Capital Markets Day 2019 London 26 June 2019
Agenda Section Time Presenters 1. Strategy update Start 08:30 Holsether 2. Driving value growth Knutsen/Hanzen 3. Improving operations Andersen/Røsæg Coffee break 10:20-10:50 4. Portfolio review Bonte 5. Capital allocation & returns Røsæg 6. Wrap-up Holsether 7. Q&A End 12:00 All presenters 2
Strategy update The Crop Nutrition Company for the Future Svein Tore Holsether
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 beyond 2020 • A leading player with the highest value proposition in core 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 4
Agriculture has delivered huge benefits to humankind over the past 100 years Mineral Fertilizer (1909) 2.7 Billion Lives Saved Blood Groups (1902) 1.09 Billion Smallpox Vaccine Green (1796) Revolution Diphtheria Penicillin Measles Chlorination DDT- 530M Wheat & Tetanus Mold (1928) Vaccine of Water Malaria (1940s-50s) Vaccine Drug (1940) (1958) (1919) Prevention 259M (1926) 82M 118M 177M (1939) 60M 21M 5 Source: Medigo GmbH
The agricultural sector is facing several fundamental changes CC impacts how and where crops Yara’s premium products, knowledge and solutions Climate Change reduce emissions, preserve resources and address can be grown, and demands specific challenges like water stress agricultural efficiency improvements Yara is contributing its knowledge and experience in Increased awareness and need Circular Economy partnerships to develop new crop nutrition business for nutrient recycling models, e.g. based on urban waste streams Innovative digital technology and solutions combine Technology Digital solutions change how ideally with Yara’s unrivalled global on-field presence in agriculture farmers operate and crop nutrition knowledge Increasing consumer demands: Yara’s global on-field presence and crop nutrition Food value chain quality, environmental impact, knowledge make it an ideal partner for food producers integration traceability and retailers 6
Our Corporate Strategy is evolving to meet these challenges xx xx Capital allocation to product Operational improvement Crop Nutrition focus Industry consolidation and market growth focus and value growth 2004 2007- 08 2013-15 2016 2017 2018 Yara listed on Major LatAm M&A, Yara Improvement Digital farming unit Updated Oslo Stock Program established launched strategy acquisitions production Exchange expansions 7
The Crop Nutrition Company for the Future Our Strategy Strategic Priorities • Yara’s strategy is to become the Crop Nutrition Company for the Future , delivering sustainable crop Advance nutrition solutions to farmers and industry, while delivering superior return on capital Operational Excellence • Crop nutrition solutions include products, knowledge and services including digital farming tools that enable farmers to optimize crop yield, resource efficiency and financial return Create Drive • Yara operates an integrated business model, with value Scalable Innovative creation focused on three strategic priorities - advancing Solutions operational excellence, creating scalable solutions and Growth driving innovative growth 8
Our journey from pure producer to the Crop Nutrition Company for the Future Producer Company Crop Nutrition Company Commodity Margin Knowledge Margin Market depth / Closeness to farmer Solutions Crop Scalable farmer Product centric solutions Crop focused Asset approach & Build product offerings reputation Sell what we produce Time and Development of Markets 9
Our integrated business model combines production of premium products with a farmer centric approach 10
Our business model creates value from factory to field Value drivers: EBITDA (MUSD) Examples : • Consistent NPK premiums Capture knowledge margin by providing crop and high margin knowledge nutrition solutions covering both product, Knowledge margin intensive micro nutrients knowledge and services based on deep insight of • Holistic solutions enabled Sales & Marketing farmer and customer needs by digital tools • Doubling EBITDA in Thailand Avoid unnecessary layers between Yara and the Shortening the 613 by selling to 150 retailers farmer and design go to market channels that distribution chain rather than one importer add value and scale up Yara’s farmer reach • Close to 200 infrastructure Infrastructure and Scale, optimization and consistent presence points ensure logistical scale logistical margin through infrastructure around the globe and lower freight costs Production • Systematic productivity improvements across 28 sites Production and Safety, productivity, high quality product portfolio, • Global sourcing strength sourcing and sourcing strength provides attractive raw material 856 prices 2018 11
We are uniquely positioned to create value Competitive landscape Yara’s competitive edge Proof points Global Sales to +160 countries +60 countries with operations Unique global presence and farmer interaction 9,000 fully branded retail outlets 1 Geographic presence Sales to 20 million farmers Yara is positioning Most of Yara’s peers to both have a Unrivalled global agronomic are mainly producers, global footprint 870 sales agronomists on the ground crop knowledge with limited on-field and strong market Pioneered agricultural growth and presence presence production for 114 years Crop-specific nutrition solutions based on a differentiated and Global #1 in nitrates and NPK sustainable product portfolio Peers with market presence do not Global optimization of production and have global reach Integrated business model market margins; reduces volatility Local Digital farming and value chain Solutions company Producer company New innovative business collaboration initiatives with leading models global partners Low Closeness to farmer High 12 1 Owned and operated by external parties
Our Commitments: Safety 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 1.4 6.1 TRI 1.4 0 Fertilizer Europe Yara 2018 Norwegian Jan'16 Mar'19 industry average 13
Our Commitments: Diversity, Engagement and Compliance Empowering an engaged, respected and diverse workforce Engagement index 1 >80% by 2025 • • Minimum 20% of female top managers by 2020 and 25% by 2025 Ethics and compliance is our license to operate • Zero tolerance for corruption • Commitment to respect human rights in our own operations and our supply chain 14 1 Korn Ferry Engagement index
Our Ambition: towards climate neutrality Use HESQ 360 reporting system Update data gathering process to be aligned with PRO energy reporting Yara’s total greenhouse gas Further improving on world Ambition to become climate emissions halved by almost leading performance by CO 2 neutral by 2050 eliminating N 2 O reduction target Past 15 years Present Future 15
We will deliver improved returns Return on Invested Capital (ROIC) 10% Targeting >10% ROIC at mid- cycle conditions by driving Improvement , Value and Growth 4% L12M Mid-cycle conditions 16
Driving value growth Strengthening our crop-focused solutions, food-chain partnerships and digital capability Terje Knutsen Lair Hanzen
Our terminal footprint is the key to secure other value creation levers Value drivers Knowledge margin Shortening the distribution chain Infrastructure and logistical margin Production and sourcing 18
Sales & Marketing contributes with resilient earnings despite deteriorating farmer economics Crop prices have deteriorated Nitrate and NPK premiums EBITDA development Index* USD/t Last 4 quarters rolling average 100 130 Production Sales & Marketing 70 50 Coffee Corn Nitrates Wheat NPK 0 0 Avg 12-15 2016 2017 2018 2019 2016 2017 2018 2019 2015 2016 2017 2018 L12M 19
We are growing the premium segment Total Sales & Marketing deliveries Million tonnes +7% Our ambition: 32.0 31.3 29.8 3.9 3.9 >3.5 million tons premium 3.3 product growth, improving overall EBITDA/t in Sales 14.7 14.1 14.5 and Marketing 17.0 13.4 13.4 12.0 2015 2018 L12M 2025 Premium products Commodities Non-fertilizer 20
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