Industrial creates value over and above the established Yara Upstream platform by developing and selling chemical products and CO2 to non-fertilizer industries such as chemicals, utilities, civil explosives and food and beverages.
Yara occupies a leading position in these nitrogen applications, creating value in its markets with a “Total Service Provider” approach. Beyond the chemicals and CO2, this encompasses services and technology solutions that Yara’s customers are not able to provide themselves. Reliability in supply and strict adherence to quality specifications are essential for industrial clients who need products on a 24/7 basis throughout the year.
The Industrial portfolio includes a growing environmental applications segment for emissions abatement in transport, power generation, water utility and other sectors. This market is driven by stricter legislation and GDP growth. Yara has been a pioneer in several applications for nitrogen oxides NOx abatement.
In 2010, Yara Industrial was re-organized into five business units, reflecting its ambition to grow the business globally from its existing strong European base. Many future growth markets lie outside Europe, with North America offering the biggest near-term potential for environmental applications. The EPA Clean Air Act, implemented in the USA during 2010, sets North America up to become the world’s largest NOx abatement market for heavy-duty vehicles, expected to hit the billion-gallon mark in 2019.
Yara is the largest producer of the high-purity urea solution used to reduce NOx emissions from trucks and has partnered with Mansfield Oil, the leading independent fuel distributor in the USA. By the end of 2010, a multi-sourcing platform and a nationwide distribution network was in place for DEF (Diesel Exhaust Fluid), bringing the solution to customers across the USA and Canada.
Industrial’s global TAN business retained its leadership position in developing markets such as Africa. In Asia, Industrial developed its foothold by opening a CN production plant in Malaysia and pursuing market opportunities for latex gloves manufacturing and for waste water odor control. In Australia, the development of the Burrup TAN project proceeded according to schedule, unaffected by the investigations into financial irregularities in Burrup Fertilizers.
Industrial’s strong European base was maintained in 2010, as the chemicals and CO2 business grew in line with GDP. Yara’s new liquid CO2 plant in Wilton was successfully commissioned and put into operation in 2010. The plant has an annual capacity of 250,000 tons of liquid CO2 based on raw gas from Ensus, a UK bio-energy producer.
Industrial EBITDA excluding special items was down 14 percent from last year despite a 13 percent volume increase. The strong volume improvement was reflected across all product groups. However, margins were considerably lower than last year due to increasing raw material prices, especially ammonia. 2010 also benefited from contractual time lag effects.
All product groups except liquid CO2 suffered from a significant drop in margins, in contrast to last year, when margins benefited from contractual lag effects as contracts entered into at higher prices were still in force. Towards the end of 2010, environmental products and technical ammonium nitrates saw a significant drop in margins as ammonia and urea prices increased sharply. The industrial gas business did not experience the same margin squeeze and was able to maintain strong margins throughout
The lower margins were compensated by a strong volume growth of 13 percent compared to 2009, when the economic downturn affected sales volumes. The volume growth was seen in all product groups, but with environmental products and sales of ammonia, urea and nitric acid to the European process industry contributing most, with 16 percent and 13 percent respectively.
Technical ammonium nitrate sales were up five percent from last year, but declined towards the end of the year as deliveries to key mining countries such as Australia and Colombia were impacted by heavy floods. Liquid CO2 sales to European end-users increased by 12 percent, primarily due to new sales in the UK from the Wilton bioethanol plant.
2010 special items reflect a NOK 31 million gain from a settlement following the Pardies ammonia plant closure in France, while the related plant closure cost of NOK 42 million was recognized in 2009.
Industrial growth is based on innovation that meets market needs, driven by GDP growth and increasingly stringent environmental legislation. Future profitable growth requires the strength of Yara’s production capability, innovation in technology, product development and operational excellence to bring the right product and expertise to the customer at the right time at the lowest cost. All of these elements will be in focus in 2011, in line with Yara’s Leadership agenda.
Alongside North America, countries in Latin America will progressively implement legislation that will pave the way for market development. Industrial will also be targeting growth in the Middle East and Turkey. All these regions need Industrial chemical solutions to support GDP growth. Yara’s Upstream platform will upgrade its production capacity in Sluiskil, Netherlands, in mid-2011, and Belle Plaine, Canada to secure product sourcing needs for Industrial growth markets.
In 2011, Industrial will position itself for the launch of the Brazilian NOx abatement market. This market is set to become the third-largest in the world for AdBlue, the high-purity urea solution that eliminates toxic NOx emissions from heavy-duty vehicles. Yara will bring expertise to this market as the leading supplier and a pioneer in the DEF markets in Europe, North America Australia and several Asian countries.
2011 should see the ownership structure of the Burrup TAN production site in Western Australia finalized. The planned annual capacity of 350,000 metric tons will meet demand from iron ore, copper and diamond mines in the region and elsewhere in Australia.
|Revenue and other income
|EBITDA excl. special items
|CROGI (12-month rolling average)
|ROCE (12-month rolling average)
|Industrial N-chemicals (incl. TAN)
|of which TAN
|Volume & mix
|Conversion (NOK vs. USD)1)
|Total variance explained
|1) Based on quarterly average NOK per USD rates as detailed in Yara 2010 reports.
Industrial aims to grow by providing innovative solutions to increasingly strict environmental requirements and the needs of rapidly growing economies around the world. Industrial’s pipeline projects and focus areas include:
The Burrup TAN project, with a planned capacity of 350,000 metric tons annually will serve demand from iron ore, copper and diamond mines in the region and elsewhere in Australia. The development of the project proceeded according to schedule, unaffected by the investigations into financial irregularities in Burrup Fertilizers.
Yara aims to expand the market for DEF in North America, leveraging the sourcing platform and distribution network established in 2010. North America is expected to become the world’s largest market for NOx abatement solutions for heavy-duty vehicles.
Yara is targeting further growth in the market for NOx abatement solutions in Europe and the USA. Environmental legislation is also paving the way in other regions, most notably in Latin America and Asia.