Downstream provides a unique global presence consisting of Yara’s worldwide marketing organization and global distribution network for fertilizer products and agronomic solutions.
The product offering covers both commodity and high-value crop segments where Downstream offers differentiated fertilizer products and services. The segment offers the fertilizer industry’s most comprehensive product portfolio, ranging from standard nitrogen products to complete crop nutrition solutions.
Downstream has a physical presence in approximately 50 countries and sales to more than 115 countries, delivering expertise and value-adding products worldwide. Yara is the number one global brand in specialty fertilizers, and Downstream is the leading supplier of crop nutrition solutions for cash crops.
In early 2010, Yara acquired full ownership of the fertilizer trading company Balderton through the acquisition of the remaining 51 percent shareholding, for USD 142 million, cash excluded. The integration of Balderton has improved Yara’s growth prospects through improved sourcing capability and market penetration.
The sales of Yara’s 15.5 percent ownership in Fosfertil and the 50 percent stake in the Anitapolis phosphate rock project in Brazil were concluded in May. The minority position in Fosfertil, a producer of phosphate and nitrogen fertilizers in Brazil, did not provide the optimal operational integration with Yara’s fertilizer marketing. The sale provided a pretax gain of NOK 3,578 million for Fosfertil and NOK 122 million for Anitapolis. Brazil continues to be an important growth market for Downstream. In South Africa, Yara divested its retail marketing assets at book value (approximately USD 75 million).
The sale of Yara’s 50 percent ownership of retail company Sidi Parani (Pty) was concluded in September, while the sale of the wholly-owned fertilizer retail activity was concluded in November. Sales at retail level are typically combined with trade of other agricultural input and produce, and are not regarded as core businesses for Yara. Yara continues to sell fertilizer delivered to harbors in South Africa. While the new owner of the previously wholly-owned retail asset Farmsecure is the exclusive distributor for a selective range of Yara fertilizers, Yara continues to sell urea and trades third-party fertilizers to other selected importers in the region.
In the USA, Yara opened two terminals during 2010. Yara has invested USD 8 million in the Savannah liquid terminal in Georgia and USD 28 million in the New Orleans Gateway Facility. New Orleans is the main entry point for fertilizer imports into North America. The terminal has the capacity to store 55,000 metric tons of urea and gives Yara the flexibility to convert urea vessel shipments into barge, truck, rail and storage positions. The completion of the terminals has further strengthened Downstream’s distribution system in the US.
Downstream delivered strong 2010 results as margins improved and sales to core markets increased. 2010 Downstream earnings included several positive special items, but the underlying result represents the second best year for Downstream so far.
Margins increased substantially from last year as a result of a continual focus on commercial optimization, along with strong demand. Average realized sales prices were up 14 percent for nitrates and eight percent for urea, while 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. In 2009, Yara incurred substantial position losses primarily due to the drop in phosphate and potash prices during the first half of 2009.
Global Yara volumes were in line with last year. NPK sales increased by seven percent, while urea increased by eight percent. Nitrates deliveries were down ten percent in 2010, as less nitrate stock was available and product availability was reduced due to the Ambes turnaround.
European deliveries were three percent above last year, mainly driven by higher NPK sales in core European markets. The increase was partly offset by lower nitrates sales due to reduced nitrates availability. Yara’s Ammonium Nitrate fertilizer plant in Ambes, France, was taken down for a planned major turnaround in September 2010. Ambes restarted production in February 2011.
Volumes outside Europe were similar to last year’s levels. The sale of own-produced premium NPK in Brazil and Thailand increased significantly from last year, reflecting new business models and a successful focus on high-value crops. The sale of NPK blends in Brazil decreased in line with the new strategy.
2010 special items impacting EBITDA were a positive NOK 4,016 million, primarily reflecting the sale of the Fosfertil asset in Brazil and the fair value adjustment of Yara’s existing ownership in Balderton. 2009 net special items were a negative NOK 224 million, primarily reflecting restructuring in France and Brazil and bad debts in Africa.
The “Other” variance mainly reflects fixed cost improvements from structural changes made during 2009 as well as a focus on continuous cost reduction in 2010.
The priority for Downstream is to sell Yara-sourced products and joint venture products at the best possible return for Yara. Another key objective is to grow profitable trade with acceptable risk, further capitalizing on the full ownership of Balderton Fertilizers. The trade activity supports our sales of own-produced products by completing the product portfolio and increasing Yara’s presence in the market.
The key foundation of Downstream’s objective to drive profitable growth is its complete and high-quality product portfolio, its global fertilizer distribution network and its extensive application competence. Downstream will continue to increase productivity through tight control of fixed cost and operating capital. As part of its continued efforts to improve operations, Yara will focus on optimizing the product portfolio of the plants while at the same time meeting market demands. Another key improvement project to be started in 2011 is the transfer of best practice across smaller sites, such as blenders and terminals, to further improve efficiency.
Innovation is the key to staying competitive. By developing knowledge, technology and tools to reduce nitrogen emissions while also achieving increased productivity, Yara has demonstrated that there need not be a conflict between addressing environmental issues and delivering improved profitability for farmers.
The Yara Crop Nutrition concept focuses on nutritional management of the crop in contrast to the traditional approach of feeding the soil. Yara Crop Nutrition brings together Yara’s global crop knowledge, product portfolio and application competence for the benefit of growers globally, increasing nutrient efficiency and reducing environmental impacts.
As a response to the global trends of water scarcity and food quality, Yara is increasing its initiatives in fertigation products and solutions, a priority area for innovation going forward. In January 2011, Yara acquired the remaining 60 percent of Yara Nipro Pty Ltd, the market leader in bulk liquid fertilizers to many crops in Eastern Australia. Yara Nipro’s unique liquid fertilizer concept makes it particularly attractive in regions of water scarcity, and the innovative technology and business model fits well with Yara’s aim to provide the best crop nutrition solution for the global challenges facing farmers today.
In 2011, Downstream will start the construction of a USD 20 million fertilizer terminal in Dar es Salaam, Tanzania. The new terminal is linked to Yara’s continued efforts to develop the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) in cooperation with several partners, including the Government of Tanzania, development partners and the private sector. By improving infrastructure and financing, the corridor aims to harness the largely underutilized agricultural potential of Tanzania, linked to the port of Dar es Salaam, and to neighboring countries. Yara also has several other ongoing initiatives in Africa focused at driving agricultural development and contributing to economic growth.
|Revenue and other income
|EBITDA excl. special items
|CROGI (12-month rolling average)
|ROCE (12-month rolling average)
|Fertilizer outside Europe
|of which own-produced
|of which own blends
|of which own-produced
|of which equity accounted investees sourced
|Conversion (NOK vs. USD)1)
|Total variance explained
|1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports.