Industrial creates value by developing and selling chemical products and industrial gases to non-fertilizer segments such as the chemical, civil explosives and food and beverage industries.
Industrial has a leading position in nitrogen applications, adding value to Yara’s product streams by developing higher-margin applications and utilizing valuable co-products from the existing production base. Industrial provides complete solutions to a wide and diversified customer base.
The Industrial product portfolio includes nitrogen-based chemicals, both for end-user application and as raw materials for numerous industrial applications. Industrial has a growing portfolio of environmental applications for emissions abatement in transport, power generation, water utility and other sectors.
Industrial’s environmental applications portfolio includes Nutriox, a solution that prevents toxic gas emissions in sewage systems. Based on a specially-developed blend of nitrates, it is sold to several thousand sites in Europe and via an exclusive commercial agreement with Siemens Water in the US. This agreement was renewed in 2009, opening further growth opportunities for sales to municipalities and industrial plants.
As demand for civil explosives continues to grow, Yara and Burrup Holdings plan to open a new technical ammonium nitrate (TAN) plant in Western Australia to supply mining companies in the region. The concept study phase was concluded in 2009, and the pre-execution phase is ongoing. Major long-term TAN contracts in several countries were renewed in 2009, and sales to Australia picked up. These developments underline the continued strength of the TAN business.
Dry ice, the solid form of CO2, is another focus area for Industrial, serving the food and catering industries in particular for “cold chain” management. Following the signing of a major ice cooling agreement, Yara in 2009 expanded an existing dry ice plant site to handle increased volumes. The trend towards more fresh food on-the-go points to continued growth for dry ice, as the favored refrigerant option among retailers and the food industry.
Industrial EBITDA excluding special items more than doubled compared with 2008, primarily reflecting higher margins from contracts entered into at higher prices.
Several significant contractual price revisions were made towards the end of 2008, shortly before the sharp decrease in ammonia and urea prices. This had a strong positive effect on margins in the environmental and explosives businesses in particular, and primarily in the first three quarters of 2009. Towards the end of 2009, margins approached a normal level, as contracts entered into at higher prices had mostly rolled over. The industrial gas business was impacted positively by lower energy and electricity prices.
Temporary plant closures during the first half of the year led to a difficult sourcing situation with adverse margin effects for both the chemical and gas businesses.
Despite a challenging macro environment, total volumes were only four percent lower, compared with 2008. The downturn affected the TAN and process chemicals businesses the most, following production cut-backs in the mining industry and industrial plant closures in the process chemicals industry. From a mid-year volume shortfall of 20 percent and 21 percent respectively, both TAN and process chemicals benefitted from improved second-half demand. TAN volumes ended down 16 percent for 2009, while process chemicals were in line with the previous year.
Projected growth for the environmental business did not materialize, but sales ended in line with 2008. Sales of liquid CO2 to European end-users were in line with 2008.
2009 special items primarily reflect the Pardies closure cost of NOK 42 million, while the 2008 result included a NOK 90 million gain from the sale of chemical marketing activities to Brenntag.
1) Based on average NOK/USD rates, 2009: 6.27 (2008: 5.57) Forward focus
The US Clean Air Act Amendments came into effect 1 January 2010, launching the largest market to date for Diesel Exhaust Fluid (DEF). Also known as AdBlue, this high purity urea solution eliminates toxic nitrogen oxide NOx emissions from heavy duty vehicles. Yara has positioned itself to capture a share of this market with a multi-sourcing point strategy and agreements with major distributors, ensuring availability and security of supply across North America. Yara brings expertise to this market, as the leading supplier and one of the pioneers of the DEF markets in Europe, Australia and several Asian countries.
2010 should see the regulatory approval of the Burrup TAN production site in Western Australia, expected in the second half of the year. The planned capacity of 350,000 metric tons annually aims to meet increased demand.
The liquid CO2 plant constructed in 2008 in partnership with Ensus, a UK bio-energy producer, was put into operation in mid 2009 and will be fully expanded in first quarter 2010 to reach an annual capacity of 250,000 tons of liquid CO2. The facility will supply growing demand from the UK food and drinks industry.