Investor Relations

Strategy 2010

Yara is a global company that focuses on the production, distribution and sale of nitrogen chemicals. The main application is fertilizers, while industrial uses are also an important and faster-growing segment. Yara employs its scale and flexibility to ensure reliable supplies of mineral fertilizer and related industrial products to customers worldwide.

Yara benefits from scale: It is the world’s largest producer of ammonia, nitrate and complex fertilizer and carries out more than a quarter of global ammonia trade. Historically, the backbone of Yara’s production system has been located in Europe. However, the company’s growth projects in recent years have extended its presence into other markets and regions around the world.

Yara has developed a global presence unrivalled in the fertilizer industry. Our global distribution and marketing network includes more than 200 terminals, warehouses, blending plants and bagging facilities located in more than 50 countries. Yara possesses a knowledge margin in the market, based on its insight in local markets, close customer relations, agronomic expertise and ability to develop new product offerings from its existing production base.

Building on its extensive knowledge base, Yara stepped up its innovation efforts in 2010. The company’s R&D has created innovative crop nutrition concepts and environmental solutions that position Yara well in growing markets. In the future, innovation will drive Yara’s ability to thrive on the business opportunities involved in solving major global challenges, such as those of food security and climate change.

One element of this is the need for innovative concepts that can close the growing gap between food demand and supply, for a future global population of more than nine billion. Closing the existing yield gap and doubling agricultural production by 2050 requires improved agricultural productivity – based on sustainable, knowledge-based solutions. In 2010, Yara’s R&D costs were NOK 102 million, compared with NOK 88 million in 2009.


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Net income after non-controlling interest

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Yara’s business model has built-in flexibility that enables it to respond quickly to changing market conditions. The majority of Yara’s operational cash cost is variable, as purchases and plants are adjustable on short notice in the event of delivery slowdowns.

Increased energy costs in Europe can be mitigated by importing instead of producing ammonia: Yara is the global leader in ammonia trading and shipping, and most of the company’s European production facilities have access to deep-sea import/export terminals for ammonia. Yara also has the world’s largest fertilizer storage capacity. This means that the company can build up stocks before peak periods to cope with delivery volatility and take advantage of geographical arbitrage opportunities.

Yara has firm growth ambitions. Our ambition to continue to realize profitable growth is based on the fact that we have consistently generated strong earnings throughout the business cycle. We have a scalable business model enabling synergies where growth would further improve optimal utilization of our marketing and distribution system. Since its launch as an independent company in 2004, Yara has demonstrated an industry-leading track record in acquisitions and green/brownfield investments.

Looking ahead

Going forward, Yara’s focus on growth opportunities will remain combined with strict valuation and capital discipline. When we evaluate growth projects, we always begin by assessing the synergies we can potentially create, compared to what we believe competitors could produce. During valuation, we carefully consider our market and cycle assumptions, compared to estimates of the seller’s and alternative buyers’ views. Timing is essential in creating value from acquisitions, and we combine a continuous search for projects with patience and discipline in execution. Yara’s growth initiatives focus on increasing the company’s production in low-cost regions, expanding its presence in high-growth markets and participating in consolidation in mature markets.

Yara’s production in competitive gas areas will further increase with the ongoing Qafco-5 expansion project, which started in 2007 with the construction of two world-scale ammonia plants and a world-scale urea plant in Qatar – at a total cost of USD 3.2 billion, expected for completion in the fourth quarter 2011, and the Qafco-6 project adding another world-scale urea plant at a cost of USD 610 million, with completion expected fourth quarter 2012. Yara has a 25-percent ownership share in Qafco and currently markets at least 50 percent of the company’s urea production.

A new world-scale urea plant to replace old assets is expected to start up at the Sluiskil production site in the Netherlands in June 2011, for a total investment cost of EUR 400 million. The plant will increase Yara’s urea capacity by approximately 500,000 tons urea per year. It takes advantage of urea upgrading margins on excess ammonia capacity in Sluiskil. The new plant will also improve the site’s energy efficiency, environmental performance and maintenance costs.

Yara continued to deliver on its growth ambitions during 2010:
In January 2010, Yara acquired the remaining 51 percent ownership in Balderton Fertiliser for NOK 560 million, cash excluded. Balderton is a leading European fertilizer trading company that traded 2.9 million tons of fertilizer products in 2009.

In May 2010, Yara sold its 15.5 percent ownership in Fosfertil in Brazil for USD 785 million to Vale, giving Yara a profit before tax of approximately NOK 3,578 million. Brazil remains an important growth market for fertilizer and Yara, but a minority position in Fosfertil did not provide the desired level of operational integration with Yara’s fertilizer marketing in Brazil, a marketing activity that Yara will continue to develop.

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