Yara’s vision is to be an industry shaper, aiming to set industry standards and driving industry development through innovative performance and growth execution and playing a role in the consolidation of the nitrogen fertilizer sector. The company’s mission – Better Yield – means delivering good returns for its customers and owners.
Yara aims to drive an inspiring and innovative performance culture based on its vision and mission, the Code of Conduct and the Ethics Program, and the core values of Ambition, Teamwork, Trust and Accountability. Yara’s ambition – detailed in its 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.
Yara has consistently implemented a strategy of profitable and sustainable growth. The strategy is a roadmap for industry-shaper performance and long-term value-creation. Yara has consistently expressed the need for further consolidation of the nitrogen fertilizer industry and the company’s readiness to participate in that consolidation through acquisitions and joint ventures.
Within the current business platform, the aim is to increase the market share globally, establishing optimal utilization of the company’s unique global marketing and distribution system. Constantly considering investment opportunities, either through attractive entry costs and/or cash flows, Yara opts to integrate new acquisitions into its global logistical and marketing system to achieve synergies and create value.
The basis for the company’s profitable growth ambition includes strong earnings delivered through the present cycle and a profitable acquisition track record unrivalled in the fertilizer industry. Yara’s unique, scalable business model is appropriate for creating growth opportunities, and the company’s global presence adds to the growth potential in several regions. This strong foundation is matched with capital and valuation discipline in the search for and selection of projects suited to the step growth strategy.
To fulfill Yara’s global growth ambitions, productivity gains in the existing business, organic growth and step growth initiatives are all necessary. Primarily, Yara will focus on growing within three major business areas: nitrogen-based fertilizers; nitrogen for industrial applications; and sourcing of phosphate and potash. Larger initiatives will focus on increasing production in regions with stable supplies of competitively priced natural gas for ammonia production and phosphate and potash resources, expanding presence in high-growth markets and participating in consolidation in mature markets. For all growth categories, scale, synergy and timing are important factors, along with strict financial discipline.
Yara’s Leadership Agenda, established in 2009, is designed to support the company’s strategic ambitions. It aims to inspire innovation and a consistent drive to explore new business opportunities driven by global developments, Yara’s knowledge base and market-oriented R&D activities.
The agenda covers five areas that the company needs to focus on in its quest for industry-shaping performance: Yara needs to grow steadily and profitably; lead global agricultural development; drive strong performance and positioning in environmental solutions; drive perfect operations and apply best practice corporate governance throughout the organization.
Yara’s strategy is closely connected to its unique business model. With global optimization at its core, the model builds upon 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, controlling more than one quarter of global ammonia trade. Furthermore, Yara has developed an unrivalled global presence. 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 crop quality. This local market insight and close customer relations, combined with agronomic expertise and ability to develop new products and technologies, have given Yara a knowledge margin in the market.
The business model has built-in flexibility to enable quick response to changing market conditions. The majority of the company’s operational cash cost is variable and related to energy, raw materials, freight and third-party fertilizer sourcing. Purchases and plants can be halted at short notice to respond to delivery slow-downs. This flexibility also extends to energy costs in Europe: increased costs can be mitigated by cheaper ammonia imported from other sources.
Most of Yara’s European production sites have deep-sea import/export ammonia terminals, and Yara is the global leader in trade and shipping of ammonia. Furthermore, Yara has the world’s largest storage capacity for fertilizers, providing it with the ability to build inventory ahead of peak seasons, tolerate delivery volatility and take advantage of geographical arbitrage opportunities.
Strategy execution - Growth strategy
In 2010, Yara continuously considered growth opportunities, aiming to add to prior acquisitions and to follow up on their integration into the company’s worldwide structures. Yara’s major acquisitions in recent years have included the JV Lifeco, Libya (2009); Saskferco, Canada (2008); Kemira GrowHow, Finland (2007); Fertibras, Brazil (2006).
In 2010, Yara acquired the remaining 51 percent ownership in Balderton Fertilisers SA, Switzerland, for USD 142 million, cash excluded, following an initial acquisition of 49 percent in 2006. Yara signed a cash merger agreement with Terra Industries Inc. in February 2010. Although Terra would have been a perfect fit for Yara in the North American market, Yara chose not to match a superior acquisition bid that Terra received. Consequently, Terra terminated the agreement and paid Yara a break-up fee of NOK 666 million.
In January 2011, Yara expanded its base in Australia by securing full ownership of Yara Nipro Pty Ltd, the market leader in bulk liquid fertilizer for many cropping systems in Eastern Australia. Yara acquired the remaining 60 percent of shares in Yara Nipro, following the purchase of an initial 40 percent stake in 2008.
In 2010, Yara sold its shares in the Brazilian phosphate producer Fosfertil to Vale for USD 785 million, together with its stake in the Anitapolis phosphate rock project. Although Brazil remains an important growth market, the minority position in Fosfertil did not provide optimal operational integration with Yara’s fertilizer marketing in the country. The offer from Vale was considered an attractive price for a non-integrated position.
Yara also sold two subsidiaries, Nuova Terni Industrie Chimiche S.p.A in Italy and Peremartoni Fertilizers Kft in Hungary; its shares in the JV Carbonor; as well as its shares in the equity-accounted investees Agrico Canada Ltd. (Canada) and the port of Baria Serece (Vietnam). Furthermore, Yara restructured its operations in South Africa, selling its fertilizer retail assets in South Africa and its 50 percent ownership in the South African retail company Sidi Parani (Pty) Ltd. – which was defined as a non-core business.
In the Australian joint venture (JV) Burrup Holdings Ltd., of which Yara owns 35 percent, Yara obtained court orders to conduct an external inspection of its accounts including those of its 100 percent subsidiary, Burrup Fertilisers Pty Ltd. The basis for Yara’s actions were, amongst others, unexplained high cost levels, failure to deliver audited financial statements and suspected discrimination against Yara as a minority shareholder. Burrup Fertilisers Pty Ltd was subsequently put into receivership by the bank which had provided financing for, amongst others, the construction of Burrup Fertilisers Pty Ltd’s ammonia plant.
With the debt/equity ratio declining sharply after 2008, supported by the 2010 disinvestment in Fosfertil, Yara has substantial financial capacity for growth.
In 2010, the modifications to previous grinding and flotation equipment at the Silinjärvi mine in Finland were completed, increasing the annual phosphate rock production by 150 kilotons. The construction of the new Urea 7 plant at Sluiskil, the Netherlands, commenced in 2009, with completion in 2011, expanding its production capacity by 1,100 tons per day.
The construction of the Qafco-5 and Qafco-6 expansion projects in Qatar continued; the former to be completed in 2011, the latter in 2012. The two Qafco expansions represent a combined increase in production capacity of 1.6 million tons of ammonia and 2.6 million tons of urea. Yara owns 25 percent of the Qafco joint venture, while the remaining 75 percent is owned by Industries Qatar.
In February, Yara’s new liquid calcium nitrate plant outside Kuala Lumpur, Malaysia, with a capacity of 30,000 tons per year, was inaugurated. In May, the new dry terminal in Stockton, California, with a capacity to store 80,000 tons of products in multiple bins, was inaugurated. The Stockton terminal, along with the yet-to-be-completed New Orleans terminal, is a key part of Yara’s coastal strategy in North America, making it possible to have a complete portfolio of dry bulk fertilizers available for agricultural and industrial customers.
In 2010, Yara launched a USD 20 million investment into a new fertilizer terminal at the port of Dar es Salaam, Tanzania, as part of the company’s commitment to the Agricultural Growth Corridor concept.
In 2010, Yara continued to act on all aspects of its Leadership Agenda. Operating in the fragmented nitrogen industry, Yara continued its search for attractive investment opportunities, aiming to play a major role in the consolidation of the industry. At the same time, increased attention was given to the company’s innovation capabilities, developing an innovation road map and establishing global innovation processes.
Yara continued its active engagement on the global arena, addressing agricultural development and environmental challenges, particularly by linking the issues of food security and climate change and introducing the conceptual approach of climate-compatible agricultural growth in 2010. Within and beyond the industry, Yara has taken a lead role in defining this global agenda, championing broad partnerships.
Having initiated the African Green Revolution Conference as the venue for public-private partnership in support of African agriculture in Oslo, 2006–2008, Yara sponsored the first African Green Revolution Forum in Accra, Ghana in 2010. Within the framework of the African Green Revolution, Yara in 2008 launched the Agricultural Growth Corridor concept, using the World Economic Forum (WEF) in Davos as a venue to introduce the idea and enlist partners. At the 2011 annual meeting of the WEF, Yara was one of the companies behind the launch of a new roadmap for sustainable agricultural development, ‘New Vision for Agriculture.’
Answering the Leadership Agenda’s call for best practice corporate governance, the company-wide Ethics Program was launched in early 2010. The program's main component, the Ethics Handbook, documents Yara’s position on relevant topics and is backed by an array of tools, providing employees with straight-cut rules for ethical business behavior.
Regrettably, Yara experienced three fatal accidents that resulted in a total of four fatalities during 2010. These accidents happened despite continued efforts to uphold the highest safety standards at Yara’s production sites and underline the need for strict operational discipline and consistent safety awareness. Responding to previous incidents, the Upstream segment established Process Safety as a separate functional area in 2010, giving safety top priority. Safety efforts will continue by paying special attention to contractor safety and units lagging behind, and through increased focus on technical standards for the Downstream and Industrial segments.
In 2010, Yara’s sales of the environmental product Air1TM reached the one-million-tons milestone. Yara also entered into a strategic distribution agreement with US Company Mansfield, positioning Yara to serve the emerging US market. Air1TM is the Yara-branded AdBlue (Europe) or DEF (US) fluid that reduces the release of harmful gases from heavy-duty vehicles.
Also with the aim of perfecting operations, Yara is taking measures to increase reliability across its production platform. Besides being the best productivity investment, increases in reliability have positive effects on safety and emissions from production.
Building knowledge and inspiring innovation are keys to Yara’s future growth. With a renewed focus on human resource and R&D activities geared toward business development, Yara is ready to respond to global challenges and changing market demands.
During 2010, Yara implemented a new human resource (HR) strategy built on three interdependent priorities: Optimizing the workforce, developing a candidate pipeline and building a highly-valued work force. The latter issue involves increasing the company’s focus on talent retention, teamwork and processes. This new strategy will enable Yara to secure the skills and expertise it needs to respond to new challenges and deliver on its future business goals.
In 2010, Yara intensified its innovation approach, underpinning its industry-shaper ambition. Developing a new innovation road map, designing an innovation platform and creating an Innovation Hub, Yara is preparing to face market demands and societal trends. The new function of Chief Technical Officer, established in 2009, became operational, and an innovation team was established to drive Yara’s involvement in strategic developments addressing global megatrends and industry challenges such as food security and climate change. This revamp goes along with the launch of a Yara Global Innovation process, tackling the issue from idea generation to commercialization and selecting market arenas for growth.
Research & Development
Yara’s R&D activities are decidedly market-oriented and geared towards business development and production improvement. The company continuously works on enhanced crop nutrition models at the interface between production and marketing. R&D supports the development of cost-saving and best-value concepts for the grower, as well as improved production processes and nitrogen-based environmental technologies. R&D is concentrated at Hanninghof, the company’s agronomic center in Dülmen, Germany; the center for foliar products in Pocklington, UK; and the technology centers in Porsgrunn, Norway, and Sluiskil, the Netherlands.
Yara continuously develops improved plant nutrition concepts and innovative agronomic solutions. The focus is on nutrition strategies that create higher agricultural productivity, contributing to food security and sustainable agriculture – and reduced greenhouse gas emissions. Through 2010, Yara made progress in improving crop uptake of nutrients, and in turn, the utilization of mineral fertilizers. The company continued to improve decision-making tools for growers, including a project on how to turn mobile phones into a fertilizer recommendation device, the CropImage solution.
Yara is also working on a tool to calculate the on-farm carbon footprint of crop production and pinpoint options for reducing emissions. The work in methods for improved water use efficiency continued, including the development of improved fertigation solutions, another growth opportunity. Yara is also engaged in research aimed at reducing agriculture’s impact on global warming.
In 2010, Yara issued the first carbon footprint certificates for the Nordic markets. In Sweden, farmers using Yara products now qualify to label their produce as climate friendly. Yara is also proceeding on research to provide tools to improve productivity while understanding and mitigating potential nitrous oxide N2O emissions from agriculture. In 2010, Yara joined the scientific advisory board of the Global Agricultural Climate Assessment.
Yara continuously focuses on improving production processes, catalyst technologies and industrial applications as well as product quality and market support. By fine-tuning the production platform, these R&D activities contribute to production efficiency and reliability, adding the benefit of increased energy efficiency and reduced emissions.
For several years, Yara has continually improved its N2O catalyst technology and led an EU-funded project investigating a new catalyst technology for nitric acid production that could potentially lead to significant savings and environmental benefits. Yara also continued to improve its environmental abatement technologies, working alongside customers and providing tools and services to ensure that they are applied in the best possible manner and perform to expectations.
In 2010, Yara’s prize for academic achievement in the field of Physics and Chemistry, the Birkeland Prize, was awarded to Dr. Jacob Linder at the Norwegian University of Science and Technology, Trondheim, for his work on electron and hole conduction across the interface between a superconductor and other material.
As the leading global fertilizer company, Yara is devoted to being a global corporate citizen, creating value for our key stakeholders and society. In line with the industry shaper ambition and position, this encompasses both Yara’s development of sustainable business and everyday business practices.
In 2010, Yara continued its commitment to the UN Global Compact, and adherence to the GRI reporting framework; a GRI Index is found on the corporate web site. Again, Yara reported in line with the requirements of FTSE4Good. Internally Yara governs its approach through its Code of Conduct, a stringent standard of Product Stewardship and an extensive Ethics Program rolled out to all employees in 2010.
Yara leverages its core business to address major global challenges such as food security and climate change. Through its knowledge base, global presence and pillars of strength, Yara is in a position to collaborate with key global players, contributing to sustainable business development. The prime example is Yara’s initiative for Agricultural Growth Corridors, a business initiative resulting from a multi-stakeholder dialogue resulting in a public-private partnership aimed to drive agricultural production and economic development.
In 2010, Yara embarked on a process to enhance the company’s sustainability strategy.
Managing risks and opportunities is an intrinsic part of Yara’s business. The company faces a number of risk factors that can be broken down in four categories: strategic, operational, compliance or financial risks. Each of them can have adverse effects on the company’s performance, and most of them are inseparable from opportunities when handled proactively and effectively.
In 2010, Yara revised and upgraded the risk management framework, establishing new procedures. The risk assessment process encompasses all business segments and expert organizations. The overall risk level at Yara has not changed significantly from 2009, but the trend is positive, and the risks considered to be the most relevant to Yara’s business are for the most part unchanged, as described in the Risk Management section. In 2010, Yara took several steps to manage and mitigate risk, specifically within the areas of safety and compliance.
Yara has taken great efforts to improve process safety, focusing on both the technical aspects as well as human behavioral factors.
In response to increased attention to ethics and compliance issues, Yara established an Ethics and Compliance Department in 2009. A company-wide Ethics Program, including a set of ethics tools for employees, was implemented in 2010.
Yara’s global presence provides access to highly qualified and diverse personnel. However, we recognize that it will become increasingly difficult to recruit the needed competence and secure mobility. As a result, we are increasing our focus on people management and improving our processes to identify, develop, deploy and recruit the talent we need worldwide.