Investor Relations

Upstream 2008

Upstream delivered a strong financial result in 2008 as all product prices were significantly up from 2007, despite a fall in the last quarter.
Financial highlights 1)
NOK million
2008 2007
Revenue and other income 45,826 23,659
Operating income 8,342 1,649
Share net income non-consolidated investees 2,482 1,316
EBITDA 12,372 3,797
EBITDA excl. special items 12,665 3,842
CROGI (12-month rolling average) 27.6 % 14.4 %
Oil & gas cost (weighted average) 2)         USD/MMBtu 9.6  5.6 
Oil & gas cost Europe (weighted average) USD/MMBtu 12.0  7.4 
Production 1) 2)
Ammonia 6,167 5,546
Finished fertilizer 10,965 8,718
Total 17,132 14,264

Upstream EBITDA

Upstream EBITDA View graph

Upstream CROGI

Upstream CROGI View graph

Ammonia production increased 11 percent and finished fertilizer production increased 26 percent from 2007, mainly reflecting the Kemira GrowHow acquisition which was effective from fourth quarter last year.

Net income from non-consolidated investees almost doubled from the previous year with an increase of NOK 1,166 million from the 2007 result of NOK 1,316 million. Qafco benefited from strong ammonia and urea prices, Tringen from high ammonia prices and Rossosh and GrowHow UK Ltd. from higher nitrate  and NPK prices. The Burrup plant incurred a loss in 2008 after a supplier incident in early June disrupted natural gas supply, and also reflecting a currency loss on USD loans. The insurance claim related to the stop has not been settled and is consequently not reflected in the results.

Oil and gas costs in Europe increased significantly due to an increase in both oil-linked and hub gas prices. European oil and gas costs were USD 12.0 per MMBtu, up USD 4.6 from last year.

Dry raw material purchase prices increased sharply in 2008 compared with 2007, but were more than offset by increased product prices.

In October 2008, Yara acquired Canadian nitrogen producer Saskferco for CAD 1.6 billion in enterprise value. The landmark transaction strengthens Yara’s production and marketing position in North America and serves as a solid platform for further growth and value creation. The Saskferco plant is one of the world’s most energy-efficient producers of ammonia, urea and UAN, with strategic proximity to western Canada’s large and cost-competitive gas reserves.

The deal will add 650,000 tons of ammonia, 980,000 tons of urea and 230,000 tons of UAN in annual production capacity. In addition, current capacity expansion projects will increase ammonia and urea production to 725,000 and 1,115,000 tons annually from mid 2009 at an investment cost of CAD 84 million. Natural gas supply to the plant is linked to AECO Hub, which has historically been priced lower than Henry Hub.

Special items include a NOK 359 million fair value adjustment as the acquired inventory position in Saskferco was adjusted to net market value at the acquisition date. In addition, special items reflect NOK 86 million Kemira GrowHow restructuring costs, a NOK 52 million loss on resale of gas related to a planned maintenance stop and a NOK 80 million gain on the sale of shares in China BlueChemical Ltd. 

Variance analysis  NOK
million
USD 1)
million
USD/
ton 2)
EBITDA 2008 12,372 2,218 137
EBITDA 2007 3,797 646 40
Variance EBITDA in NOK 8,575
Conversion (NOK vs. USD) 116
Variance EBITDA 8,692 1,572 97
Kemira GrowHow 2007 (pro forma) 3) 598 113 7
Volume & mix 524 90 6
Price/Margin 12,072 2,187 135
    of which write-down on inventories  (264)  (41)  (3)
Energy cost in Europe  (4)  (793)  (49)
    Oil & gas products  (4)  (769)  (47)
    Electricity  (147)  (24)  (2)
Special items  (439)  (73)  (4)
    Non-recurring items  (517)  (80)  (5)
    Contract derivatives 78 8 0
Other 264 47 3
Total variance explained 8,692 1,572 97
1) Based on quarterly average NOK/USD rates as detailed in Yara 2008 reports.
2) Divided by 2008 ammonia and finished fertilizer production
3) Pro forma Kemira GrowHow 1-3Q 2007 EBITDA, restated to Yara segment structure and accounting policies.

Upstream production volume

Upstream production volume View graph

Natural gas cost

Natural gas cost View graph

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