Yara International ASA Tor Holba Head of Upstream Nomura Global - - PowerPoint PPT Presentation

Yara International ASA

Tor Holba – Head of Upstream

Nomura Global Chemical Industry Leaders Conference 22 March 2012

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A business strategy geared for global optimization

Unrivalled presence

+ +

Upstream Industrial Downstream Supply & Trade

Scale advantages Unique flexibility

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* Incl. companies’ shares of JVs Source: Yara & Fertecon Source: Fertilizer Europe Source: Fertilizer Europe

1 2 3 4 5 6 7 8 9 Yara CF GDF Agrium PCS 1 2 3 4 5 6 7 8 Yara* Euroc. Acron ZAT Rossosh 1 2 3 4 5 6 7 Yara Euroc. GDF Acron Agrofert

Yara – the leader in nitrogen fertilizers

Production capacity* (mill t)

Global no 1 in ammonia Global no 1 in nitrates Global no 1 in NPK complex fertilizer

Production capacity* (mill t) Production capacity* (mill t)

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100 200 300 400 500 600 700 800 4Q09 2Q10 4Q10 2Q11 4Q11 USD/t

Phosphate upgrading margins

DAP Margin above blend cost Nitrate premium above urea Value above gas Rock*1.4 Value above raw material 300 350 400 450 500 550 600 650 700 4Q09 2Q10 4Q10 2Q11 4Q11 USD/t

NPK blend premium

Blend cost T17 del France 100 200 300 400 500 600 700 4Q09 2Q10 4Q10 2Q11 4Q11 USD/t

Nitrogen upgrading margins

Urea CFR proxy CAN proxy (46% N) NH3*0.22 Yara EU gas cost *25

Yara creates substantial value over and above the commodity nitrogen margin

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Food prices at high levels despite drop in fourth quarter

50 100 150 200 250 1/2004 1/2005 1/2006 1/2007 1/2008 1/2009 1/2010 1/2011 1/2012 Index

FAO price index

Cereals Price Index Food Price Index Yearly avg Food price index

Source: FAO

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Continued strong price incentives necessary to avoid inventory decline

1,800 1,850 1,900 1,950 2,000 2,050 2,100 2,150 2,200 2,250 2,300 98 00 02 04 06 08 10 12F

Consumption Production

Source: USDA, March 2012

Grain production and consumption Days of consumption in stocks

Million tons 40 50 60 70 80 90 100 110 120 98 00 02 04 06 08 10 12F Days

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Source: Fertecon urea update January 2012. Consumption data source is IFA. Previous update in paranthesis

Year Driving regions Urea capacity growth relative to nitrogen capacity World Excluding China World Excluding China 2011 China 46% Pakistan 18% Pakistan 34% Iran 17% 1.6% (2.0%) 1.4% (1.5%) 2012 China 64% Qatar 10% Qatar 27% Algeria 23% 4.2% (4.2%) 2.4% (3.1%) 2013 China 28% Algeria 22% Algeria 30% India 19% 2.3% (2.0%) 2.7% (2.2%) 2014 Algeria 23% Saudi Arabia 23% Algeria 25% Saudi Arabia 25% 0.3% (0.9%) 0.5% (1.4%) 2015 Brazil 18% Indonesia 15% Brazil 19% Indonesia 16% 2.1% (-) 3.2% (-) Gross annual addition 2011-2015 ~2.0% Assumed annual closures ~0.5% Net annual addition 2011-2015 ~1.5% Trend consumption growth from 2001 2.5% 2.0%

Projected nitrogen capacity additions outside China in line w ith historical consumption grow th

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Low er Chinese urea exports in 2011

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2007 Kilotons

Source: BOABC

2008 0 % 20 % 40 % 60 % 80 % 100 % 120 % 140 % 160 % 180 % 200 % 100 200 300 400 500 600 700 800 900 USD per ton Export tax

Urea fob Black Sea Export tax

2009 2010

Accumulated urea exports Urea price and export tax

2011

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Demand-driven Chinese domestic urea price since mid 2011

Higher coal prices, increased focus on emission control and energy efficiency has led to higher domestic urea prices

Source: China Fertilizer Market Week

800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 RMB/t Urea price ex works Anthracite price

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370 335 430 765 100 200 300 400 500 600 700 800 CMD 2011 Anthracite price & 2012 system Domestic price & 2012 system Domestic price & 110% tax USD/t Cash cost Inland transport Tax Producer margin Series5

Current domestic price and 2012 tariff implies sw ing price of USD 430 fob China

Date: 28.02.2012 Page: 10

Global dow nstream player w ith sales to 150 countries

Yara plants Joint venture plants Sales offices Development programs R&D Units

48% Europe 9.4 mill tons 12% Asia 2.3 mill tons 15% North America 2.9 mill tons Latin America 3.8 mill tons 19% 6% Africa 1.2 mill tons

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European deliveries lagging last season

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 2H07 2H08 2H09 2H10 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

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 2H07 2H08 2H09 2H10 2H11 Production Net imports

West Europe USA

• 18%

Million tons Million tons

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Nitrate premium is mainly a function of crop prices and marketing effort

50 100 150 200 250 300 350 400 50 100 150 200 250 300 350 400 450 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 Wheat price, USD/t CAN price, USD/t Adjusted urea* Nitrate premium, USD/t Wheat price

* Urea fob Black sea adjusted for import costs into Europe and nitrogen content similar to CAN

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100 1,016 200 400 600 800 1,000 1,200 Wheat/UK Oranges/Brazil Index

Increase in crop production value using nitrates instead of urea

Nitrates’ agronomic advantage has higher value for cash crops than for commodity crops

(160 kg N/ha) (180 kg N/ha) 1,553 3,192 500 1,000 1,500 2,000 2,500 3,000 3,500 Wheat/UK Oranges/Brazil €/ha

Crop value with nitrates

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20 40 60 80 100 120 140 160 180 4Q Full year USD/t

NPK margins*

2010 2011

* Product from Porsgrunn, Glomfjord, Ravenna and Montoir sold in Europe

Good NPK development

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 1Q 2Q 3Q 4Q Kilotons

NPK volumes

2010 2011

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11.90 10.20 13.88 20.63 28.27 13.08 30.24 41.99 5 10 15 20 25 30 35 40 45 2004PF 2005 2006 2007 2008 2009 2010 2011

EPS EPS ex special items & currency

2011 earnings per share highest so far

 Healthy grain fundamentals and

farm margins led to strong demand for all nutrients

 Supply constraints as China halved

exports due to a tighter domestic market and higher coal prices

 Rossosh and 16% in Yara Praxair

divested at attractive terms

NOK per share

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0.34 0.75 0.49 0.20 0.28 0.63 0.38 0.22 0.40 0.57 0.32 0.12 0.84 0.56 0.27 0.12 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 2008 2009 2010 2011

Strong cash-generation

Net interest-bearing debt / equity ratio (end of period)

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5 10 15 20 25 30 2010 Qafco, Sluiskil and Porsgrunn expansions Remaining 2016 Million tons

External OPP/JV sales

We aim to increase ow n-produced and JV volumes by 8 million tons by 2016

In the five years to 2016, Yara’s OPP/JV sales will grow by

40%

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Basis for Yara’s profitable grow th ambitions

Valuation and capital discipline



In acquisitions Yara looks for:



Relative synergies compared to alternative buyers



Distressed sellers



Our cycle view compared to seller & alternative buyers 

Capital and valuation discipline demonstrated



Grain, fertilizer and gas outlook has recently improved increasing nitrogen asset values 0 % 5 % 10 % 15 % 20 % 25 % 2004 2005 2006 2007 2008 2009 2010 L12M

Strong earnings through the cycle

Long term target

Yara CROGI

Industry-leading acquisition track-record A scalable business model giving synergies

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More information can be found at w w w.yara.com

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9.63 14.93 10.91

• 7.27

3.06 3.88 1.21 4.93 5.27 12.86 6.68 5.42 10.02 7.73 12.42 11.84

• 10
• 5

5 10 15 20

Earnings per share*

NOK

* Average number of shares for 4Q 2011: 286.0 million (4Q 2010: 288.4 million).

NOK 28.27 13.08 30.24 41.99 Annual 2008 2009 2010 2011

EPS excluding currency and special items

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6,108 6,618 6,472 8,441 17,917 5,549 15,315 18,163 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2004PF 2005 2006 2007 2008 2009 2010 2011

EBITDA EBITDA ex special items

NOK millions

Earnings before interest, tax, depreciation and amortization (EBITDA)

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Fourth-quarter net debt development

NOK millions

* 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

4,961 5,539 2,523 304 329 2,039 786 297 175 441 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000

Net interest- bearing debt Sep 11* Cash earnings** Dividends received from equity accounted investees Net operating capital change Praxair divestment Investments (net) Share buy- backs and redemption of shares Foreign exchange gain/(loss) Other Net interest- bearing debt Dec 11

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Strong European 2Q deliveries despite drought

• 500

1,000 1,500 2,000 2,500 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Kilotons

European nitrogen deliveries

Average

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0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Index, June 2007=1 11/12 07/08 08/09 09/10 10/11

Source: Fertilizers Europe

European producer nitrate stocks increased in 4Q

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3,710 3,002 2,562 1,956 2,592 2,551 2,451 2,436 2,983 2,347 2,564 2,400 2,937 2,256 2,216 1,960 2,575 3,015 2,180 1,540 2,290 2,658 2,765 2,355 2,146 2,412 2,910 2,514 2,543 2,715 2,617 2,280 6,284 6,017 4,742 3,496 4,882 5,210 5,216 4,791 5,129 4,759 5,474 4,914 5,481 4,970 4,834 4,239

1,000 2,000 3,000 4,000 5,000 6,000 7,000 Outside Europe Europe

Fertilizer volumes

Kilotons 2008 2009 2010 Accumulated, Kt

• Fin. fertilizer

20,540 20,099 20,276 19,522 2011

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Yara 4Q fertilizer sales by market and product

2,401 997 516 631 370 1,960 949 487 611 233 500 1,000 1,500 2,000 2,500 3,000 Europe Latin America Asia North America Africa Kilotons

4Q10 4Q11

1,685 1,287 1,170 434 166 173 1,547 1,086 852 350 241 165 1,000 2,000 3,000 NPK Nitrate Urea Other products UAN CN Kilotons

4Q10 4Q11

2011: 4.2 million tons (2010: 4.9 million tons)

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Yara – production volume*

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Kilotons Urea Nitrates NPK CN UAN

2008 2009 2010 2011

* Including share of equity-accounted investees 500 1,000 1,500 2,000 2,500 Kilotons

Finished fertilizer Ammonia

2008 2009 2010 2011

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4.4 5.6 5.6 9.6 4.8 5.7 7.6 8.3 8.3 8.6 7.8 7.8 5.4 7.5 7.0 12.0 6.6 7.6 10.1 11.1 10.9 10.8 10.6 10.5 2 4 6 8 10 12 14 2005 2006 2007 2008 2009 2010 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 US gas price (Henry Hub) Yara Global Zeebrugge day ahead Yara Europe

Spot natural gas versus Yara average

USD per MMBtu

Source: Yara, World Bank, Platts

Yearly averages 2005 – 2010, quarterly averages for 2011-12 with forward prices* for 1Q12 and 2Q12

*Dotted lines denote forward prices as of 26 January 2012

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0% 2% 4% 6% 8% 10% 12% Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Share of annual sales 10/11 Avg 05/06-09/10 seasons

Yara nitrate sales

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0.0 2.0 4.0 6.0 8.0 10.0 Ammonia Nitrate NPK Urea Outside Europe Europe

Yara production capacities

Million tons product

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0.0 2.0 4.0 6.0 8.0 10.0 12.0 Million tons

Quarterly urea trade

Source: IFA, Iran from GTIS

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Source: PepsiCo Vietnam, 2011

Yara Crop nutrition program helps potato grow ers in Vietnam

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25 50 75 100 AN Urea UAN

Nitrate-based fertilizers are superior to urea both agronomically and environmentally

The agronomical efficiency of nitrates is superior to urea The carbon footprint is lower than for Urea

Source: DEFRA (2006), NT26 project report; Fertilizer Europe; 2EMEP/EEA air pollutant emission inventory guidebook (2007); Yara

Nitrogen recovery (% of AN)

Urea requires up to 20% higher N application to achieve same cereal crop yield and quality as AN

Lifecycle carbon footprint (kg CO2 eq/kg N) 4 8 12 AN Urea

Although urea is more CO2 efficient in production, CO2 emissions and ammonia volatilization on application more than offset for this

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NPKs have significant cash crop share, w hile nitrates today mainly serve commodity crops

North America Europe Asia Africa Latin America

2,571 4,700 NPK Nitrate

Commodity crops Cash crops

191 100 NPK Nitrate 70 150 NPK Nitrate 866 10 NPK Nitrate 343 450 NPK Nitrate

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Key investment value driver Typical source of value creation Selected examples

Attractive capital cost/ entry fee Attractive

• perating cash

flow Distressed seller



Rostock Non-core divestiture



Belle Plaine Advantageous CAPEX



Qafco 4 First mover





DeNox (Air1) Finders’ fee





Qafco, Dallol Scale advantages



Kemira GH, Lifeco Low-cost raw material



Qafco, Burrup Hidden trends





Trinidad Unique product offering



Kemira GH, Phosyn Consolidation synergies



Kemira GH, European production assets

Focus on key investment value drivers ensures value-creating grow th

Typically increasing degree of Yara specific value creation potential from investment

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*Assuming 30% marginal tax rate on underlying business and 287.2 million shares ** Net fixed costs in EUR and NOK

Yara sensitivities

Operating Income USD million EBITDA USD million EPS* USD Urea sensitivity +100 USD/t 944 1,095 2.8

…of which pure Urea 304 422 1.2 …of which Nitrates 367 391 1.0 …of which NPK 198 207 0.5

Nitrate premium +50 USD/t 439 467 1.2

…of which pure Nitrates 273 294 0.8

Hub gas Europe + 1 USD/MMBtu (90) (110) (0.3) Ammonia + 100 USD/t

• 50

0.2 Phos rock + 50 USD/t 50 50 0.1 Hub gas North Am + 1 USD/MMBtu (27) (27) (0.1) Crude oil + 10 USD/brl (80) (80) (0.2) Currency + 1 USD/NOK ** 90 90 0.2

Sensitivities assume stable value-added margins and no inter-correlation between factors

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NOK Last 4 quarters 5-year avg. to 30 Sep 20112) Chinese swing Demand- driven

EBITDA1) 14,800 15,200 13,500 23,600 Depreciation

• 2,600
• 2,600
• 2,600
• 2,600

Interest expense

• 800
• 700
• 700
• 700

Income before tax 11,400 11,900 10,200 20,300 Tax

• 2,400
• 2,800
• 2,100
• 4,500

Net income 9,000 9,100 8,100 15,800 Number of shares (millions) 287.9 287.2 287.2 287.2 Earnings per share (NOK) 31 32 28 55 Currency translation +1 USD/NOK 2,600 2,550 2,300 4,100

1) Including interest income, assumed in line with last 4 quarters in all scenarios. 2) Not historical earnings, but estimated earnings for today’s Yara business, using 5-year average price conditions.

Yara financial scenarios

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Price and currency assumptions in scenarios

Last 4 quarters 5-year avg. to 30 Sep 11 Chinese swing* Demand- driven** Ammonia fob Black Sea (USD/t) 459 366 450 550 Urea prilled fob Black Sea (USD/t) 386 342 360 510 Nitrate premium , USD/t 94 77 62 68 Phos rock fob North Africa (USD/t) 164 158 200 200 DAP fob Morocco (USD/t) 594 575 600 600 Zeebrugge natural gas (USD/MMBtu) 8.8 7.3 9.3 9.3 Henry hub natural gas (USD/MMBtu) 4.1 5.8 3.9 3.9 Yara’s European energy price (USD/MMBtu) 10.1 8.8 10.8 10.8 Brent blend crude oil price (USD/bbl) 98 81 106 106 NOK/USD 5.7 5.9 5.8 5.8 * Ammonia and urea prices equal to marginal producers’ cash cost, energy prices are forward prices as of 21 November ** Given example to illustrate effect of urea price USD 150 per ton above marginal cost.

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Key value drivers – quarterly averages

359 354 408 484 446 100 200 300 400 500 600 4Q 10 1Q 11 2Q 11 3Q 11 4Q11

Urea prilled fob Black Sea (USD/t)

318 377 384 376 378 50 100 150 200 250 300 350 400 450 4Q 10 1Q 11 2Q 11 3Q 11 4Q11

CAN cif Germany (USD/t)

3.8 4.2 4.4 4.1 3.3 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 4Q 10 1Q 11 2Q 11 3Q 11 4Q11

US gas price Henry Hub (USD/MMBtu)

8.3 9.0 9.5 9.2 9.0 7.6 7.8 8 8.2 8.4 8.6 8.8 9 9.2 9.4 9.6 4Q 10 1Q 11 2Q 11 3Q 11 4Q11

Zeebrugge day ahead(USD/MMBtu)

5.9 5.7 5.4 5.5 5.8 1 2 3 4 5 6 7 8 9 10 4Q 10 1Q 11 2Q 11 3Q 11 4Q11

NOK/USD exchange rate

403 470 499 526 576 100 200 300 400 500 600 700 4Q 10 1Q 11 2Q 11 3Q11 4Q11

Ammonia fob Black Sea (USD/t) Source: Fertilizer Market Publications, CERA, World Bank, Norges Bank

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10-year fertilizer prices – monthly averages

Source: Average of international publications

200 400 600 800 1,000 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 USD/t

Ammonia fob Black Sea

100 200 300 400 500 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 USD/t

CAN cif Germany

200 400 600 800 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 USD/t

Urea prilled fob Black Sea Average prices 2001 - 2011

200 400 600 800 1,000 1,200 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 USD/t

DAP fob US Gulf