Reflecting on 2013, Yara continued to execute its strategy of profitable growth, and delivered on its strategic ambition of Creating Impact. Our business model mitigated negative effects of lower commodity prices. Extending our footprint in Latin America, we further strengthened our growth ambition.
2013 has been a year characterized by a supply driven market with higher volumes shipped out of China. The result has been a more demanding market situation and lower prices globally. We also believe that North American gas supply will continue to influence prices in the future, as will lower coal prices in China.
”Our business model mitigated effects of lower commodity prices”
Jørgen Ole Haslestad CEO, Yara
Our competitive edge is reflected in our robust value-added premiums and strong deliveries. When commodity prices are challenged, we differentiate ourselves through high margins above commodity levels. This demonstrates that the importance of value added products increases in a supply driven market. This confirms our strategy and business model.
As part of our go-to-market strategy and our efforts towards distribution levels closer to farmers, we carried out a full integration of Bunge’s fertilizer business in Brazil. I had the pleasure of welcoming 1300 new employees to our Brazilian team when we began the integration process. The acquisition added both production volumes and downstream capacity. For Yara, Brazil holds the world’s largest growth potential, and I believe the country’s role as a global bread basket will increase over the years to come.
Entering 2014, we are now the largest player in the Brazilian market. This market absorbs more than 30 million tons of fertilizer annually. The acquisition reduced our seasonal vulnerabilities, as we are equally positioned both north and south of the equator. Furthermore, we are also in the process of acquiring OFD Holding Inc., a company with production facilities in Colombia and distribution companies across Latin America. I am truly glad to see our presence in Latin America strengthen.
In 2013 we increased our Downstream sales by 14% compared to 2012. We also followed up on our innovation platform, connected to improved technological solutions to advance sustainable agriculture. The acquisition of the German water sensor company ZIM Technologies confirms our commitment to contributing to a more efficient agricultural sector.
The Upstream segment is instrumental to our medium-term growth ambition of adding 8 million tons of own-produced and joint-venture produced deliveries compared to a 2010 baseline. In 2013 we continued the project to increase NPK capacity by 300 kilotons at Yara Porsgrunn, Norway.
In Australia we finalized the engineering and commenced construction of the 330 kilotons TAN project at Yara Pilbara. In Brazil the Bunge acquisition added two SSP plants with an annual production capacity of 300 kilotons, and we benefitted from the first full year of production after the Qafco 5 and 6 expansions in Qatar. Investing in our own plants increases the reliability of these production units and removes bottlenecks that hold us back, giving value in return as expected.
In 2013 the Industrial segment increased overall sales volumes by 5% compared to 2012. This was mainly due to the large increase in sales of NOx abatement solutions to the transport sector, driven first and foremost by demand in North America. Our Industrial segment further strengthened its position by acquiring H+H, a leader in Marine Selective Catalytic Reduction (SCR) Technology. The move enables us to provide customers with a complete portfolio of NOx reduction solutions.
We have started a process to improve further in safety, based on the belief that every accident is preventable. Our goal is to have no injuries. To achieve this, we launched the company-wide Safe by Choice initiative in 2013, aiming to build a common safety culture across the entire organization. Looking back at our track record last year, I am pleased to say we are moving towards an improved safety culture.
In Yara, we commit to high standards for ethical conduct across all levels of the organisation an in relation to business partners, investors, regulatory authorities and society at large. We have zero tolerance for unethical behavior and violation of our Code of Conduct.
We have developed Creating Impact as a key framework for long-term business development and value creation. Our business connects with issues of global importance, like food security, preservation of the environment and climate change. Our operations directly address these mounting global challenges.
Yara continuously considers new profitable business opportunities and we explore and prepare for such opportunities by engaging our industrial expertise and agronomic experience.
We strongly believe in innovation and R&D as drivers for future, sustainable growth. This vision is reflected in our efforts in the area of technology development and knowledge sharing. We envision Precision Farming as a key to improving agricultural management practices. The concept helps farmers to add the specific nutrients needed for their crop, in exactly the right amount, at the right time – leading to an increase in farmers’ yields and profits. Our Emission to Air innovation platform is an important factor that drives NOx and SOx reduction solutions.
We have a good cooperation with the World Economic Forum (WEF), where we contribute on issues of food and climate. At the 2013 and 2014 annual meetings we co-hosted sessions on the Grow Africa partnership. Also, we followed up on our engagement in the related New Vision for Agriculture, which catalyzed the new Grow Asia initiative in 2014.
We have an ambition of reducing agriculture’s impact on climate change by employing an approach that saves resources, preserves the environment and contributes to maximizing yield. Subsequently we have increased our focus on Nutrient Use Efficiency within our Resource Efficiency innovation platform. We believe Climate Smart Agriculture is key to producing more food sustainably, feeding a growing population.
As a global company, we are exposed to global megatrends and major challenges influencing our operations. We remain determined to seize emerging business opportunities – and to create impact.
Jørgen Ole Haslestad
President and CEO