Investor Relations

Yara Financial:MD&A Overview 2010

Global market recovery, following the food and financial crises of 2008 and 2009, contributed to Yara's highest annual result. The company is positioned to drive industry consolidation and contribute to the transformation of global agriculture.
Yara Financial: MD&A overview

Yara’s 2010 net income after non-controlling interests was NOK 8,729 million, compared to NOK 3,782 million in 2009, a 131 percent increase. Corresponding earnings per share were a record high NOK 30.24 compared to NOK 13.08 in 2009. EBITDA was up 176 percent compared to 2009, reflecting higher volumes and improved margins.

Compared to 2009, when volumes and prices were significantly affected by the global financial crises, world fertilizer market conditions improved considerably in 2010. Despite turnarounds, Yara’s fertilizer volumes were up 11 percent on the previous year, with 17,195 tons produced. The significant swings experienced, from 2008 to 2009 and then 2009 to 2010, underline the volatility of the fertilizer business.

However, they also demonstrate that deliveries rebound quickly, with robust growth in demand for agricultural products even during periods of economic contraction, driven in particular by population growth and changes in consumption patterns. This also drives the global fertilizer market, which is affected by international food commodity prices.

Despite a slump following the peak of early 2008, world food prices have remained high, increasing through 2010 and reaching record heights in early 2011. Average realized sales prices were up 14 percent for nitrates and 8 percent for urea in 2010, while NPK prices were in line with 2009. However, increased demand for NPK, combined with lower stocks, enabled improved margins.

Yara's performance

Yara’s industrial products also saw strong volume growth in 2010, as increased demand for Air1 in Europe and the USA drove growth in the environmental segment.

Net interest-bearing debt decreased by NOK 6,687 million during 2010, ending at NOK 9,540 million, with the debt/equity ratio standing at 0.27 as of Dec. 31.

The Downstream segment delivered an EBITDA of NOK 7,796 million, a strong result, as sales to core markets increased and margins improved. While earnings include several positive non-recurring items, the underlying EBITDA is the second best in the history of the segment.

The Industrial segment delivered strong results with an EBITDA of NOK 1,104 million, excluding special items. The result represents a decrease of 14 percent compared to 2009, despite an increase in volume of 13 percent, reflecting lower margins.

The Upstream segment delivered an EBITDA of NOK 5,975 million, an increase compared to 2009, despite higher oil and gas costs. The result reflects increased production volumes and product prices, and lower production curtailments.

Costs

Energy costs increased in 2010 and into 2011. Yara’s European oil and gas costs increased 14 percent compared to 2009, while the company’s global average gas cost increased by 21 percent. A significant portion of Yara’s dry raw material purchases have been renegotiated, with the changes effective from 2011.

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