Yara International ASA 2019 second quarter results 16 July 2019
Safety is our first priority TRI 12M rolling Ensuring a safe workplace environment for 5 employees and partners Striving toward zero accidents with no fatalities and Total Reported Incidents (“TRI”) <1.2 by 2025 9,8 1.5 6,1 TRI 1,4 0 Fertilizer Europe Yara 2018 Norwegian .Jan-16 Jun-19 industry average 2
Improved second-quarter results Earnings improvement continuing Improved but not satisfactory profitability L12M EBITDA ex. special items (MUSD) • EBITDA excluding special items and IFRS 16 2 500 increased by 62% 1 2 000 • Improved results with higher production and lower energy cost 1 500 • Premium product deliveries up 7%, in line with 1 000 strategy • 500 Return on invested capital (ROIC) at 5.4% 2 0 2Q16 2Q17 2Q18 2Q19 1 2Q IFRS 16 EBITDA effect is USD 27 million 3 2 L12M ROIC
9% increase in own-produced deliveries, with increase for all main product groups Total own-produced deliveries (million tonnes) Comments +7% +4% • Total 2Q deliveries up 2% to 9.6 1 2Q18 +11% million tonnes 1.6 1.6 2Q19 1.5 1.5 1.4 +29% • Higher own-produced deliveries 1.3 partly offset by lower deliveries of 1.1 blends and third-party sourced products 0.9 • Positive mix effect on EBITDA, as 0% average margins for own production are higher than 0.4 0.4 margins in the rest of the portfolio Nitrates Urea NPK Other CN 1 Excluding ammonia trade 4
Improved margins Lower European natural gas Higher urea prices outside China Higher nitrate and NPK prices prices Urea price development 1 (USD/t) Spot gas prices 1 (USD/Mmbtu) Yara realized CAN and NPK price 2 (USD/t) -6% +1% -37% 310 463 457 +6% 7,7 291 259 244 +4% 4,8 -4% 221 212 2,8 2,7 Europe US Urea granular Urea inland CAN 27 NPK 19-10-13 FOB Egypt China proxy 2Q18 2Q19 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, CAN 27 equivalents ex. Sulphur, Yara’s realized global NPK price (average grade) at German proxy 5 CIF
Capex reduced in 2019, growth projects ramping up Capex plan 1 Status USD Billions Major growth projects under execution: Growth - acquisitions • Sluiskil (Netherlands): completion 2H 2019 2.2 • Growth - expansions Salitre (Brazil): chemical production 1H 2020 • Rio Grande (Brazil): completion end 2020 Cost&capacity improvements 0.7 Maintenance Cost & capacity improvements: 1.6 • Smaller short-payback investments mainly in production 0.0 facilities, typically ~200 MUSD annually 1.3 1.2 0.5 0.6 Maintenance: 0.2 • Normalized maintenance capex of ~800 MUSD annually; 0.6 0.2 0.2 with variation from year to year driven by turnaround 0.2 schedule 0.1 Capex going forward: 0.8 0.8 0.7 0.6 • Priority is to deliver current commitments • High bar for new investments; preference for smaller high- return short-payback projects 2017 2018 2019 2020 1 Committed investments as of end 2Q19 6
Improving earnings and profitability trend Quarterly EBITDA ex. special items L12M ROIC USD millions Percent 546 5.4 464 424 402 4.1 3.8 3.7 321 3.1 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 7
Performance overview 2Q 2018 2Q 2019 EBITDA ex. special items 321 546 (USD millions) EPS ex. currency and special items 0.16 0.77 (USD per share) Cash from operations 523 680 (USD millions) Investments 589 246 (USD millions) ROIC 3.1% 5.4% (12-month rolling) 8
EBITDA improvement mainly driven by higher Yara-produced deliveries and lower energy cost EBITDA ex. special items 546 USD millions 30 27 103 5 IFRS 16 +27 MUSD 60 321 Portfolio +8 MUSD Other -5 MUSD 2Q18 Volume Price/Margin Energy costs Currency Other 2Q19 9
Higher production margins EBITDA ex. special items (MUSD) 2Q18 2Q19 308 196 174 125 37 31 Production Sales & Marketing New Business • • • Higher nitrogen margins in Europe Underlying results in line with last year Deliveries up 1% excluding Cubatão • • Finished fertilizer production up 4%, Significant premium growth in Brazil • Underlying improvement driven by ammonia production up 1% Maritime 10
Net interest-bearing debt reduced 2Q development Comments • Strong cash earnings and USD millions operating capital release - funding 4,205 investments, annual dividend and 4,019 368 86 net debt reduction 203 39 314 246 • Lower operating capital reflects seasonal prepayments in Brazil • Net debt/EBITDA 3 ratio at 2.2, down from 2.5 at end of 2018 • Revolving Credit Facility renewed, with margin linked to carbon intensity target Net debt Cash Dividend Net Investments Yara Other Net debt Mar 19 earnings¹ from EAIs² operating (net) dividend Jun 19 capital change 1 Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges 2 EAI = Equity Accounted Investees 11 3 End of period net debt divided by L12M EBITDA ex. special items
Improvement Program as presented at CMD: volume improvements 1 Comments Ammonia production volumes , kt annualized 2023 target Qtr, annualized • Positive production volume trend, with some 8,900 12 month rolling quarterly volatility L12M 7,791 • Reliability negatively affected by 1Q outages, but improving trend in 2Q 2018 7,850 • Focus on turnaround performance and reliability improvements at major sites 2Q17 4Q17 2Q18 4Q18 2Q19 2023 Finished products production volumes , kt annualized Increase from 2018 in ammonia & finished products Kilotonnes 2020 Final year 2023 target 23,930 Qtr, annualized Ammonia 690 1 050 12 month rolling NPK+CN 200 880 L12M 21,275 Nitrates 250 490 TAN 180 340 2018 Amidas 530 580 20,870 Urea+UAN -660 -420 2Q17 4Q17 2Q18 4Q18 2Q19 2023 P-products 1 050 1 320 Total volume increase 2,240 kt. 4,240 kt. 1 As presented at CMD, includes volumes from both growth and improvement projects 12 See appendix for definitions
Improvement Program as presented at CMD: non-volume KPIs Ammonia energy efficiency Fixed costs Operating capital GJ/ton MUSD Days 12 month rolling 34,4 2 356 2 340 2 340 33,7 33,9 L12M: 32,7 2 217 2018: 104 102 2023 target 90 2017 2018 L12M 2023 2017 2018 L12M 2023 2Q17 2Q18 2Q19 2023 target target • • • Negatively affected by ammonia outages Fixed costs in line with target ambition Slight increase in 1H 2019, however mainly in 1Q level; 1H 2019 with improving trend underlying trend positive As presented at CMD. See appendix for definitions 13
Sales & Marketing performance Increased EBITDA with higher Premium product deliveries Higher revenues deliveries in Brazil up 7% EBITDA ex. SI (MUSD) Volumes (Mt) Revenues (MUSD) +2% +6% +12% 8.6 2.9 8.4 2.7 196 174 1.5 4.7 5.0 1.5 1.4 3.6 1.2 3.4 2Q18 2Q19 2Q18 2Q19 2Q18 2Q19 Portfolio Commodity Premium* *Premium defined as Differentiated N, NPK, CN, fertigation products and YaraVita. YaraVita only included in revenues. 14
Fertilizer deliveries by region Total fertilizer deliveries Mill. tonnes Portfolio 0% +23% 2.5 2.5 2.1 Commodity 0.1 1.7 -12% 0% 1.1 1.1 1.0 -22% 0.9 Premium +16% 0.7 0.5 0.4 0.3 2.1 2.2 0.4 0.7 0.6 0.6 0.6 0.6 0.4 0.3 0.1 0.2 OPP Europe Brazil Latin Africa Asia North America America *Premium = NPK, Differentiated N, CN, fertigation products and YaraVita. 15 OPP = Own Produced Products
Our long term targets; increased premium product deliveries and higher margins Increase premium product Increase YaraVita deliveries to Increase EBITDA margin deliveries by > 3.5 mill tonnes > 100 million units Premium products in mill. tonnes YaraVita in mill. units EBITDA margin in USD/tonne +27% +150% 17,0 100 22 21 13,7 13,4 42 40 2018 L12M 2025 2018 L12M 2025 2018 L12M target target 16
The Crop Nutrition Company for the Future Delivering improved returns as a focused company Crop Nutrition Focus Industrial Focus Improvement Evaluating IPO of industrial business • Capturing the full value of our growth investments • First major integrated industrial nitrogen-player • Extending productivity, cost and capital improvements • A leading player with the highest value proposition in core beyond 2020 markets Value • Strengthening our crop -focused solutions and market • Solid European platform as fundament to achieve a strong positions, further reinforcing resilient Sales & Marketing global position earnings • Attractive market portfolio balancing stability & growth Growth • Driving collaborative growth through food-chain partnerships and digital capability Improved returns Clear principles for capital allocation 17
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