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.

Thank you, Magnus. The current situation is really unprecedented for the global markets, and the the fertilizer industry is no exception to that. Together with the Ukraine war, the current conflict in the Middle East adds to the geopolitical volatility. Jonas Business Model is well adapted to navigate such volatility. And as I said at our Capital Markets Day, we have improved our resilience, building on our experience over the recent years and our competitive edges are really key in achieving this. The bedrock of this is our scale and global optimization, which is even more vital in the current situation. Operational excellence combined with flexible energy sourcing helps us to uphold finished fertilizer production And our premium and diversified product portfolio provides a strong foundation helping to mitigate earnings volatility when commodity prices fluctuate. Finally, a disciplined and flexible investment approach, clearly anchored in our strategic priorities, will continue to strengthen our long-term competitiveness. Then to conclude our presentation, it is important to highlight that our ambitions and commitments remain firm despite the current market turmoil. Further maturing our resilient business model and delivering on the improved program launched at our capital markets back in January. They remain core focus areas. And our long-term goals of diversifying our exposure to lower gas costs and enabling low carbon ammonia opportunities remain key priorities. With a strong balance sheet, capital discipline maintained, and a clear commitment to our credit rating, we are as well positioned to deliver sustainable long-term value creation. And with that, I'll hand back to Maria.

Thank you, Sventura. That concludes today's presentation. We will now take a short break to set up and get ready for the Q&A session. If you wish to listen only, please remain in the webcast. If you wish to ask questions, please join the team's meeting, which you can find linked to below the webcast. With that, see you in a short bit. Thank you. Okay, welcome back to everyone. We are now ready for the Q&A session. This is Maria speaking. I'm here joined by today's presenters, our CEO, Svein Thor Olsættir, and our CFO, Magnus Krogh-Antarsson. in addition to our Head of Market Intelligence, Dag Tore Mo. For those that only want to listen to the Q&A, you can remain on the webcast window. If you wish to ask questions, you need to join the Teams meeting by pressing the link underneath the webcast window. Once you are in the Teams meeting, please raise your hand if you wish to ask a question. If you are joining by phone and wish to ask a question, please press star followed by five to raise your hands. When it's your turn, I will introduce you, or at least state the name you registered on Teams, and you will be asked to unmute. Please state then your name and the company you're calling from. Christian Veit, please unmute yourself and ask your question.

Yes, good afternoon, everyone. Two questions, if I may. First of all, can you remind us how you deal with the volatility in gas prices at this point in time, and are you considering hatching at some point, and how are you secure through the rest of the year on the gas side? That's the first question. And then the second question, obviously, yes, thanks for the helpful slides you had in the presentation and in the slide deck. And you did show, obviously, that large parts of the European, of the northern hemisphere is actually covered in terms of fertilizer demand. But if I was a farmer, I would obviously try to optimize costs and maybe also skip one or the other topping during the season. Is that what you see? And could that also be an inventory issue at some point heading into the 27th season? Thanks very much.

It's something I can start with the first and then I'll hand over to my colleagues on the second one. When it comes to gas prices, we're not hedging that and that's been our practice over a very long time period because we see a very strong correlation between global energy prices and nitrogen prices that we have that flexibility to move with the market and then we've built in additional robustness in our system by also being able to switch between producing ammonia, and I can use Europe as an example where it's most exposed. So we don't have to produce the ammonia in Europe for about 75% of our finished goods. We can bring ammonia into Europe and that gives us flexibility to switch if it should not be economical to use gas to produce ammonia in Europe. For the time being, the upgrading margins from gas to ammonia in Europe are also at a level that justifies continued operation and we're running at full blast. And should that for some reason change, well then we'll do like we did back in in 2021 and 2022 to bring ammonia in and that's part of the strength in our business model where we can utilize the global networks that we have on ammonia. We're one of, if not the largest ammonia trader in the world and we have ships that can transport ammonia across the world and we're utilizing that to maintain finished goods production. And should we have hedged, then we would have lost some of that flexibility. So that's the reason we have that structure in place. And then I'll hand over to Dr. Magnusson on the second question.

When it comes to, let's say, markets like Europe or North America, in some ways, they are kind of when you talk about the import situation and urea in particular. I think I should mention that we are still seeing nitrogen demand. We are delivering both from Belle Plaine and from our production system in Europe, now in the second quarter as well. But if you just look at the urea situation, both the U.S. Gulf area which is far away from the application areas in North America at the moment. And in Europe, pricing now is such that they do not match, let's say, the India price or the peak pricing elsewhere. So from that perspective, at the current global urea values, there is very low demand, import demand, and probably not the need for it either. If you look at relative pricing between nitrates and urea, for instance, in Europe, So in that sense, covered. On the application, I think that nitrogen application, most areas that are exposed to the global values today will see some demand destruction, more or less. You have China and India, covers almost half of global demand. demand for urea which are not covering which are not following the global market and have their own domestic pricing which is way below so that leaves kind of half the global market that has to do the demand rationing in a situation where there are significant supply losses so if you if you again take europe as an example just to give some more details i think that the industry deliveries in europe are fairly stable season over season uh And we see that imports, according to Eurostat and the numbers from the European Union, so far this season, through March, Europe or EU has imported 4.2 million tons of urea, which is down from 4.9 million tons of urea, same period last year. And there's probably been some declines also in other products, or there has been some declines in other products, although urea is the dominant one. So I think that just looking at the apparent supply situation, it's logical to expect, let's say, a shortfall of demand or a drop in demand of 5 to 10 percent, something like that, in Europe, probably. On your question of inventories, that is something that I'm kind of concerned of, or we have been trying to follow that as well. And what we hear from the field is that, from our commercial units, is that farmers are generally using the fertilizer they have bought so no big carryover risk there into next season we think and that distributors and retailers are also back to back mostly so that in Europe and that is normal there are kind of regularly people are quite careful about not having too much inventories. North America that can be a little bit different because of the longer lead times on the import side that if could end up in a situation where, let's say, the imports is a little bit more than what is needed. So I hope that helps.

Yes, thanks, thanks, Arturo. Very helpful.

Thank you, Christian. The next question is then from Magnus Rasmussen. Please unmute when you're ready to ask your question.

Yes, thank you for taking the questions, Magnus Rasmussen, SAB. I wanted to touch upon volumes as well, and I wonder if you can give some comments about what you are thinking for Q2. You stated in the presentation that Europe have among the highest season-to-date levels, but also stronger volumes in American Q1. I think Dag Tore touched upon it a bit as well, but some further comments for Jara specifically as well would be helpful. Also, a question on price realization in Q2. I mean, we see urea prices skyrocketing and nitrate prices not so much. Prophecy also reduced their European nitrate prices yesterday. Your sensitivities cover a mix of different products. Is there anything that we should keep in mind and be aware of in terms of price realization into Q2? And also, how do you read the low nitrate prices in Europe relative to urea from, call it, demand or market perspective in Europe. Thank you.

Yeah, I can maybe start a bit on the volume side. We don't, as normal, we don't give any future guiding on volumes as such. I think what we can comment, as we also said in our presentation, is that Yara has a global system and, of course, that Also, normal circumstances obviously benefit, given the difference between season in the northern hemisphere and the southern hemisphere, and we think that will be even more so the case this year. And, of course, beyond that, I mean, our production levels are a question of whether we have sufficient margin to actually produce at different times. So in a way, looking at market prices and gas prices throughout the quarter, that will kind of explain that situation. But of course, in addition to that, it's important to keep in mind the fact that we also can import ammonia from into Europe if gas prices were to go up, but obviously, as everyone can see right now, in the current situation, nitrogen prices have increased a lot more than gas prices. So, I mean, so that, in terms of what we produce and then ultimately sell, that's really, you know, what determines that. And, of course, where we sell it depends a bit on how markets develop. And I think on maybe the urea nitrate pricing I can give to you.

I think it's, of course, a bit more challenging for you and others to monitor this now that prices are so extremely high because it leads to some more fragmentation and regional differentiation than otherwise. When prices are more normal, then you can use fairly straightforward sensitivities, right? Because everything is kind of correlating very strongly. Some of that is now kind of a little bit distorted. Let's say if you put in spot prices, In the Arab Gulf, that is basically the netbacks from the India tender, which they paid kind of $950, say. There are very few regions now in the world that are willing to pay $950 for urea, as you can observe, if you observe carefully. in the regional prices that the publications quote. There's nothing secret about that. You see that US Gulf is discounted, even Europe is somewhat discounted, Brazil is discounted. So just putting in, let's say, $910-$920 for Arab Gulf, for instance, is giving a little bit of an exaggerated picture, probably. So that is one thing that, of course, you have to be a little bit careful about. When it comes to Europe, of course, I mean, if you were a farmer now that needs urea for March, would you buy it now? And of course, that is an understandable dynamic, I think, that for a while now, maybe the urea import parity is not really the main driver of nitrogen prices in Europe for a period. And that we see already, as you were hinting at, right, you have zero, say, round numbers, zero nitrate premiums right now based on the publication references. And it wouldn't be a surprise if you, let's say, with a starting price for next season, that you will see a negative nitrate premium versus urea, unless urea comes down a bit. So I think that, as Svein Tore was saying, the farmer affordability is so stretched that I think that there will be more regional differentiation based on what farmers need the product right now and those farmers that can defer the purchasing closer to their application season. So a bit more challenging, I think, to be very precise on price realization than normal.

And just to remind everyone as well, the sensitivities are based on high-level, easy assumptions, right? One-month lag and two or three market prices in volatile markets and with increased regionalization. Like you say, it's natural that they will be less precise than in a more stable market environment. Moving to the next question is from John Campbell. You can please unmute yourself.

Hi there, everyone. It's John from Bank of America. I have two quick questions. So maybe if we continue on the NPK and nitrate premium, if I remember properly, I think the second quarter, 25, had pretty robust reported NPK. I think it was $265 per tonne. I think you've just continued the practice of actually quoting the specific figure. But presumably, based on what you're kind of saying, gathering the comments you've made on this call, it sounds like that will be down maybe quite steeply. into the second quarter. That was my first question. Second question, just very quickly, you know, any comments or assumptions or expectations for consumption of Chinese exports of urea in 2026? I think Bloomberg had a comment saying that it could be something like 3 million tons, which would be down year on year, but anything you've heard would be interesting. You could really say it's kind of all of the market balancing areas of supply. Thank you.

Should I take this question first? Nobody knows, of course. I think there is discussions ongoing in Beijing as we speak. It's our understanding they are debating this right now. The flow started in July last year, so a little bit of time left for that. We also see that there are quite a few market players that have already started to move product to ports. effectively removing that product from the domestic market already and that has caused some reactions both from the government and from the nitrogen association it seems that are a little bit upset about this development ahead of approvals so that there are even some discussions of maybe that could lead to some delays in the export approvals let's see how that how that fits. And I also said you referred to those 3 million tons. I've also seen those referred. To me, I haven't seen anything concrete yet, nor from our experts in the market. So I tend to believe that must be some kind of speculation. But I also saw 3 million tons mentioned. I would think that would be a first. tranche then in that case and not necessarily the total volume for the year but that's what they also did last year right they first approved two million tons and then they added to that quota as they saw that the domestic market did not react to the export volumes so i don't think you should conclude i wouldn't have concluded that those three million tons that's it but uh but be open that this is a really important factor in the market for the rest of the year.

On NPK premiums, and again, of course, we don't give guiding on premiums, exact premium levels as such, but I think it's fair to say that the last couple of years, NPK premiums have been very high and higher than maybe average over longer time periods, but... obviously now with commodity prices increasing as much as they have and nitrogen, as we talked about, but also phosphates with a significant increase due to the same reasons as for nitrogen in the current crisis. It's also natural that that puts some pressure on the premium that farmers can pay on top of that, of course also considering the farmer economics. So, even though NPK premiums are somewhat down since last quarter and a year ago, they're still holding up quite well, and then we'll see how that plays out, which will depend as well on the commodity development in the next quarter. But, of course, for FIARA, I mean, we, of course, make money both on the premium as well, that's the upgrading margin or the commodity margin, and there, of course, both N but also particularly phosphates, of course, has been a significant increase. And I think also worth to mention in our production system, roughly only a third of our MPK production depends on... depends on sulfur in the production system. And, of course, sulfur is right now being a significant cost driver in the phosphate or DAP production and phosphate prices. That's, of course, an advantage that we have on the margin side.

Thank you very much.

Thank you. I'll just remind everyone listening that if you wish to ask a question, you need to join the team's meeting and raise a hand in there. Next question is from David Simmons. Please unmute and ask your question.

Hi, thank you. It's David from BNB. I have three, I think, please. First one, could you talk about your assessment of damage to Middle Eastern nitrogen and LNG facilities so far? How much do you think we've lost longer term? And if if the war ends this weekend, let's say, what would be the time lag before we get back to a more normal situation in nitrogen? Second, could you, this is more just a modelling question, you very generously gave us the 150,000 tonne number for the bell plane turnaround. Is there an estimate of how much you might lose from the India and Australia outages and curtailments that you announced in the second quarter? And then thirdly, what could the policy response to this current crisis be? Is there an increased likelihood of C-band suspension for fertilisers in the near term? Do you think we might see reopening of plants as we saw Brazil do with tetrabras? Any thoughts on that would be great. Thank you.

On the Middle East, it's of course hard for us to know. What has been announced is that Qatar has had some damage to their natural gas infrastructure that will take quite some years to repair. We don't think that the fertilizer plant is damaged, so that should be able to restart very quickly. There have been some damage in Bahrain and some damage in Saudi Arabia also we hear, a little bit unclear here. how much and how long it will last. And in Iran, there is quite a lot of damage to the gas infrastructure, and there are only a few of the plants in Iran that have been able to start up. But to your question about how long time this would take to normalize, I think it's hard for us to speculate around that. It certainly takes some time. It's hard to estimate.

I think on your questions on India and Australia, I mean, on the Indian side, the impact to a result is fairly limited from the current curtailment there. On the Australian part, or sorry, the Australian pneumonia plant, as I said, we assessed roughly 140,000 tons in total. I think we also said in the markets that we expect to start up sometime first half of May. So then, you know, I mean, from, you can sort of do the math on how much that, because we, I mean, you know, when the plants went down, so how much of that will be the second quarter versus the first quarter. The politics.

John, politics, start over here. You mentioned CBAN. I think the last thing that Europe should do right now is to create any uncertainty around CBAN because that's in place in order to create a level playing field so that imported volume pays the same emission cost as European players do. And if there's one region that has felt the consequence of dependencies, it's Europe. Look at what happened in the energy sector. sector on the energy crisis and what that meant for households and industries that we're still struggling with in Europe right now. So then to weaken such a vital industry as fertilizer and farming would further emphasize the challenges in Europe. in Europe. So I think what policymakers should consider here is to rather use the CBAM revenue and redirect that towards farmers to not put a burden on the shoulders of the farmers. They don't have the margins to support this, but we need food production in Europe and we need a healthy fertilizer production system in Europe as well. And if we're, as a result of this, creating an uneven or not a level playing field, that would maybe come at a very short-term relief, maybe, but at very high cost long-term, because then it would be even more dependent on imports. So it's important to keep the long-term in mind here as well. But any uncertainty on... on CBAM in Europe for industry right now will have impact on the ability to invest in long-term products. But of course, as you look globally and with fertilizer being responsible for half of the world's food production, I understand that this is something that is very high on the agenda for politicians all over the world. right now, but it's important that we balance the short-term need with the long-term implications that interventions could have. But we really do think that CBAM is an important lever, and that in combination with the ETS, if we are to reach the Paris Agreement, to reach the emission targets for Europe that needs to stay here and that's also important for the long term of actually growing food because we also have to solve the climate challenge here and I would say that one of the occupations hardest hit by climate change is actually farming they work out in nature and they work whether it's floods or droughts or record heat or record cold that's where they have to produce food so it's It is in our interest that we deal with the climate challenge as well, but it's not something that we can just put on the shoulders of farmers.

Thank you. Let's move to the next question, which is from Tristan Lamotte. The line is yours.

Hi, Tristan Lamotte, Deutsche Bank. Two questions, please. The first one is... How high is the risk that the capex number that you quoted for central blue ammonia projects has to move up given the developments in the world since you first gave those numbers and given that the final agreement is yet to be signed? And the second question is just wondering if you could talk about any opportunities for permanent market share gains relating to the conflict. Thanks.

Thank you. When it comes to the project with their products, as we said when we had the announcement, I mean, the time we spent towards mid-year to the next phase of that project, including the preparations of the potential FIDs, it was around the contractor market and evaluating the technical side of the project together with AP. And I think that work is still ongoing and there's nothing particular that's happened since then that sort of changed anything substantial in that regard. So, I mean, it depends on the markets, depends on the bids. And so, yes, there's nothing new as such there and sort of things are proceeding according to the plan that we had. I think in terms of market share, I would say, Our primary objective, also sort of affected in our improvement program, is to increase organically production output for organic growth from our production system. So up to one million tons of additional treatment products through production improvement and the bottlenecking. And in addition, we have a few projects coming online now with MPK expansions in Cartagena as well as in the UK and so on. So obviously that will go into increasing our market share as we sell what we produce. But in addition to that, and also as a part of the improvement program, we are looking at optimizing our global system, taking more market share in our most profitable markets. and as we also communicated there, Europe is one, not the only, but one core market for us, of course, and I think that is also why it is very important for us to keep production running now, as we have. They take some risk in doing that, but of course, at the current level so far, we have good production margin on Finnish products. We also have good operating margin on ammonia, and if gas prices were to go up further. We also have the possibility to import ammonia and keep finished fertilizer production going. So we believe that Tiara, as such, has a quite strong competitive edge, also gets competition also in Europe, in terms of being a very stable, reliable supplier for the European market and gain market share.

And to add in, you put it very well, Magnus. And as you said, at our capital markets day back on January 9th as well, we said that we're a battle-proven organization. And we've been tested again now. And I want to thank all our colleagues for an outstanding presentation. where finished goods production is at one of the highest levels we've seen. But one thing is to produce, but also to get it out to our customers as well. We've been an outstanding performance on really working hard throughout our whole supply chain in order to get that done. And we've used the... and the flexibility that we knew that we had in our business model before the energy crisis and before Russia's war on Ukraine. But the learnings that we had from that, we've also built in even more flexibility in our system, and that's what we're fully utilizing now to maintain production at high levels but also moving the product.

Very helpful. Thanks a lot.

Thank you. For those that have dialed in by phone, if you wish to raise your hand, you need to press star followed by five. With that, we'll move to the next question, which is from Masahir Mamagli. Please unmute. The line is yours.

Thank you. So two questions from my side. So firstly, as we near the planting season in the southern hemisphere, and if the situation stays the same, How should we think about the market development, whether it's volumes, demand destructions, acreage decisions, and also perhaps some relief from AMSOIL substitution in Brazil from Chinese imports? And my second question is, with the free cash flow that you are generating now and perhaps in the next few quarters, what's the plan? First, in the scenario where you decide to go ahead with the air products project, and second, in the scenario where you decide not to do that, what would be the capital allocation decision there? Thank you.

First, I think it's hard for me here in Oslo now to have a full picture on exactly how the decision-making is going to be on the southern hemisphere by the farmers. What we have heard, it's logical that the topic is on the agenda, right? We hear from Australia, for instance, which has the peak import season for urea now in the second quarter, and maybe one of the regions that are hardest hit by the by the timing of this conflict there are some talk about reducing wheat acreage for instance to go for maybe barley maybe some canola find some other crops that are a little bit less nutrient demanding and i would think that that would be also topic in places like brazil argentina we know south africa is struggling with high prices and low margins So exactly, very good questions, but I think it's hard for us to speculate in exactly how that will play out. But surely there will be efforts to try to find solutions that would maybe require less nutrients.

To the question on capital and capital allocation, I think for us, it obviously starts with strong capital discipline, as we outlined in January. Investing into U.S. projects, as we said, is a core priority for our energy diversification strategy, and then we outlined there as well, you know, roughly over the period up to 2030, how much money we sort of, or how much capital we plan to spend on that. irrespective of sort of FID decision there, I mean, capital discipline will stay strong. Potentially, you know, we would do other projects, pursue other similar type projects for the same objective, but still with the same discipline. And that's really driven by, you know, how much we believe that we can take on at one point in time, not only sort of from a balance sheet perspective, but also to make sure we actually deliver a strong return on those projects. And that's kind of the guiding star for that. Of course, if our cash flow, you know, was to increase significantly in the period as well, I mean, that doesn't change our plans on the investment side necessarily as such. But, of course, then we would look at the levers that we have at hand. And, of course, as we've said, additional distribution is also something that we would always consider, right, in such a scenario. And I think also on that note, of course, also important to mention that with the current market volatility that we see, we also, of course, need to keep in mind that there could be changes in the market as well. And I think particularly with what we see now, of course, maintaining a very strong balance sheet is extremely important for our flexibility, both to navigate the market but also to sort of make shareholder-friendly decisions. But sort of regardless, of course, our capital discipline remains even though our cash flow would increase. we are sticking to our capital allocation policy, our dividend policy, and we will, as a part of that, always consider additional distributions.

Great. Thank you.

Thank you. The next question is then from Angelica Glazova. Please unmute and ask your question.

Hello, and thank you for taking my questions. Angelica Glazova from Jake Morgan. I just have one question left, actually, and that's on the U.S. Blue Ammonia Projects. I am wondering how you think about the timeline for mid-2026 FID that you provided us with. Do you view it as a hard deadline, or do you think that this is a goalpost that can be moved potentially? And the reason I'm asking is that we had quite a detailed discussion on policy earlier on the conference call, and, you know, it is... it is a possibility that we might not get final certainty on CBAM regulation in Europe by mid-2026. And I'm wondering, in this case, how would you approach the decision? Would you still make the decision in conditions of uncertainty, or would you rather wait till we get this final certainty on regulation?

Yeah, thank you for the question. I think when it comes to, you know, certainty around political decisions, whether it's CBAM or tax rates, for that matter, you never get that, right? You never get 100% certainty. So I think we, as such, always have to make decisions knowing that there is that level of uncertainty. Everything that's politically decided could, of course, be undecided. That being said, I think sort of the tendency we see on CBAM now as well, also politically and also the signals that are public out there, is that the appetite for changing it, you know, seems to meet with resistance in many places and, you know, importantly among those, the European Parliament, as an example. That being said, when we do a project like this, obviously we don't base that solely on subsidies or sort of political incentives like that. As we've said many times before, basically if we Main objectives, it's lower gas prices, it's increased scale, and with that comes lower fixed costs and capex per ton. And then it's tapping into carbon, sort of the carbon margin as well. So all three are important and play a role in the business case. Obviously, if you take one away, then the business case is less strong. But, I mean, still, for us as a big ammonia producer, the two first ones are very important. When it comes to the timeline, I think that is our plan, and we work by the plan. But, I mean, what's important both for us and for our product is to make the right decisions. So, I mean, if there's outstanding technical matters or any other good reason that it makes more sense to wait a little bit, that's, of course, what we do. I mean, there's nothing forcing our hand to make a decision on a certain date. I mean, we will make the the right decision for both companies, and that is one that is value-creating for all our shareholders.

Thank you very much. Thank you. We only have one more question so far, so if anyone else has a burning question, they should raise their hand now. First, Bengt Jonasson, the line is yours.

Thank you, Bengt Jonasson, ABG. Just one follow-up question on comment on the industrial segment i think stated in the webcast that there were some curtailments or permanent curtailments of some capacity in the industrials uh could you confirm that and how much of the capacity was curtailed so um yeah so it's um so on the volume side we have made we announced last year the few

closures or settlements in Brazil for the industrial side. In addition to that, we had some smaller production issues as well in Cubatao this quarter that also impacted the volumes. So I was a bit remiss not mentioning that in the presentation as well.

It's the hibernation of this sulfuric acid plant in Polinia, which we've mentioned in the last year, if you remember.

Oh, OK.

Yeah. It's a smaller plant, so it's actually a smaller volume impact. OK. There are no further questions, it seems like, so that means that we will end the Q&A session now. Should you have any need for follow-ups, the IR team remains at your disposal. But with that, thank you for joining, and we wish you a pleasant day. Thank you.