Investor Relations

Strategy 2011

Yara is a 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, flexibility and global presence to ensure reliable supplies of mineral fertilizer and related industrial products to customers worldwide. Yara is headquartered in Oslo, Norway and is listed on the Oslo Stock Exchange.
Citrus tree using Yara fertilizer

Yara benefits from scale: it is the world’s largest producer of ammonia, nitrate and complex NPK fertilizers, and carries out approximately 20% of global ammonia trade. Historically, the majority of Yara’s production system has been located in Europe. However, the company’s growth initiatives 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, with a global distribution and marketing network including more than 200 terminals, warehouses, blending plants and bagging facilities located in more than 50 countries. Yara has built a knowledge margin in the market, based on its insight into local markets, close customer relations, agronomic expertise and ability to develop new product offerings from its extensive production base.

Building on its comprehensive knowledge base, Yara is stepping up its innovation efforts. 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 2011, Yara’s R&D costs were NOK 123 million, compared with NOK 102 million in 2010.

Yara’s global footprint, both in terms of production assets and market presence, delivers industry-leading flexibility, meaning that challenging conditions experienced by an individual plant or market can normally be mitigated through sourcing or sales arbitrage within the wider Yara system. The majority of Yara’s operational cash costs are variable, as purchases and plants are adjustable at 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, to continue realizing profitable growth based on its track record of consistently generated strong earnings through the business cycle. Yara has a scalable business model enabling synergies through improved utilization of its marketing and distribution system. Since its launch as an independent company in 2004, Yara has built an industry-leading track record in profitable acquisitions and green/brownfield investments.

Strong earnings and growth opportunities

Going forward, Yara’s focus on growth opportunities will remain combined with strict valuation and capital discipline. When evaluating growth projects, Yara will always start by assessing the synergies it can potentially realize, compared with estimated competitor synergies. Market and business cycle assumptions are carefully considered and compared with 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 access to competitive raw materials, 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 and Qafco 6 expansion projects, which started in 2007 with the construction of two world-scale ammonia and urea plants in Qatar – at a total cost of USD 3.8 billion – expected for completion during 2012. Yara has a 25% ownership share in Qafco and currently markets approximately 50% of the company’s urea production.

Yara continued to deliver on its growth ambitions during 2011. A new world-scale urea plant replacing old assets started up at the Sluiskil production site in the Netherlands in July 2011, with a total investment cost of EUR 400 million. The plant increases Yara’s urea capacity by approximately 500,000 tons per year, taking advantage of urea upgrading margins on excess ammonia capacity in Sluiskil. The new plant also improves the site’s energy efficiency, environmental performance and maintenance costs.

During 2011, Yara announced further brownfield expansion projects within its existing asset base. In Belle Plaine (Canada) Yara is studying a potential world-scale ammonia/urea expansion, and in Porsgrunn (Norway) a smaller investment and de-bottlenecking program will increase NPK capacity by approximately 300,000 tons by 2013. In early 2012, Yara increased its share in the Burrup (Australia) ammonia plant from 35% to 51% and announced a Heads of Agreement with Orica and Apache Energy to construct a 330,000 tons p.a. technical ammonium nitrate facility adjacent to the existing ammonia plant.



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