Investor Relations

Strategy and execution 2009

Yara is a global company that primarily focuses on the production, distribution and sale of nitrogen chemicals. The main application is fertilizers, while industrial uses are also an important and faster-growing segment. Yara employs its scale and flexibility to ensure reliable supplies of mineral fertilizer and related industrial products to customers worldwide.

Yara benefits from scale, as the world’s largest producer of ammonia, nitrate and complex fertilizer, and with more than one quarter of global ammonia trade. Historically, the backbone of Yara’s production system has been located in Europe. However, the company’s growth projects in recent years have extended the company’s presence to other markets and regions.

Yara has developed a global presence unrivalled in the fertilizer industry. Our global distribution and marketing network includes more than 200 terminals, warehouses, blending plants and bagging facilities located in more than 50 countries. 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 crop quality and nutritional value.

To enable quick responses to changing market conditions, Yara’s business model has built-in flexibility. The majority of Yara’s operational cash cost is variable, as purchases and plants can be adjusted at short notice in response to delivery slowdowns.

Handling costs

Increased energy costs in Europe can be mitigated by importing instead of producing ammonia, since most of Yara’s European production facilities have access to deep-sea import/export terminals for ammonia and Yara is the global leader in trade and shipping of ammonia. Yara has the world’s largest storage capacity for fertilizer, enabling the company to build up stocks before peak seasons and thereby handle volatility in deliveries and take advantage of geographical arbitrage opportunities.

Yara has set a considerable increase of its global market share as a long-term objective, which would result in optimal utilization of its 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 growth initiatives will focus on increasing Yara’s production in low-cost regions, expanding its 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, along with capital discipline.

Yara's initiatives

Yara continued to deliver on its growth ambitions during 2009 and into 2010, through several important initiatives:

In February 2009, Yara’s production in competitive gas areas was increased with the establishment of Lifeco, a 50/50 joint venture in Libya. Yara contributed USD 225 million in cash to match the Libyan contribution of existing plant assets totaling an annual capacity of 900,000 tons urea and 700,000 tons ammonia. The attractive valuation reflects the premium that our Libyan partners place on access to Yara’s marketing network through a long-term marketing agreement and Yara’s operational and project management expertise.

Yara’s production in competitive gas areas will further increase with the ongoing Qafco-5 expansion project, which started in 2007 with the construction of two world-scale ammonia plants and one world-scale urea plant in Qatar – at a total cost of USD 3.2 billion, scheduled for completion in the first half of 2011.

In October 2009, the Qafco-6 project was announced, adding another world-scale urea plant at a cost of USD 610 million, with completion around the end of third quarter 2012. By choosing the same construction consortium and design for Qafco-6 as for Qafco-5, major cost synergies are secured from the consortium having already mobilized at site and the reuse of experience. Yara has a 25 percent ownership share in Qafco and currently markets at least 50 percent of the company’s urea production.

By the end of 2009, the phosphate rock sourcing for Yara’s NPK production was improved with an expansion in annual capacity of 150,000 tons phosphate rock in Siilinjärvi, Finland, by investing EUR 60 million in modifications of rock upgrading equipment.

2010

In January 2010, Yara acquired the remaining 51 percent ownership in Balderton Fertiliser for USD 142 million, cash excluded. Balderton is a leading European fertilizer trading company, trading 2.9 million tons of fertilizer products in 2009. Full ownership will simplify integration and increase optimization of Balderton in Yara.

In January 2010, Yara agreed to sell its 15.5 percent ownership in Fosfertil in Brazil for USD 785 million to Vale giving Yara a profit before tax of approximately USD 550 million at the expected closing in the second quarter of 2010. Brazil remains an important growth market for fertilizer and Yara, but a minority position in Fosfertil is not giving the optimal operational integration with Yara’s fertilizer marketing in Brazil, a marketing activity that Yara will continue to develop.

In February 2010, Yara signed a cash merger agreement with Terra Industries Inc representing a Terra market capitalization of USD 4.1 billion. The transaction would give Yara an improved position in the US. In March 2010 CF Industries launched a competing bid that Terra concluded on being a superior offer to Yara's. Yara decided not to increase its offer, and received a USD 123 million break-up fee when the merger agreement was terminated.

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