Yara International Asa

Welcome to Jara's first quarter results presentation. The presentation today will be held by Jara's CEO, Svein Tore Holstedt, and Jara's CFO, Magnus Klog Ankerstad. I would like to mention that we have a change in how we do our Q&A session today. Once the presentation is done, we will move straight into the Q&A session. For those of you that want to listen to both, you can remain in the webcast window after the presentation is done. I will come back with instructions on how to ask questions in the Q&A. But first, let's start the presentation. It is my pleasure to hand over to our CEO, Svein Toda Holsetters.

Thank you, Maria. Good morning, good afternoon, good evening, depending on where you're dialing in from. And thank you for joining our first quarter presentation. As always, I'm starting with our safety performance. Our license stock rate is creating a safe working environment for all our employees and contractors. And we have a lot to be proud of our performance in the first quarter, but safety is not one of them. We continue to see an increase in accidents, and this has also been the case in in April, which means that we'll likely see a further deterioration as we get into the second quarter. And there is only one responsible for it, and that is me. And I take that responsibility very seriously. I'm now in my 30th year in industry, and what I've learned on safety is that you cannot dictate your way to safety, and also that Campaigns, they only have a short-term impact. It is what we do every day, every week, and every year that matters, and we know what to do. We will continue to work according to our safe by choice approach that has now been in place for 12 years. This is our joint commitment to safety throughout the whole organization because at the end of the day, 1.2 TRI, That's a ratio. But behind that, there are 59 accidents, 59 colleagues, someone's mother, father, brother, sister, friend that got injured at work during the last 12 months. We can and we will bring that to zero. But for now, we need to turn the negative trend. On Tuesday next week, we will have our annual safety day. And that is another opportunity for us to spend time together and get this right. That was the low light. Now let's take a look at some of the key highlights for the first quarter. Yara delivered a strong quarter with an EBITDA excluding special items of $896 million. This is an increase of 40% compared to last year, and that's reflecting higher nitrogen operating margins in a tight market in the start of 2026. And in addition, Viara has increased deliveries to customers in the quarter, reflecting a strong commercial execution. And this also enables us to maximize production volumes and consequently also capital efficiency. First quarter results mostly reflect pre-war markets. but the Middle East conflict has disrupted global fertilizer markets since the end of February. The blockage of the Strait of Hormuz disrupts around one third of global traded urea. It also has other key raw materials for fertilizer production such as gas, it's ammonia, it's phosphate and sulfur. And this supply truck has led to significant increase in global fertilizer prices. And that, coupled with weak crop prices and high regulatory burdens, farmer affordability has increasingly come under pressure. And the high prices are increasing volatility and also risk premiums across the fertilizer value chain and eventually into the food markets as well. As we said at our capital market stay January, JARA is a battle proven organization due to our global diversification, our energy flexibility in Europe and also our highly competent workforce. And now that is being put to a test again and we are demonstrating the strength of our business model where our global system enables us to uphold production and to ensure the continuity of supply. This means that we are uniquely positioned in the current situation with strong commercial and operational execution in a disrupted nitrogen market. And I want to thank all my colleagues in IATA for their strong performance this quarter. Looking then at EBITDA variance for the quarter, the increase of... 40% since last year mainly reflects the increased nitrogen spreads. Nitrogen prices have seen a significant increase since first quarter 2025. And gas price changes are typically reflected after two months in our earnings. So this quarter EBITDA is largely based on pre-war market dynamics. Volumes are also up, reflecting a strong commercial execution in the season to date. And keep in mind here that we also had a strong fourth quarter on volumes. We continue to see a positive impact on EBITDA from our fixed cost reduction program and a further $18 million down from last year. Return on invested capital has increased. doubled from 6% last year to 12.2% on a rolling 12-month basis. And that's above our through-the-cycle target of 10%. Global fertilizer markets are currently heavily affected by the ongoing conflict in the Middle East. Around one-third of globally traded urea is exported through the Strait of Hormuz. but also a quarter of the world's ammonia, as well as 50% of sulfur, which is significantly impacting the availability of phosphate fertilizer. Furthermore, 20% of global LNG trade is disrupted, and that's leading to urea production curtailments as well, such as in India. The disruption to urea availability has led to a significant price increase, so far 47% since February, and urea FOB Egypt is up even more at 77%. TTF gas prices have also increased, however, less so than urea and phosphate prices. Farmer's situation was challenging before the war, driven by weak crop prices and cost of inflation across many input factors, as well as regulatory burdens and global market volatility, which all add to this pressure. And this is concerning. Those that will be hit the hardest are smallholder farmers in the poorest parts of the world because of lower ability to pay. But it's actually a double hit because it's likely also impacting the farmers where the yield curves are the steepest, meaning that marginally lower fertilizer application will have a higher yield impact. Fertilizers. are essential for food production and stable access is really critical for farmers to produce the food that the world needs. JARA's role is to remain robust and to ensure the continuity of our production and also the deliveries to the farmers. Building on long-term operational improvements, our production system has seen a steady increase in output. And this is also our core focus in the current situation. And as you see here, deliveries to customers are also up in the same period. Volumes on this slide are not adjusted for turnarounds, but it's reflecting actual production and actual deliveries. And ensuring high uptime of our assets is really a key objective and it improves our capital utilization and also our energy efficiency. In addition our energy flexibility that enables us to import ammonia if needed in order to keep finished goods production running and this has enabled IIDA to be a reliable source of fertilizer in this critical period as well. Alleviating some of the pressure on market and serving farmers around the world. Yara's position is unique globally and the flexibility in our system continues to limit cyclical downsides as well as maximizing output in the current situation. And with that, I'll now hand over to our CFO, Magnus Krogh Ankarstad.

Thank you, Saifuddin. As mentioned, EBITDA is up more than 40% on the strong first quarter 2025, predominantly driven by increased nitrogen operating margins before the effects of this ongoing conflict in the Middle East. This translated into 60% increase in earnings per share, as depreciation, interest, and tax remained stable. Return on invested capital increased to 12.2% on a 12-month rolling basis, reflecting both increased earnings as well as portfolio adjustments. The quarter saw a $75 million U.S. increase in operating capital, driven by an increased price environment. However, this was more than offset by an increase in cash from operations, resulting in a significant increase in free cash flow of $196 million U.S., as net investments were flat. This increase in cash returns is attributable both to the improvements undertaken, as well as the constructed nitrogen market in the first quarter. Turning to deliveries, we see an increase of 3% in crop nutrition deliveries compared to first quarter last year. This was primarily driven by increases in the Americas, but worth noting that stable deliveries in Europe comes on top of a strong first quarter last year, that saw a 15% increase over the year before and a 6% increase in volumes in Q4 2025. That means that season-to-date deliveries in Europe are up to 0.5% and are among the highest in the last five years. In Africa and Asia, we saw a reduction of commodity volumes, however, an increase in deliveries of our premium products. and deliveries in industrial solutions are down 5% for the quarter following planned closures in Brazil. However, these portfolio changes have a positive impact on our cash flow. Yara has focused through the last months to ensure both production and supply chain flow in the extreme situation to safeguard deliveries to our customers worldwide, and we have not experienced major disruptions to our production or supply. This then increases our cash earnings further and strengthens our balance sheet, putting Yara in a robust position in the ongoing market volatility. Cash earnings are partly offset by an increase in net operating capital, which, despite the seasonal release of inventory, is up due to the increased values driven by prices. We are currently experiencing a strong market for all nutrients, especially nitrogen and phosphate. This increase in the RS nitrogen and phosphate operating margins and increases the bar for our premiums, which we measure above commodity value for the nutrients. That, combined with lower crop prices in general, exercise some pressure on our premiums in certain markets. For the fourth quarter, strong demand and pre-buying in Europe supported European nitrate premiums ahead of the year end. And premiums in the first quarter, 2026, were comparable to the fourth quarter. but lower than first part of last year, given the higher nitrogen prices in general. NPK premiums are somewhat pressured and primarily driven by Asia, which see a contraction towards more normalized premium levels at a very high commodity price base. Yara is a robust commercial organization and is on a day-to-day assessing the market environment on how to optimize volumes and margins globally. This also underlies the flexibility of our business model and the ability to create value both on the upstream margin as well as the premiums, which also limits the commodity downside through the cycle. And building on that, there's no doubt that the current global situation puts significant stress on supply chains, and this is particularly visible in the fertilizer space. GAR's global reach and flexibility is uniquely positioned to navigate this, The current price environment, coupled with weak crop prices, is already leading to a substantial difference in buying appetite in prompt markets versus off-season markets. Despite moving into the end of the season in the northern hemisphere, the significant loss of nitrogen and phosphates, as described by Sankura, means a supply and demand shortage in several southern hemisphere markets as well, in addition to India being a main driver for demand in the period to come. And due to Yara's global reach, we are able to optimize global deliveries and ensure we can keep our production system running at full speed, also by changing from locally produced to imported ammonia if necessary due to gas prices in Europe. And this is vital to keep serving a market in severe shortage of new fins in our core markets, such as Latin America. Ensuring our assets run interrupted is a core part of operational excellence, However, we have had an unfortunate outage in Pilbara since mid-March, expecting to come back on stream in May. That is our ammonia plant that will stop. In addition, we will execute a long plant major turnaround in Beltane after the season is over in June. This will lead to a reduction of approximately 160,000 tons of urea in Beltane compared to a full year of production and a loss of 140,000 tons of ammonia in Pilbara due to the outage. Diving deeper into this market situation, it is clear that the ongoing crisis in the Middle East has an unprecedented impact on global supply. Not only urea and phosphate, but also other raw materials essential for fertilizer production, such as sulfur, are stranded and limiting fertilizer supply globally. And with as much as one-third of urea supply impacted and further supply reductions from Russian plants, as well as reduced production in India due to LNG shortages, global availability is severely reduced, And in an already tight re-market without spare capacity, significant demand reduction is required to balance the lack of supply, and naturally market prices go up to balance the market and ration demand. This has been exacerbated by the ongoing season in Europe and the U.S., and it's obviously an extraordinary situation given the crisis in the Middle East. Market development going forward will depend a lot on the duration of a blocked Strait of Hormuz, the level of damage to infrastructure, and the ramp-up time required to get back on screen. Demand reduction is a balancing factor, as is potential exports out of China. In the median term, as previously illustrated at our Capital Markets Day, there's a limited number of supply additions from ongoing area projects, and this already seems to increase market tightness versus historic demand growth. And recently, and recent announcements suggest that several of these projects are that were announced to be commissioned in 2027, will be further delayed, driven by both the Middle East situation and other factors. Capacity and export out of China is likely to remain the balancing factor in the medium term. And for Yara, this medium-term constructive nitrogen outlook is set to drive further value creation. However, our strategic priorities are designed to increase shareholder value irrespective of market developments. As presented at our Capital Markets Day, our strategic priorities rest on two pillars, driving performance and competitiveness, and growing from our core. The former is the operationalization of our improvement program, focused on asset utilization, logistical optimization, capital reallocation, and commercial excellence, all aimed at increasing our EBITDA and cash flow. Our medium-term goal of diversifying our energy position further remains a core part of that agenda. Meanwhile, growing from our core is key to increase value creation, scale, and return to our shareholders. This includes healthy organic growth from recent and future production increases, up to 1 million tons on premium products, as we announced in January. In addition, this includes realization of recent growth projects, such as the NPK expansion in Cartagena, our Yara Vita plant in the UK, and the CCS project in Sloyskog, all to be completed this year. In addition, Yara will explore further growth opportunities linked to our core, all within our commitment to a strict capital discipline and focus on cash returns. As mentioned on the previous slide, energy diversification is core for Yara, and the collaboration with our products is a strong strategic fit to deliver this. The combination of Yara's significant ammonia system, including import infrastructure in Europe, and the Air Products Advanced Project in the ammonia space is a strong strategic fit for both parties. For Yara, the drivers are threefold. Access to local gas, asset competitiveness, and renewal through scale and the ability to harness carbon premiums. Predominantly through CBAM and with our collaboration with Air Products, we get all of these three. At the same time, the RIA is able to place volumes from air products more cheaply and efficiently into the core markets without the significant infrastructure investments otherwise needed. Commercial negotiations are proceeding according to plan, with a priority on the NEON project that is due to commission in 2027, and the U.S. project is progressing according to the previously announced timelines. IARA is fully underway to materialize the improvement program announced in January. Summarizing the first part, our cost program that we launched almost two years ago, we already have a head start on that. Excluding currency changes, our fixed cost level on a 12-month basis is at $2.3 billion, down approximately $230 million from the second quarter of 2024. And this incorporates the underlying inflation in those two years as well. Going forward, we will include this into our improvement program, which expands the value levers into a range of other areas as well. But having achieved a strong cost control environment up front provides us with a very solid starting point. And the improvement program remains a core focus going forward, aiming at more than 200 million US dollar EBITDA improvement by the end of 2027 and 350 million US dollar by the end of 2030. This includes our 10% ROIC target through the cycle, and we are starting to see a strong financial metrics through a combination of market developments and improvements. It is, however, important that our aim of improvements irrespective of market developments. Looking at the last 12 months, we see a significantly increased EBITDA, about 3 billion US dollars. an accumulated cash flow close to 1.2 billion, and perhaps most importantly, a return on invested capital firmly above 12%. And with that, I will give the word back to Sainto Witte.