About Yara

The turnaround achievement

In the autumn of 1999, Hydro's management announced that the company's new strategy would be to develop the two main areas: Aluminium and Oil and Energy. The company's Agri business was not returning satisfactory results and was told that it needed to make radical improvements.

The entire fertilizer industry was affected by poor profitability and overcapacity during the latter half of the 1990s, especially in Western Europe, where the industry’s survival was at stake. For Agri the message was crystal clear: no new funds for investment would be made available before the business achieves a respectable level of profitability.

Hydro Agri played a leading role in the restructuring that the industry had to undertake. New improvement targets marked the launch of the Agri Turnaround process that subjected Hydro’s entire fertilizer business to intense scrutiny. Each single area was set improvement targets. The employees and their organizations were consulted and informed of the measures implemented, which also included downsizing and the closure of capacity.

Attention was focused on three drivers: lasting productivity improvements, active portfolio management and growth through smaller shares. Head of Agri, Thorleif Enger, stated the company’s intention of developing its areas of strength. Non-performers would be required to improve or face exclusion, while new businesses with considerable growth potential would be acquired in their place.

In what was perhaps the toughest restructuring process in the company’s history, results actually exceeded expectations. Fixed costs were reduced by 35 percent and a financial target of a 10 percent return on invested capital was made possible. The effects of Turnaround were felt particularly strongly in sales and marketing. However, production per employee rose to almost 3,500 tons compared with the 2,500-ton level of the mid-1980s.

After two years, Hydro Agri’s improved productivity placed the company in the industry’s upper quartile and further improvement measures were defined.

Following the sale or closure of several businesses, Hydro Agri had gained a leading position in ammonia, nitrates, complex fertilizer, and in speciality fertilizers for fruit and vegetables. It also played a leading role in environmental products and in terms of its global marketing network.

The company’s nitro-phosphate production technology helped secure it a leading position in calcium nitrate. All in all, Hydro Agri was in a position to supply its customers with an attractive range of products at favorable prices.

The successful implementation of the improvement program enabled Agri to enter a new century as a viable company. It formed the basis for the decision to spin off the business as an independent listed company from the second quarter of 2004.

Hydro Agri boosted its position as a result of the restructuring. Thanks to the greater efficiency achieved, it has been possible to maintain an industry that ensures agriculture in Europe still has access to plant nutrition that is specially suited to the soil and plants cultivated.

And, of course, the company’s shareholders have every reason to welcome the restructuring. The future of the enterprise most closely associated with Norsk Hydro’s origins – almost a century ago – seems assured.

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