Downstream provides a unique global presence, consisting of Yara’s worldwide marketing organization and global distribution network for fertilizer products and agronomic solutions.
The product offering covers both commodity and high-value crop segments where Downstream offers differentiated fertilizer products and services. The segment offers the fertilizer industry’s most comprehensive product portfolio, ranging from standard nitrogen products to complete crop nutrition solutions.
Downstream has a physical presence in more than 50 countries and sales to more than 120 countries, delivering expertise and value-adding products worldwide. Yara is the number one global brand within specialty fertilizers, and Downstream is the leading supplier of crop nutrition solutions for cash crops.
In 2009, Downstream further restructured and streamlined its operations in Europe, mainly through implementing a new business model in Eastern Europe, including closure of the Peremarton plant in Hungary, and increasing the efficiency of its operations in France. Capacity was increased at the Pocklington plant in the UK, which produces sophisticated foliar and micronutrient fertilizers.
In North America, Downstream successfully integrated the Belle Plaine (formerly Saskferco) operations in Canada following the acquisition in 2008, and completed the construction of the Stockton terminal. These actions strengthen Downstream’s distribution system with increased capacity and ability to service customers, and give Yara improved logistical leverage in the US.
Downstream has repositioned its operations in Thailand, through successfully taking over the distribution of own-produced premium NPKs. In late 2009, a new business model was implemented in Brazil, focusing on higher value products to better capitalize on Yara’s global strengths and improve long-term profitability. The process includes product portfolio simplification with more emphasis on own-produced products, closure of blending units and a manning reduction of 170 employees.
Downstream delivered weak 2009 results as earnings were impacted by reduced volumes, lower market prices and position losses from declining prices. Global Yara volumes were down two percent from 2008, mainly reflecting NPK deliveries 18 percent below 2008. European deliveries were eleven percent below last year, but Yara’s market share increased.
Lower demand for potash and phosphate saw NPK volumes down 38 percent, while nitrate deliveries increased six percent. Volumes outside Europe were up eight percent, with the main increase in urea and nitrates. Asian deliveries increased by 32 percent compared with 2008 while North American volumes were up 29 percent reflecting a positive contribution from the Belle Plaine acquisition. Sales in Latin America were down ten percent compared with 2008, mainly due to lower sales of NPK blends in Brazil.
Margins were substantially lower than in 2008, reflecting lower prices for most products. Average realized nitrate and NPK prices were approximately 50 percent and 30 percent below 2008. However, urea and nitrate demand and prices increased strongly towards the end of 2009. Yara incurred substantial position losses in 2009 primarily due to the drop in phosphate and potash prices during first half 2009.
2009 special items impacting EBITDA were a negative NOK 224 million, primarily reflecting restructuring in France and Brazil and bad debts in Africa. 2008 net special items were a positive NOK 410 million, primarily reflecting the sale of shares in SQM. Position losses are not classified as special items.
The “Other” variance mainly reflects fixed cost improvements, partly offset by last year’s NOK 215 million dividend from Fosfertil in Brazil. No Fosfertil dividend was paid in 2009.
Tight inventory management was exercised throughout 2009. Stock levels were brought down during first half and maintained at low levels during second half. Stock levels ended 45 percent below end 2008.
1) Based on average NOK/USD rates, 2009: 6,27 (2008: 5,57)
The main priority for Downstream is to sell Yara-sourced products and joint venture products at the best possible return for Yara, supplementing with third-party products where additional value can be added at an acceptable risk. Going forward, Downstream will continue to focus on optimizing its regional business models and increasing productivity through tight fixed cost and operating capital management. Yara continues to focus on growth in the US, and will finalize the construction of a new terminal in New Orleans as well as a liquid terminal in Savannah by mid 2010.
Innovation is key to staying competitive. Through developing knowledge, technology and tools to reduce nitrogen emissions while also achieving increased productivity, Yara has demonstrated that there need not be a conflict between addressing environmental issues and delivering improved profitability for farmers.
The Yara Crop Nutrition concept focuses on nutritional management of the crop rather than the traditional view of feeding the soil. The concept brings together Yara’s global crop knowledge, product portfolio and application competence to the benefit of growers globally, increasing nutrient efficiency and reducing environmental impacts.