Yara International ASA
Q1 2021 Earnings Call Transcript

Published: 23 Apr 2021

[Thor Giæver:]

Good morning and welcome to Yara’s First Quarter Results Presentation. Our presentation today will be by our CEO, Svein Tore Holsether; our CFO, Lars Rosaeg; and our EVP for Europe region, Tove Andersen. And a little after the presentation, at 1

[Svein Tore Holsether:]

Thank you very much, Thor. Good morning, good afternoon, good evening, depending on where you’re dialing in from. As usual, we start with safety, where we continue to be at a stable, low and industry-leading level. We are also stable year-over-year at 1.3 and we consider this to be a strong performance in the challenging environment that we’ve been operating in. And this is thanks to a strong safety culture and attention and efforts every day from all our 16,000 employees. And it’s this safe-by-choice way of working that has helped us to continue to operate during a very challenging time with the pandemic.

[Lars Rosaeg:]

Good morning, good afternoon, everyone. It’s a pleasure to go a little bit more into detail on the results for the first quarter. The EBITDA was up 16% in the quarter, and I’ll get back to that shortly. The EPS increase was even stronger, and this is mainly reflecting higher operating income, mainly driven by higher net financial items. As Svein Tore mentioned, the return on invested capital continued to increase, both due to improved results and release of operating capital, and the release of operating capital was mainly due to lower inventories. Investments were stable and for the quarter, mainly related to ordinary maintenance at our assets to drive productivity and secure reliability in strong markets. Looking at the bridge, we have a significant positive effect from higher prices in strong markets, which is more than offsetting the increase in energy cost. The volume mix development was overall flat in the quarter. As we communicated at the fourth quarter, we reallocated approximately $100 million from 2021 CapEx to fixed cost in order to ramp up our strategic activities, and the Q1 development on fixed cost was in line with this.

[Tove Andersen:]

Thank you, Lars and good morning and good afternoon everyone. Let me first give you a snapshot of our operations in Europe. Europe is the largest – Yara’s largest region in terms of deliveries. In 2020, we delivered just over 10 million tons of products, and we have almost 3,400 employees. The turnover last year was $2.1 billion, and we produced an EBITDA of almost $400 million. We have commercial operations in around 40 countries and 12 production sites, producing a full range of premium and commodity products, including then also production of YaraVita and fertigation products. Our capacity is 1 million tons of ammonia and 8.1 million tons of finished products. The agricultural sector in Europe is dominated by livestock, grains, vegetables and fruits, and the farmers are a very diverse group. There is a large number of smaller family farms, but there is also a significant segment of large professional farmers. Let’s then look a bit on Q1. The Yara Europe results for first quarter were up 12 – 21% as improved prices more than offset higher energy costs and slightly lower deliveries compared to a record volume in Q1 2020. Even though deliveries were down 5%, our revenues grew by 9%, thanks to higher prices. We also saw a positive development in our YaraVita range and increased the deliveries with 10% in the quarter. The fast increase in urea prices during the quarter put pressure on our premiums, but we were able to follow up and increase our prices in the market, generating higher absolute revenues and earnings.

[Svein Tore Holsether:]

Thank you, Tove. There is a massive transition happening in the food system right now, and companies across the whole value chain are setting new and ambitious targets for emissions and for a good reason. 25% of greenhouse gas emissions come from the food system, and it’s not possible to reach the Paris Agreement without getting agriculture right. It’s a huge challenge, but it’s also a huge business opportunity. And as Tove already touched upon, we’re working across the whole board to reduce the climate footprint, both of our own operations and those of our customers. We have ambitious targets to reduce both absolute emissions, 30% reduction during the decade; and our emission intensity, 10% reduction in the same period.

[Thor Giæver:]

Thank you, Svein Tore. Just a quick roundup from me then to remind people that we do have a conference call in about 40 minutes, at 1