argus/ICIS Heren *Dotted lines denote forward prices as of 30 January 2018 Pilbara actual
IR – June 2018
Energy cost
23
4.0 4.4
4.0
2.8
3.7 4.4
2.6 2.0 2.1
2.8 3.0 3.0 3.0 2.9 2.9 3.2 3.2 2.7 2.8
4.8
5.7
8.2 8.0 8.0
6.9
5.5
4.1 3.8 4.0 4.3
5.3 4.7
5.9 6.0 5.7
4.7
6.6
9.2 9.4
10.5
8.1
6.4
4.2 4.4 4.2
5.4 5.8 5.0 5.5
6.6 6.8
6.9 6.9 6.6
7.6
10.7 11.0 11.4
9.1
7.1
5.0 4.6 4.9 5.3
6.5
5.6 5.7
6.6
7.7 8.0
7.4
2009 2010 2011 2012 2013 2014 2015 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
US gas price (Henry Hub) Yara Global TTF day ahead (Zeebrugge 2009-2012) Yara Europe
Yearly averages 2009 – 2015, quarterly averages for 2016-18 with forward prices* for 1Q18 and 2Q18.
*Dotted lines denote forward prices as of 30 January 2018 Source: Yara, World Bank, Argus/ICIS Heren
IR – June 2018
Fertilizer deliveries
24
0
7,000
Kilotons
2014 2011 2012 2013 2015 2016 2017 2018
Europe
Outside
Europe
IR – June 2018
Yara 1Q fertilizer deliveries by market and product
25
2,752
1,529
474 756
528 319
2,262
1,350
444 773 805
297
Europe Brazil Latin America North America Asia Africa
1Q17 1Q18
1,547
857
1,535 1,170
615 320 300
1,420
734
1,306 1,418
484 271 291
Nitrate Urea Other products UAN CNCompound NPK1 Blend NPK
1) Yara-produced compound NPK and third party sourced (Total NPK minus blend NPK)
Kilotons
IR – June 2018
Fertilizer deliveries by product and source
26
1,535
1,306
1,547 1,420
857 734
1,170
1,418
320 271
929 783
1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18 1Q17 1Q18
Yara-produced deliveries Joint venture & third party sourced
NPK compounds NPK blends Urea UAN Other
Kilotons
Nitrate
IR – June 2018
Strong premium product deliveries
27
1) YaraBela, YaraMila and YaraLiva deliveries
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1Q14 1Q15 1Q16 1Q17 1Q18
250
409
198
43
172
317
449
237
70
180
307
458
236
100
176
Asia Brazil LatinAmerica excl.
Brazil
Africa NorthAmerica
Value-added fertilizer deliveries1 Value-added fertilizer deliveries1
CAGR
8%
Outside Europe Europe
1Q18 1Q17 1Q16
IR – June 2018
AdBlue deliveries
28
0
600
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18
Kilotons
IR – June 2018
0
8,000
Yara stocks
29
Kilotons
Finished fertilizer
Urea
Nitrates
Compound
NPK
Other
IR – June 2018
Peak of new capacity was in 2017, but higher production growth
forecast for 2018
2.6
2022 2021
2.5
2020
1.9
2019
3.4
2018
3.8
2017
6.6
2016
4.7
2015
3.4
2014
1.1
Production
Others
India USA Iran
Algeria Russia
3% consumption growth
Global urea capacity additions excl. China (mill. tonnes)
Source: CRU March 2018 - CRU has removed Dangote Fertilizer, Nigeria (3 mill tons) from the medium-term forecast and shifted the project to 2023
30
IR – June 2018
Steady growth in grain consumption, while production growth is
more volatile due to weather variations
31
Source: USDA May 2018
2,000
2,600
08 09 10 11 12 13 14 15 16 17 18E 19F
Million tons
Consumption Production
Grain consumption and production Days of consumption in stocks
55
60
65
70
75
80
85
90
95
100
08 09 10 11 12 13 14 15 16 17 18E 19F
Days
IR – June 2018
Relatively weak grain economics
32
0
50
100
150
200
250
300
1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 1/2017 1/2018
Index FAO price index
Cereals Price Index Cereals 5 year avg. Food Price Index Food 5 year avg.
Source: FAO
IR – June 2018
China: Increased coal prices have driven nitrogen prices higher
33
Coal price in China (fob Qinhuangdao 5500, RMB/mt) China anthracite and urea prices (RMB/mt)
Source: IHS, CFMW
0
900
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016
2018
2017
IR – June 2018
Higher domestic price and lower exports from China are offsetting
oversupply elsewhere
34
170
190
210
230
250
270
290
310
330
350
370
390
Urea fob Black Sea Urea prilled fob China
Urea granular fob Egypt Urea inland proxy China
Source: BOABC, CFMW
Increasing urea pricing (USD/ton) Chinese export is falling (1000 tons)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
IR – June 2018
45.3
5.5
39.8 41.0
2.3
43.3
0
5
10
15
20
25
30
35
40
45
50
Pro
du
ctio
n
Expo
rt
Dom
estic
Dom
estic
Expo
rt
Pro
du
ctio
n
3.6
5.2
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Source: CFMW, covering close to 100% of production
17/18
Chinese domestic supply stable, as export decline offsets lower
production
Jul-Apr 16/17 Jul-Apr 17/18
1%
16/17
Chinese urea production down vs last year (million tons) Export reduction so far kept supply stable (million tons)
35
IR – June 2018
Deliveries in USA and Europe lagging last season, partly due to
late spring
0
14
13/14 14/15 15/16 16/17 17/18
0
7
13/14 14/15 15/16 16/17 17/18
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
West Europe Million tons N USA Million tons N
36
-5% -7%
Domestic
Production
Production
Net imports
IR – June 2018
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
17/18 12/13 13/14 14/15 15/16 16/17
Source: Fertilizers Europe, March estimate by Yara
Index
June 2007 = 1
37
IR – June 2018
24.2 24.0
29.6 30.3
Modest import catch-up need in India
38
20.8 19.7 20.1 20 20.7
21.5 22 22.3 23 22.7 23.7
24.4 23.7
22.6 23.5
25.5 26.9 26.4
27.3
29.4 29.6
31.5
29.7
32.5
30.2 30.6 +1.7%
2017 2016 2017
+2.6%
2005
Production Sales
Million
tonnes
+ 2%
- 1%
Season-to-date (Apr – Mar) Calendar year
Million
tonnes
IR – June 2018
Key value drivers – quarterly averages
39
242
190 207 244 229
265
201 234
272 261
1Q17 2Q17 3Q17 4Q17 1Q18
Urea prilled fob Black Sea (USD/t)/Urea granular fob Egypt (dotted line, USD/t)
231 198 205
239 245
1Q17 2Q17 3Q17 4Q17 1Q18
CAN cif Germany (USD/t)
3.0 3.0 2.9 2.9 3.1
1Q17 2Q17 3Q17 4Q17 1Q18
US gas price Henry Hub (USD/MMBtu)
5.8 5.0
5.5 6.6
7.7
1Q17 2Q17 3Q17 4Q17 1Q18
TTF day ahead (USD/MMBtu)
8.4 8.5
8.0
8.2
7.8
1Q17 2Q17 3Q17 4Q17 1Q18
NOK/USD exchange rate
301 282
198
286 287
1Q17 2Q17 3Q17 4Q17 1Q18
Ammonia fob Black Sea (USD/t)
Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank
IR – June 2018
10-year fertilizer prices – monthly averages
40
0
200
400
600
800
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
USD/t Urea prilled fob Black Sea/Urea granular fob Egypt
Average prices 2008 - 2017
0
200
400
600
800
1,000
1,200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
USD/t DAP fob US Gulf/MOP granular fob Vancouver
0
100
200
300
400
500
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
USD/t CAN cif Germany
0
200
400
600
800
1,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
USD/t Ammonia fob Black Sea
Source: Fertilizer Market Publications
IR – June 2018