Investor Relations

Strategy 2008

Yara strategy

Industry Shaper

Yara’s vision is to be an Industry Shaper, aiming to set industry standards and being a positive force in developing the industry through performance and growth. The company’s mission – Better Yield – is aimed at delivering good returns for farmers, industrial customers and its owners.

Yara aims to drive an inspiring performance culture based on its vision and mission, the company’s Code of Conduct, and the four core values: ambition, teamwork, trust, accountability.

The ambition – further detailed through the ten strategic goals for long-term value creation – is based on the company’s global position; its industrial platform and business model, its growth strategy and its combined strengths.

Growth Strategy

Yara aims to deliver on its overall ambitions and goals by implementing its strategy of profitable and sustainable growth. This is a roadmap for industry shaper performance and long-term value-creation, building on extensive business experience and leading industrial and agronomic expertise. Yara aims for growth by strengthening its global position and local presence, increasing market shares and delivering profitable returns.

Yara is positioned to deliver by consistently executing its strategy; developing its existing production base and optimizing its global operation – pursuing new business opportunities. Yara’s unique, flexible business model offers opportunities for global optimization. The stated long-term objective of a ten percent global market share reflects an optimal utilization of the company’s global marketing and distribution system.

Reaching this objective will require productivity gains in the existing business as well as organic growth and step growth initiatives. The larger growth initiatives will focus on increasing Yara production in low-cost regions, expanding market presence in high-growth markets and participating in consolidation in mature markets. For all growth categories, scale, synergy and timing will be important factors together with capital discipline.

Yara operates within a global environment that strongly influence on world business, and which offers new global opportunities. Yara is well positioned to take advantage of opportunities created by global trends and developments, at the same time employing its position and presence to deliver solutions to major challenges such as food security and climate change. Global trends and issues constitute an essence of Yara’s strategy for corporate citizenship, which is an integral part of the business strategy.

Business Model

Yara has developed a flexible business model which is unique to the industry and closely connected to the strategy. The model has global optimization at its core, building on Yara’s scale advantages, extensive flexibility and unrivalled presence.

Yara benefits from scale as the world’s largest producer of ammonia, nitrate and NPK fertilizer, and has more than one quarter of global ammonia trade. Furthermore, Yara has developed an unrivalled global presence in the fertilizer industry: Its global distribution and marketing network includes chartered shipping capacity and more than 200 terminals, warehouses, blending plants and bagging facilities. Local sales and marketing units provide customer services as well as agronomical support, sharing knowledge and working with farmers worldwide to increase yields and improve crops quality and its nutritional value.

Yara’s business model has a built-in flexibility to enable quick responses to changing market conditions. The majority of Yara’s operational cash cost is variable and related to raw materials, energy, freight and third-party fertilizer sourcing. Purchases and plants can be halted at short notice to respond to delivery slow-downs.

Increased energy costs in Europe can be mitigated by cheaper imported ammonia since most of Yara’s European production has deep-sea import/export terminals for ammonia and since Yara is the global leader in trade and shipping of ammonia. Yara controls the world’s largest storage capacity for fertilizers, with the capacity to build up inventory before peak seasons, handle volatility in deliveries and take advantage of geographical arbitrage opportunities.

Strategy Execution - Growth initiatives

Yara pursued its growth strategy in 2008, expanding its production capacity and following strategic initiatives to strengthen the global position and presence, in accordance with its targeted step growth categories. Also, Yara explored and took opportunities connected to the market pull for environmental solutions and nitrogen explosives in industrial growth markets.

Yara’s targeted step growth categories remain unchanged, and were reconfirmed by key initiatives in 2008, primarily with acquisitions in North America, notably Saskferco in Canada. Thereby, Yara added a world-class nitrogen manufacturing plant with access to cost competitive gas resources to its already considerable capacity, together with storage facilities located close to an important regional agricultural market. The joint venture company, the Libyan Norwegian Fertiliser Company (Lifeco) in Libya, effective as of February 2009, also adds to Yara’s low-cost capacity.

During 2008, Yara took advantage of several other growth initiatives, including the purchase of 25 percent of Agrico Canada Ltd, a leading supplier of fertilizer products and services in North America, and an agreement to increase ownership in Burrup Holdings Ltd, Australia, with five percent. Key strategic moves also included Yara Sluiskil BV entering contracts to expand its urea production in the Netherlands, and the decision to increase capacity at the Siilinjärvi phosphate mine in Finland.

Knowledge Development

Knowledge is key to the future growth and development of Yara. Local market insight, close customer relations, agronomic competence and ability to develop new products and technologies have already given Yara a knowledge margin in the market. Yara encourages innovation and creativity within its talent pool, seeking to develop a performance culture, looking for new opportunities to arise.

Sustainability is a common denominator for Yara’s R&D activities, with considerable efforts devoted to public concerns about modern farming. Several of the environmental applications Yara has developed, such as the successful NOx abatement technologies and N2O catalyst, originally aimed at reducing emissions from own plants, have been made commercially available.

Corporate Citizenship

Yara considers corporate citizenship an integral part of its overall strategic direction. Being a truly global company, Yara in 2008 chose to adopt a strategic approach of global citizenship. Externally, Yara leverages its core business and global position within areas where it can contribute and make a substantial, positive impact, responding to major global challenges. Internally, Yara is committed to adhere to laws and regulations of the countries in which it operates, as well as its own code of conduct and stringent rules, not least with respect to safety and product stewardship.

Underlying the citizenship, are the principles of the UN Global Compact, which Yara adheres to, and the company’s dedication to contribute towards the UN Millennium Development Goals (MDGs), in particular the one on eradicating hunger and poverty.

Yara’s citizenship activities and performance is reported in the Citizenship Review 2008.

Major Risks

By the nature of its industry and business, certain major risks are connected with Yara’s operation. This ranges from operational risks, including chemical production processes, through safety, environmental and financial risk, derived from operating within a global industry and market, including the price of key commodities, to strategic risks, including the acceptability of fertilizer use in agriculture, as well as political and regulatory aspects. Yara has developed and implemented a risk management system, aimed at revealing a number of identified risks stemming from all levels of the group. Financial risks are accounted for in the financial statement, whereas risk management is described in the article on corporate governance.

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