Investor Relations

Financial performance 2010

Yara’s 2010 net income after non-controlling interests was NOK 8,729 million, more than double the 2009 result. 2010 earnings per share were NOK 30.24, compared with NOK 13.08 in 2009.

Full-year results improved significantly from 2009 due to higher prices and margins, as well as positive non-recurring items. Overall fertilizer deliveries were in line with 2009, with a small increase in European volumes, while sales outside Europe were slightly lower. Average realized nitrate prices were approximately 14 percent higher than last year, while realized urea prices increased eight percent.

Net interest-bearing debt decreased by NOK 6,687 million during 2010, ending at NOK 9,540 million. The decline primarily reflects strong earnings and consideration from the sale of Yara’s 15.5 percent ownership in the Brazilian phosphate producer Fosfertil.

The Downstream segment delivered an EBITDA of NOK 7,796 million, a strong result as margins improved and sales to core markets increased. In addition to strong underlying performance, the result was further improved by positive non-recurring items. Global fertilizer sales were in line with 2009, as higher NPK and urea sales offset lower nitrate sales.

The Industrial segment delivered strong results with an EBITDA of NOK 1,135 million, down nine percent from 2009 despite a 13 percent volume increase, as margins declined due to increasing ammonia prices during 2010.

The Upstream segment delivered an EBITDA of NOK 5,975 million, a strong result reflecting an increase in both production volumes and product margins compared with 2009. Higher product prices more than offset the negative effect of higher energy cost.

EBITDA excluding special items was up 96 percent compared with 2009, as higher prices and margins more than offset an increase in energy cost.

Fertilizer deliveries were in line with 2009, with NPK and urea sales up seven and eight percent respectively, while nitrate sales were down ten percent. European NPK sales were hampered throughout 2009 by high potash prices, but increased in 2010 as nitrogen and phosphate demand continued to improve, while potash prices declined in relative terms. Nitrate sales were limited in 2010 by low opening stocks and a turnaround at Yara’s Ambes plant, while 2009 started with higher stocks. Industrial volumes increased 13 percent, improving in particular on a weaker first half in 2009.

Realized prices were up compared with 2009, with nitrates approximately 14 percent higher while urea prices increased eight percent. NPK prices were in line with 2009, as lower potash prices offset the effect of higher nitrogen and phosphate prices. However, the improved market situation for NPK with lower stocks enabled improved margins. Industrial margins were lower than a year earlier, due to increasing ammonia prices in 2010 and favorable contractual time lag effects in 2009.

European oil and gas costs increased 14 percent, reflecting an increase in both oil-linked and hub gas prices compared with 2009.

2010 special items were a net positive NOK 4,568 million, primarily reflecting a NOK 3,578 million gain from the sale of Yara’s 15.5 percent ownership in the Brazilian phosphate producer Fosfertil and a NOK 666 million gain generated by the break-up fee paid to Yara following the termination of the merger agreement with Terra Industries Inc. 2009 special items were a net positive NOK 57 million.

The US dollar was approximately four percent weaker versus the Norwegian krone compared with 2009, resulting in a negative translation effect in Yara’s results.

Net income from equity-accounted investees

Net income from equity-accounted investees improved seven percent from the previous year, reflecting higher prices and margins. However, most of this improvement was offset by unsatisfactory financial performance in Burrup, Australia, including a NOK 165 million write-down related to balance sheet items in Burrup Fertilisers Pty Ltd (BFL) following findings in the ongoing Yara-initiated investigations of financial irregularities in the company.

The improvement in Qafco primarily reflects a 15 percent increase in international urea prices (fob Black Sea) compared with 2009. Tringen results are strongly exposed to international ammonia prices, which were up approximately 45 percent compared with 2009 (fob Black Sea). The improvement in GrowHow UK Ltd and Rossosh results primarily reflects a strong improvement in nitrate and NPK margins.

Financial items

Yara bases its long-term funding on diversified sources of capital to avoid dependency on individual markets. As the fertilizer business is essentially a US dollar business, with both revenues and raw material costs denominated or determined in dollars, Yara keeps a major part of its debt in US dollars in order to reduce overall currency exposure. At year end 2010, 78 percent of Yara’s long-term debt was US dollar-denominated, and USD 900 million of Yara’s long-term debt carried fixed interest rates at an average interest cost of 7.3 percent.

2010 net financial income was NOK 2,197 million, compared with NOK 794 million in 2009. The difference was mainly due to a net gain on securities from the sale of Yara’s 15.5 percent ownership in the Brazilian phosphate producer Fosfertil, partly offset by a foreign exchange loss.

The net foreign exchange loss for the year totaled NOK 676 million as the US dollar appreciated against both the Norwegian krone and Yara’s emerging market currencies such as the Brazilian real. During the year, Yara’s US dollar debt-generating currency effects were reduced from USD 1.4 billion to USD 1.2 billion, with approximately USD 1 billion of the exposure towards the euro.

2010 interest expense was NOK 61 million lower than last year, with an average gross debt level NOK 5 billion lower than in 2009. 2009 interest expense included a NOK 323 million gain on interest rate derivatives.

Tax

2010 current and deferred taxes were NOK 2,386 million, representing approximately 21 percent of income before tax.

Yara has previously stated that a normal tax rate for the company is expected to be 19 percent in a supply-driven scenario and 23 percent in a demand-driven scenario.

Net interest-bearing debt

As a supplement to the consolidated statement of cash flows, this table highlights the key factors behind the development in net interest-bearing debt.

Net interest-bearing debt decreased by NOK 6,687 million during 2010, ending at NOK 9,540 million. The decline primarily reflects strong earnings and consideration from the sale of Yara’s 15.5 percent ownership in the Brazilian phosphate producer Fosfertil. 

Cash earnings increased significantly in 2010, reflecting an improved market situation, particularly for Yara’s core nitrate and NPK products. Dividends from equity-accounted investees were NOK 827 million, up more than 50 percent from a year earlier.

Net operating capital at the end of 2010 was NOK 9,292 million, an increase of NOK 1,898 million (excluding currency effects) from Dec. 31, 2009. This primarily was primarily driven by higher prices for most products. Net operating capital turnover improved significantly during 2010.

In addition to normal maintenance programs, growth investment activity in 2010 was significant, primarily the on-going urea capacity expansion in Sluiskil, Netherlands, as well as the rebuilding of the Tertre ammonia plant and a urea expansion in Brunsbüttel.

Yara’s Annual General Meeting approved a dividend for 2009 of NOK 4.50 per share, giving a total dividend of NOK 1,300 million payable in 2010. Share buy-backs amounted to NOK 115 million in 2010.

The debt/equity ratio at the end of 2010, calculated as net interest-bearing debt divided by shareholders’ equity plus non-controlling interests, was 0.27, compared with 0.56 at the end of 2009.

Dividend policy

Yara’s objective is to pay out a minimum 30 percent of net income as an average over the business cycle. Yara believes it will be beneficial for shareholders that the company strives for a gradual increase and predictability in the absolute dividend level over time, independent of the business cycle.

Yara’s Board will propose to the Annual General Meeting a dividend payment of NOK 5.50 per share for the 2010 financial year, representing 18 percent of net income and 27 percent of net income excluding net foreign exchange gains/losses and special items.

Cash payments to shareholders from dividends and share buy-back programs combined are expected to be an average 40–45 percent of net income over the business cycle. The Board intends to propose to the Annual General Meeting a new buy-back program along the lines of the previous one.

Variance analysis
NOK million 2010
 
EBITDA 2010 15,315
EBITDA 2009 5,549
Variance EBITDA 9,767
 
Volume & mix 801
Price/Margin 5,374
Oil & gas costs in Europe (758)
Special items 4,511
Other 120
Conversion (NOK vs. USD) 1) (282)
Total variance explained 9,767
 
1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports.
Financial highlights
NOK million, except where otherwise indicated 2010 2009 2008 2007 2006
 
Revenue and other income 65,374 61,418 88,775 57,486 48,261
Operating income 7,467 1,271 12,281 4,987 3,352
Share net income equity-accounted investees 1,515 1,412 2,760 1,624 1,463
EBITDA 15,315 5,549 17,917 8,441 6,472
EBITDA excl. special items 10,748 5,492 17,723 7,788 5,506
Net income after non-controlling interests 8,729 3,782 8,228 6,037 4,188
Earnings per share 1) 30.24 13.08 28.27 20.60 13.86
Earnings per share excl. currency and special items 1) 20.69 8.82 36.28 15.91 9.80
Average number of shares outstanding (millions) 288.7 289.2 291.1 293.0 302.1
CROGI (12-month rolling average) 17.4% 8.5% 22.9% 16.1% 14.1%
ROCE (12-month rolling average) 20.6% 7.4% 29.0% 22.4% 20.5%
 
1) NOK per share. Yara currently has no share-based compensation programs that result in a dilutive effect on earnings per share.
Key statistics
Thousand tons 2010 2009 2008 2007 2006
Sales
Fertilizer 20,276 20,099 20,540 21,303 18,791
Industrial products (excl. industrial gases) 4,251 3,756 3,898 3,289 2,825
Total 24,527 23,855 24,438 24,592 21,616
Production 1)          
Ammonia 7,335 6,736 6,377 5,759 5,296
Finished fertilizer and industrial products, excl. bulk blends 17,195 15,457 16,695 14,550 13,183
Total 24,531 22,193 23,072 20,309 18,479
 
1) Including Yara share of production in equity-accounted investees.
Net income from equity-accounted investees
NOK million 2010 2009 2008 2007 2006
           
Qafco 728 607 1,446 787 793
Tringen 227 118 295 184 176
Rossosh 137 81 506 104 104
Burrup 1) (156) 311 (193) 151 (19)
GrowHow UK 221 112 514 (33) 0
Lifeco 188 127 0 0 0
Other 169 56 193 432 409
Total 1,515 1,412 2,760 1,624 1,463
           
1) Burrup production halted from June to December 2008 due to gas supply disruption.
Financial items
NOK million 2010 2009 2008 2007 2006
           
Interest income from customers 112 130 238 183 166
Interest income, other 130 121 132 105 108
Dividends and net gain/(loss) on securities 3,580 124 306 36 3
Interest income and other financial income 3,822 376 676 325 277
Interest expense (667) (728) (1,347) (488) (377)
Return on pension plan assets 419 376 423 358 298
Interest expense re. pension liabilities (486) (504) (490) (370) (336)
Foreign exchange gain/(loss) (676) 1,364 (3,313) 982 422
Other (214) (89) (86) (81) (56)
Interest expense and foreign exchange gain/(loss) (1,625) 419 (4,813) 401 (49)
Net financial income/(expense) 2,197 794 (4,136) 726 229
Net interest-bearing debt
NOK million 2010
   
Net interest-bearing debt at beginning of period 1) (16,227)
Cash earnings 2) 7,926
Dividends received from equity-accounted investees 827
Net operating capital change (1,898)
Balderton (560)
Fosfertil (after tax paid) 4,383
Other investments (net) (2,499)
Yara dividend and share buybacks (1,415)
Foreign exchange gain/(loss) (676)
Other 599
Net interest-bearing debt at end of period (9,540)
   
1) Including external bank time deposit (4–12 months), part of other current assets in the balance sheet.
2) Operating income plus depreciation and amortization, minus tax paid, net gain/(loss) on disposals, net interest expense and bank charges.
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