Earnings call transcript: Yara International reports strong Q1 2024 results

Yara International ASA (YAR) delivered robust Q1 2024 financial results, with revenue of $2.66 billion and EBITDA of $585 million, highlighted by significant market share gains and effective cost management strategies. Despite a lack of immediate stock movement from its current price of $20.1, the company maintained its strategic momentum with ongoing innovation projects and operational efficiencies. According to InvestingPro analysis, Yara’s overall Financial Health Score stands at 2.23 (FAIR), reflecting its balanced operational approach. Yara’s focus on sustainable practices, such as carbon capture and storage, positions it well for future growth.

Key Takeaways

• Achieved strong Q1 2024 results with notable market share gains.
• On track with a cost reduction program targeting $2.385 billion.
• Advanced carbon capture and green ammonia projects.
• Maintained high production rates and optimized ammonia sourcing.

Company Performance

Yara International’s performance in Q1 2024 was marked by strong market share gains and strategic cost management. The company successfully maintained high production rates across its European facilities, leveraging its flexible ammonia supply strategy to mitigate potential carbon costs. This approach has allowed Yara to regain competitiveness in the European nitrogen market, despite challenging market conditions.

Financial Highlights

• Revenue: [Data not provided]
• Earnings per share: [Data not provided]
• Cost reduction target: $2.385 billion in fixed costs
• Positive currency impact: $50 million

Outlook & Guidance

Yara is focusing on strategic initiatives, including the development of blue and green ammonia projects. The company plans to finalize its carbon capture and storage project in Norway by 2025 and is exploring global opportunities for green ammonia uptake. With a debt-to-equity ratio of 1.12 and expected revenue growth of 5% for FY2025, the company appears positioned for measured expansion. Capital expenditure guidance includes $750 million for maintenance and $300 million for growth projects, with an additional $150 million for potential opportunities. Based on InvestingPro’s Fair Value analysis, the stock currently appears slightly undervalued. For more insights on undervalued opportunities, visit our Most Undervalued Stocks list.

Executive Commentary

CEO Sven Kuden Horseti emphasized the company’s progress on cost targets, stating, "We are almost exactly to the number on the fixed cost target." CFO Magnus highlighted Yara’s commitment to competitiveness, saying, "Our aim is to always be the most competitive around production assets." These statements underscore Yara’s strategic focus on efficiency and market positioning.

Risks and Challenges

• Potential European tariffs on Russian fertilizer imports could impact market dynamics.
• Ammonia and urea price volatility may affect profitability.
• Changes in US tax credits (45Q) could influence financial planning.
• Credit tightness in the Brazilian agricultural market poses challenges.
• China’s focus on domestic agricultural production may limit export opportunities.

Yara International’s Q1 2024 performance reflects its strategic focus on cost management, innovation, and market competitiveness. The company’s ongoing projects and flexible strategies position it well to navigate future challenges and capitalize on growth opportunities in the sustainable fertilizer market.

Full transcript - Yara International ASA S (YAR) Q1 2025:

Maria Gabrielsson, Head of Investor Relations, Yara: Good morning, ladies and gentlemen, and welcome to the Yara’s First Quarter Results twenty twenty five Conference Call. Thank you. I’d now like to hand the call over to Maria Gabrielsson, Head of Investor Relations. You may now begin. Thank you, and welcome to everyone to this conference call for Yara’s first quarter results.

I’m here together with representatives from Yara’s management, including our CEO, Sven Kuden Horseti our CFO, Mangkur Guntherstad acting UCS strategy and corporate development, Kudi Aved, and head of market intelligence, Sven Ture Husteppe. We’re not planning to give a presentation as we hope you will all have watched our webcast a few hours ago, and we will then go straight into questions. So operator, you may please open the first line. We are now opening the floor for question and answer session. Your first question comes from the line of Christian Faitz of Kepler Cheuvreux.

Line is now open.

Sven Kuden Horseti, CEO, Yara: Thanks. Good afternoon. Good morning. Contract on the results. Two questions, please.

First of all, can you update us on the timing of the Fluske, the CCS project? And in relation to that, any updates on the regulatory side? And the second question would be also staying in Europe. Any appetite to consolidate the Western European nitrogen market at this point in time?

Magnus, CFO/Strategy and Corporate Development, Yara: Yes. Thanks. Thank you, Mung. It’s Duncan here. So the the first year CCS project, we we aim to finalize next year and and go into operation there.

On the regulatory side, there are no updates per se in in in Europe as it changed to that project. Major benefit of for the project for for the investment itself will, of course, be avoided EPS as well as such c o two taxes. And then we are working actively with the customers and all over the world in terms of the addition I mean, additional premiums for low the low carbon fertilizer that will be produced as a result. In terms of your second question of on consolidation, I mean, we don’t comment on on that typically. I think we’re I mean, as as we are, we’re always looking at value creating growth opportunities all over the world.

Sven Kuden Horseti, CEO, Yara: Alright. Fair enough. Thank you very much.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of Your line is now open.

Analyst: Hello. Good afternoon, and congratulations on a very strong set of results. I would have three questions, please. In your outlook, you mentioned that European industry deliveries were

Sven Kuden Horseti, CEO, Yara: And

Analyst: second of the on the EBITDA bridge where you reported a positive contribution from fixed cost of 34,000,000 Maybe can you help us understanding what’s the run rate we should be expecting for the remainder of the year as the cost savings looks they are progressing very well. And the third one is on the what I think is the big elephant in the room, which is represented by the potential comeback of the Chinese exports. Domestic urea prices continue to fall. So what would prevent these guys from resuming exports today? Thank you.

Magnus, CFO/Strategy and Corporate Development, Yara: Yeah. No. Thank you. In terms of in terms of the market share gain, I I think, I mean, it’s of course, a reflection also of the fact that we, through q four and q one, ran our assets full blast in Europe. So we had significant projects to sell and and, of course, very strong commercial performance of our teams as well in in the markets where they should perform well.

So we think all in all, I mean, given our relative competitiveness on European cost curve, that that this is something that is is sustainable. And, of course, we know it’s been a slightly early spring, but but nevertheless, it is a real market share gain as well. In terms of on the on the fixed cost side, I think we we stick to the estimate that we have given you in in terms of what what we believe our run rate will be by the end of this year, which is, of course, by a bit by coincidence, the same as as where we are now last twelve months. But but you also need to keep in mind that on that entire cost base, there is, of course, inflation in in that period as well. And and our aim is then to be at the run rate of 2,400,000,000.0 by the end of the by the end of the year.

And then then, of course, that means that we need to make reductions on the yep. According to the plan and and in the same dimension. And then If

Sven Kuden Horseti, CEO, Yara: I may add it to the front wheel on the cost side, so we’re almost exactly to to the number on on the fixed cost target, but but also, as Magnus already explained, that that we also get some help from currency here, $50,000,000, and our target is currently adjusted. So so so that means that we we we have additional activities that we’re carrying out, and that will have impact, and then we’ll see the full run rate impact from that according to plan by the end of the of of of this year. On the China situation, we cannot, of not know what is in the cards here as as nobody else outside China either can, but but you cannot observe from some elements. I think one is that the government of China has a very strong priority recently and now on food production domestically in order to reduce their import depend dependency. And it’s interesting that all that all this is also expressed by by a record grain crop last year of first time more than 700,000,000 tons.

So according to the last USDA estimate now, imports of grains into China is cut by more than half this season compared to last season. So it’s it’s it’s a bit of strong priority in China in boosting their own food production. And I think that makes them very careful on the export policy because as soon as they open up for exports, domestic prices will immediately increase. And they are concerned about timing of that and the impact in the in the local market. So so that’s why it’s it’s it’s not it’s not possible to kind of get for the score.

That’s exactly how they are thinking around it. So we just have to we are just pointing to it at the at the probably the number one supply uncertainty. There are probably in supply uncertainties as well, but the number one supply uncertainties for next year and and beyond. Okay. Thank you very much.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of Joel Jackson of BMO Capital Markets. Your line is now open.

Magnus, CFO/Strategy and Corporate Development, Yara: Hi. Good afternoon, everyone. Thanks for taking my question. Good results. Couple questions.

First, you know, urea and nitrate prices are rising and strong, especially urea prices. We’re seeing ammonia prices stay weak. So first question would be, can you comment on the deferred the divergence of those two prices? And and and what does that mean for your business? You know, what are you doing to try to track that margin difference between urea and ammonia?

My second question would be, you talked about both in The Americas, good strength, and you guys are well in Brazil. Can you talk about how the North American market has played out in q one and and into early q two? Thank you.

Sven Kuden Horseti, CEO, Yara: Alright. Thank you. On the on the on our versus urea, it’s a good question. And, of course, long term, there’s a strong correlation between between the two. They are both nice and products.

But particularly in the short to medium term, it you know, it’s apart from the The US market where there’s a certain segment of direct application, there is no substitution on the demand side between ammonia and upgraded ammonia products because farmers and others cannot utilize it. So so so in in that sense, the ammonia supply demand balance can be totally dependent on the nitrogen supply demand balance because the the the demand segment for merchant ammonia, that phosphate production, it’s industrial applications, and to some extent nitrate and NPK production. And as you said, now we have a little bit different dynamic where there is more supply on ammonia relative to demand compared to for upgraded products. And what what we are doing at Yara here is trying to optimize as best as we can on this to try to import or reduce production or optimize our portfolio to take advantage of wherever we can get low ammonia as as much as we can. So and and and as I as I as a company, in total, we are almost balanced.

Let’s say we have a surplus of half a million tons of ammonia or something like that. So so it’s not that big issue when it comes to our financial exposure.

Magnus, CFO/Strategy and Corporate Development, Yara: And on the straight foot, on the North American market, you talked about Brazil is really strong. I didn’t see a lot of comments on North America. How did the North American market playing out in q one and into q two? Yeah. And I I think, obviously, very I mean, a fairly low starting inventory in The US market and and, of course, with a high expected corn acreage in in for on the planting side, we see a very tight US market as well, which is, of course, now reflected in in NOLA prices close to 500 tons per metric ton on on urea.

So we I mean, so that that looks looks very, very strong and and, of course, we’ll eventually also move into some of the pricing bit later than what would be in Europe. So I think from our perspective, fundamentals for for The US and North American general look look very strong. Just just follow-up on that, would that mean that US market I mean, putting words in your mouth. So if The US market was more slow developing, but starts really take off into the second quarter, is where you see the strength. Does that make sense?

Sven Kuden Horseti, CEO, Yara: It’s it’s off already in the first quarter, think, from December and onwards, actually. And I think here The US buying from December and onwards were one of the key drivers behind the urea price increase that we have seen, but they were they were basically zero coverage on the imports through November and the 3,000,000 tons that is needed had to be bought during a very concentrated period. And it’s still as long as that is still very tight. I mean, if you have that if you have a cargo in position, you can make now hundred dollars on it just as a freighter. So now the the game is kind of a whole whole long will the season last and how long will you be there to have to take that exposure on that market.

But it’s interesting that we can still sell May cargo for May, just at between 450 and $500. So you you may have seen that Egypt today hold a large cargo, 30,000 tons probably for The US gold market just this week. So it’s still still a very active market.

Magnus, CFO/Strategy and Corporate Development, Yara: Thank you very much.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of Angelina Guizhouka of JPMorgan. Your line is now open.

Angelina Guizhouka, Analyst, JPMorgan: Good afternoon, and thanks for taking my questions. Congratulations on good results. I have three questions, please. The first one is just a quick follow-up on the question asked earlier on the market share gains. And maybe looking forward to the rest of 2025, could you highlight some factors for us which could help you sustain this market share?

For example, how do you think about the proposals by the European Commission to impose tariffs on Russian natural fertilizer imports? Is it something that you would expect to be supportive already starting from this year if it is approved? And then my second question is on the blue ammonia project. You have mentioned as part of prepared remarks that there is no change in the time line of FID, which is first half twenty twenty six. But could you just remind us what other key steps for you between now and the time line of FID?

So what needs to be done for you to be prepared to take a decision at that time? And the last question is a clarification on the CapEx guidance. So we’ve discussed in detail the maintenance and committed growth part of CapEx. But could you please outline what is included in the uncommitted growth part of 150,000,000, which is included as part of the guidance for this year? Thank

Magnus, CFO/Strategy and Corporate Development, Yara: you. you. I I think to to the market share question, I I think from from from our perspective, I mean, we will continue to take advantage of the asset status that we have in Europe, both in terms of, of course, running capacity and and keeping productivity high, but also affecting between own producing imported ammonia as as needed. And then, of course, we will put all commercial efforts into protecting our market share and and round chimney of our our plants. I think in terms of in terms of competition and and sort of other questions, I think that this is something that we’re sort of well accustomed to dealing with.

And and it’s important also to highlight that, of course, the reductions that we’ve seen on market share in in previous years, of course, has been driven by very extreme conditions in the European market as you still recall with the gas prices in 2022 and and so on, which, of course, takes time to recover. But I think in terms of the tariffs any is there any comment? Well, it

Sven Kuden Horseti, CEO, Yara: it it it’s a step in the right direction that this is now in in in process. I don’t think it’s a it’s too too little too too late, but but at least it’s addressed and it’s about creating something that resembles the level of playing field here at inconsistency around that and as we’ve seen in terms of Russian imports into the in into into Europe, not only has it continued, but when it comes to urea, it’s it’s at a much higher level than it was even before Russia’s War on on Ukraine. And and and to to to also reflect the the competitive disadvantage that we have in in Europe when it comes to energy prices at least in short term. It needs to be addressed for such a a vital industry, and I think it’s a step in the right direction from the from EU to to address this. And then that will be gradually phased in, but there are also some volume triggers here so that if it exceeds certain volume thresholds, these tariffs would then be accelerated.

Then I just wanted to add on the also on on the way that we work in in the market. As Magnus said, we’ve been extremely busy in in the last few years on on managing extreme volatility throughout our whole supply chains and and managing production moving products and so on. And perhaps in that in in in in previous presentations from us and how we talk about how we work in in the market. We haven’t been able to communicate enough about how our agronomists work throughout the the the value chain together with the farmers in order to to to also capitalize on the next step on the fertilizer production. That’s the application and how we do that with the crop nutrition programs and the value that we create for farmers as as well.

And just a side note here, I just wanted to mention concrete example that I saw myself in in when we’re visiting a farmer in China just last month where she followed the the outcrop nutrition program for for melon production of course, had a yield impact of that, nutritional impact of that, quality impact yield impact. But, also, she was following the the other way of working together with our agronomist. She was able to have her balance right and ready for the market two weeks of ahead of the competitors, and that’s also value. And and and that’s part of the we got a value proposition that is also very important in our business model. It’s good to see how that is materializing, and it’s it’s also something that we see every day in in Europe.

You’ve seen the announcement from months ago that together with PepsiCo as well, working on potatoes and other crops. So this is something that we we also need to take into consideration that it’s not only about the fertilizer, it’s about which fertilizer, when to apply it, and to optimize that as as well. And and with that, that it also opens up opportunities to to increase market share now in a in an environment that is still volatile, but compared to what we’ve been through since 2022, some some of that.

Magnus, CFO/Strategy and Corporate Development, Yara: I I think in terms of ammonia projects in in in The US, nothing has has changed there in terms of of the development and the development activities. There is, of course, a lot of technical activities to perform before you come to the point where you can evaluate your your FID. So that that’s ongoing now. And then, of course, we are in parallel also doing I mean, mean, taking that time to evaluate both market conditions, regulatory conditions, geopolitical conditions, yep, what you would normally see between the different case case in a in a large scale investment program. In terms of CapEx guidance, I think, yeah, maybe maybe just to sort of recall a bit also what we’ve said previously compared to on the maintenance side first compared to our guidance a year ago of of 900,000,000.

We have now, as as as we said in the program, down on 750,000,000. And the growth portion that’s as pointed out today, 300,000,000 is, as mentioned previously, committed projects where the growth of CCS project and our Yara Vista plant project are are the two main elements and then some some investments in our phosphate mine in in Finland. And and, of course, those are all projects where we expect a significant return and then we’ll also follow-up that we that we get that return once these projects enter into the market. And when it comes to what is uncommitted, then then, of course, that’s that it means uncommitted in the sense that we don’t have any plans to to spend that as as of now. And, of course, if if we did, it would be if there were significant, I would say, somewhat smaller opportunities with significant and and relatively immediate returns.

Maria Gabrielsson, Head of Investor Relations, Yara: Thank you very much. Our next question comes from the line of Benk Jonathan of ABG Sundal Collier. Your line is now

Sven Kuden Horseti, CEO, Yara: Yes. Good morning. Thank you for taking my questions. I have two questions. One is related to the European nitrogen market.

Did you see volumes push forward into the first quarter compared to what we have seen historically at the expense of second quarter volumes? That’s one thing. Or it’s another explanation that buying pattern is moving back to the pattern you saw before the Ukraine invasion and the high year nitrogen deliveries or nitrate and and to get deliveries in the European market that the product has regained market share at the expense of urea. The second question would be on the on the cost side. You still target $2.03 8.

But as you stated, the 50,000,000 is related to FX. Is it sound to assume that the that the actual realized cost will lower despite the headwind on inflation given the FX development since the initiation of the program? Thank you.

Magnus, CFO/Strategy and Corporate Development, Yara: Thank you. I think in terms of the European nitrogen market, I I I would say that probably to to some extent, also given that in early spring, we have some some movement from q two into into q one, but I but I think still majority of the increase that we’ve seen is is the regain of of market share. And I think you’ve got about I mean, that’s kind of underlined by the fact that our production rates moving into q one have been significantly higher as well. In terms in terms of the buying pattern, when it comes to sort of nice base market share compared to UELA, I guess, everything is increased when it comes to I mean, buying pattern in terms of timing. Is that the return to b world level?

I think the answer is more no. But that’s that’s remains what it has been over the last couple of seasons. On the on the on your fixed cost question, I mean, obviously, if we we will target you know, our target remains unchanged, but we are we are looking to I mean, we are targeting this x currency impact. And so, of course, what what that will be in at the end of twenty twenty five also in, well, I mean, what the actual number will be at the end of twenty twenty five. We’ll put the impact of what kind of currency effects that we that we have, but but our our target remains the target despite of the currency impact.

Sven Kuden Horseti, CEO, Yara: Yep. So so just to add on on what my if this quarter had been at the end of the year and we were at $2.03 85. Like, now with the current current then we would have been $50,000,000 behind. So so so we’re we’re adjusting for current, so that’s the underlying improvement. It should be a hundred and $50,000,000.

So that’s the that’s the we’re not taking headwind or tailwind from from currency in that that regard. So so so if this had been at the end of the year, we would have been $50,000,000 fourth of our ambition level at this stage. But we’re on track.

Magnus, CFO/Strategy and Corporate Development, Yara: Thank you.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of Magnus Rasmussen of SEB. Your line is now open.

Sven Kuden Horseti, CEO, Yara: Hi. Thank you for for taking my questions, and congratulations on a good report. Continuing on the FX and fixed costs, we have seen the dollar weakening, especially against the euro over the past few weeks. I’m just wondering whether that will reverse some of that currency gain on fixed costs and also to what extent that is anyway captured by your sensitivities. Also, how you have calculated then the split between the 34,000,000 fixed cost impact and the currency impact of 25,000,000 in your bridge for this quarter year on year?

And finally, a question on the sensitivity. If you have adjusted down your European gas price sensitivities by 25% and also increased The US sensitivities by 25%, That seems like the loss given the decrease in even taken into the time to be decrease in your consumption of European gas. So I’m just wondering if there is something something else going on as well. Thank you.

Magnus, CFO/Strategy and Corporate Development, Yara: Yeah. No. I think I can answer a bit in general terms, and then I’ll refer to Maria for some of the sensitivities. Vicente can answer those. But I think on the fixed cost, I mean, I mean, obviously, we have significant fixed cost in euros, Norwegian kroner, and and and reais, and of course, some other currencies.

So so fixed cost will and and then, of course, our online business is in in in US dollar, and that’s what we report. So so fixed cost will always be impacted by by currency shift that that that’s kind of out of our control and and hence with some of the previous answer that our our aim is the cost reduction irrespective of of the currency changes we want underlying cost cost reduction. As it pertains to the gas price, specifically, we haven’t had, you know, normal production years and years for for the last couple of years. So so that’s also impacting a bit the the changes that we now updated. And and and and, obviously, with with a more stable production, we also achieve higher energy and gas efficiency in our in our plant, which is impacting as well.

But, Maria, do you wanna say something more about the the sensitivities? Yeah.

Maria Gabrielsson, Head of Investor Relations, Yara: It’s mostly reflecting that that we have a 2024 more normal production year. So it’s easier to see the the true effects of all the energy efficiency impact we have, and then that reduces to more normal European gas consumption level, basically. For the currency effect, I just want to say that if you look at last twelve months fixed cost for the $50,000,000 currency impact, then that includes currency from the second quarter twenty four when we launched the program to one two twenty five. If you look at the bridge in the EBITDA bridge for the quarter result, it’s from 01/2024 to 01/2025. But you’re right.

If the dollar depreciates, it will move the other way, of course, so that can reverse partly as we move the cost here depending on how it materializes.

Sven Kuden Horseti, CEO, Yara: And just just that I I would encourage also looking at the slide that Magnus told in the in the quarterly presentation when it comes to ammonia production in in in Europe versus finished goods production and and how we’re optimizing that to to to to also reduce ammonia production in Europe and how we can flex that with imports as well as that also impacts the sensitivities. That’s where we stand right right now. So that’s the ultimate factor that we need to take into into account.

Analyst: Thank you.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of Lisa Denis of Morgan Stanley. Your line is now open. Hi. Thank you for taking my questions. I I have two left.

So the first one, we discussed The US and European market dynamics, but it would be very helpful to sort of see or or get some insight on what you’re seeing in the

Angelina Guizhouka, Analyst, JPMorgan: Brazilian markets because farmers are

Maria Gabrielsson, Head of Investor Relations, Yara: bit with with credit tightness and and mixed farmer economics. But on the other side, they do may face a better setup if if China US tariff tensions persist. So any insight there, that will be great. And the second one is I would like to come back to Aaron’s question on Chinese urea exports. Do you have any insights on whether urea production has been running as normal for the period where China was not exporting any product, at least not for agricultural purposes.

And therefore, they have been building quite mature inventories and especially so because we know that domestic demand hasn’t fundamentally changed in the last two years. So any insights on that would be great as well. Thank you.

Sven Kuden Horseti, CEO, Yara: Yeah. I think on the Brazilian market, I have not observed any kind of major developments that are not normal or anything. They have been a little bit more careful on the import front starting the calendar year, which is a bit of hard hit to pricing given particularly where nitrogen and phosphate prices have developed, become quite expensive. So so they are down on where urea imports and and fairly slow. But I think, as you say, I mean, it’s fundamentally a strong market for the agricultural products.

So it’s not only you it means yeah. You mentioned soybeans related to the China issue, corn, it’s not bad. Coffee, sugar, there’s a lot of strong strong segments there. So we have not seen anything other than fairly normal development. Although, like I said, a little bit more careful on the sourcing, I think, perhaps for free buying for the it’s for for for the next season starting in the third quarter.

On the China situation, the China urea production is still increasing year over year as it has been over the last few years, but consumption is also increasing. We think it was a double digit consumption growth last year. I don’t think that’s stable. That has increased in parallel with the with ambitions and signals from the government to boost the the food production in China. So that is a sort of that’s an open question of who ended the ended with their are they in then right now?

And I think that’s what many people are asking themselves to what extent the supply increase they see has ended up in inventory versus on the field. So that is that is something I think that’s not where we did we don’t have the answer and others are also trying to kind of get some more information around that. Because as as you hint that it would probably be quite important for what kind of forward this will be be resulting now following the main season.

Maria Gabrielsson, Head of Investor Relations, Yara: Thank very much. Your next question comes from the line of Dave David Simmons of BNP. Your line is now open.

Sven Kuden Horseti, CEO, Yara: Thank you very much for taking this. I just wanted to come back on some

Magnus, CFO/Strategy and Corporate Development, Yara: of your prepared remarks around the flexibility of your European ammonia supply, helping you to mitigate potential future carbon costs. Do I understand that That means that you’d be willing to buy somebody else’s blue ammonia to feed into European plants and sacrifice the premium, or is that just a reference to being able to import your own blue ammonia from The US if you take out a deal on that project? Thanks. I think it’s all of the above. I mean, first of first of all, of course, it means that with I mean, when it comes to our production in Europe, we will, with our TPS project in Kurskim, avoid EPS on on more than 800,000 tons of of CO two.

So that in itself is is a significant amount and and and also keeping in mind that we, of course, today have significant additional c o two volumes as well that are ready for capture. So I think so that is is is sort of the main impact impact of that. I think when it comes to ammonia sourcing today, already, I mean, we have flexibility in the sense that roughly 70% of our ammonia consumption is on produced and and 30% is sourced in the market. And that’s a split we like very well and, you know, something that we want to see in the future as well. And and this is, of course, the rationale why we’re seeking equity exposure in in the ammonia projects through in The US through our through our ammonia projects.

So so so clearly, I mean, there is a I mean, we believe that there will be a a premium as you as you alluded to for a low carbon ammonia in in Europe in in in the future. It will be reflected in in in pricing as well. And and I think that’s I mean, that’s the rationale behind why why we’re looking at at those investments. Understood. Maybe I could ask for a follow-up on that.

It’s the thinking that I I guess the fact that you can expect the premium of the ammonia by the time you cannot fully expect that for jets that you you still expect the marginal ton of ammonia supply to Europe to be great. How close are we, given all the projects that’s been announced and the fact that European carbon price is the highest in the world, and therefore, that the ammonia is likely to enter Europe to this kind of destination. How close are we to a situation where the marginal kind of Europe is actually through ammonia by 2034? I I think I missed part of your question and and including the the the year you mentioned, but but but I think I mean, obviously, that depends on how many projects actually develop in the end, which I think is is also highly dependent on, you know, to what extent these projects can can get firm off they can demand prior to their investment decisions. So that’s I mean, that that that remains to be to be seen.

And as you know, that’s been relatively few actual FIDs so far. And then also, we sort of go back to, you know, the way we’ll I’m only real projects that were announced in 2012 and 2013 as we know, only a only a fraction of those actually came into fruition in in the end. And and, of course, the other part of of that is the demand side and particularly as we sort of move into the well, into the twenty thirties and and and beyond. And, of course, you have potential new demand from Asia and which needs to be even sooner. But, of course, also from from shipping, but also from other decarbonization efforts in in in the rest of the world in in addition to Europe.

Of course, there is I mean, obviously, the ammonia tons the ammonia tons or or or the carbonated ammonia tons that are there will, of course, they largely can seek towards Europe. And and, of course, at at some point, you know, you could you could see that almost all the ammonia into Europe will be decarbonized and and Gray will no longer be marginal. But I think we also need to keep in mind that there is significant ammonia production in Europe today. And and I think, you know, so that will require quite quite significant amount as well.

Sven Kuden Horseti, CEO, Yara: Understood. Thank you very much.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of Tristan Lumoff of Deutsche Bank. Your line is now open.

Sven Kuden Horseti, CEO, Yara: Hi. Thanks for taking my questions. I’ve got three, please. The first is on market share. Just a bit confused in the comments on market share gains.

You alluded it related to the change in costs in your earlier response. So are you dropping your prices to undercut competitors? Or is there another dynamic here as well? I think you also alluded to, which is maybe with decreased volatility, there’s an ability for the Salesforce to focus more now. Or is it really just actually the case that it’s quite difficult to definitively state why you’ve gained market share?

That’s the first question. Second is on blue blue ammonia and CF Industries recent announcements around the project. Looking at the project cost, I think they’re quite a bit higher than you alluded to in your CMD. So are you seeing kind of 50% plus cost inflation versus the numbers you quoted initially for those two blue ammonia projects? And also, does the CF project increase the pressure to make a decision yourself?

And the the third question is just theoretically without decarbonizing at all, what would the cost headwinds at a group level be if you can’t source any decarbonized ammonia when the carbon allowances run out? Would this be in the hundreds of millions? And on the other side, do you think that European farmers can actually absorb price increases given where profitability is? Thank you. Yeah.

Thank you. On the market share part, we

Magnus, CFO/Strategy and Corporate Development, Yara: we we didn’t allude to any any cost or or investment in pricing or or anything like that. Think When it when it when it when it said was that one one key contributor has has been the fact that we’ve been able to keep production running throughout, you know, throughout q four and and and q one, which is, of course, the change from the volatility that we’ve seen in in in previous years. And then, of course, also, as as you alluded to that reduction of volatility has, of course, made it possible for us to to focus more. That’s that’s, of course, there. But but I think at the end of the day, I mean, our our our commercial force has worked very, very diligently in the market all along.

But, of course, their job is a bit easier when there’s more stability around production in our system, obviously. So I think that’s that’s that’s the main reason for for the increases that we’ve that we’ve seen. And and, of course, it’s our aim to always be the most competitive around around production production assets as we as we should be. I think when it comes to CS and and their announcement, we we don’t typically comment on other company’s projects or or investment decisions. I think, you know, we have many times in the past developed new projects at the same time as others have made investment decisions as well.

Freeport, as an example, back in 2015 is a is, you is is an example of that. And we make our decision based on our independent assessment of what we think, you know, the project viability is, which depends on everything from from CapEx to supply demand, price expectations for the future, and and and so on. I think in terms of of CapEx, we don’t have any further updates based on what we’ve said in addition to what we’ve said earlier in in terms of how much we we sort of the direction they said that we thought that we could spend or would spend. But other than that, we don’t have any updates on on the CapEx that’s missed. Of course, we we monitor any development there, inflation and so on very, very carefully.

Maria Gabrielsson, Head of Investor Relations, Yara: Final question on the second. I can start it. Yeah. In today, if you assume the production we have of ammonia in Europe today, we need roughly 7,000,000 tons of EETS for this per year. So you can do a cost calculation based on your assumed CO2 price.

But I think more importantly, what happens to the European urea price once this gets implemented. Right? It’s we think you really will be the marginal nitrogen project in Europe setting the price. And we since you cannot decarbonize urea, that will increase carbon cost elements in it above what we would pay a cost and carbon cost for our

Sven Kuden Horseti, CEO, Yara: products. So so keep in mind that we we have an a huge advantage here where the setup that we have with nitrates the production and the ability to bring in ammonia as well, and a very large player in the ammonia state already, and we represent significant potential and and captive demand as as well. So so so we have several competitive advantages regardless of of the solutions we we we go for and we go for here.

Magnus, CFO/Strategy and Corporate Development, Yara: And and I think maybe maybe maybe that was one final point of that is, of course, that when it comes to ammonia imports and and ammonia pricing, that that, of course, will be reflected in the market and market pricing as as well. So so from that perspective, I mean, with that with our flexibility, I think and in terms of our ability to generate up upgrading margins above the mine ammonia and premiums above ammonia, I think we are very good position on that even in the future.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of John Campbell of Bank of America. Your line is now open.

Sven Kuden Horseti, CEO, Yara: Hi. Thank you for taking my question. I wanted to continue this discussion on the topic of blue ammonia. I’d be interested if you can shed any light on Japan’s ambitions to do 20% coal fire blue ammonia against coal plant. But at least in August sorry, January 2023, you signed up a memorandum of understanding with Jira, one of utilities.

I’d be particularly interested on how this technology compares in terms of cost per megawatt hour produced and emissions of c o two per megawatt hour versus, say, example, incremental gas fired generation using imported LNG. Perhaps if you can give any detail with your update on Japan’s plan CFD subsidy scheme for imported blue ammonia, and any words or comments you can make on The US Forty Five b or 45 q production tax credits. When do you expect to have full clarity on the status? That would be very helpful. Thanks.

Magnus, CFO/Strategy and Corporate Development, Yara: Yeah. I think I think when it comes to the specific energy efficiency for Meggodar compared to LNG and so on, we don’t I don’t have that data specifically in front of me. I think when it comes to Japan in general and and and the subsidies,

Analyst: I mean, they

Magnus, CFO/Strategy and Corporate Development, Yara: are out tendering both I mean, both tendering and taking in input on on potential supply options. And our what we heard is is that, you know, during this year, they will officially launch the subsidy scheme that they’re looking into. So so from from what we can see, I mean, their their commitment and and willingness to continue with their money co firing program remains remains strong. And then we’re awaiting, of course, news from from from that end.

Sven Kuden Horseti, CEO, Yara: And and on on this, it’s also important to to to to to look into the the ability to use existing infrastructure, which coal firing allows to be done both in Japan and other parts of the of the world as well. I mean, we we need not only one solution, but several solutions here in order to to solve the energy transition in Asia and across the world. So this is one of these elements and and where there’s continued a lot of activities, in in particular, in in in Japan, but that could be of track with other parts of Asia as they develop it first.

Magnus, CFO/Strategy and Corporate Development, Yara: And on the regulatory side, I think as it as it pertains to 45 q, there there is clarity in the sense that 45 q I mean, the second forty five q in the in the internal revenue code exists today and has existed for for many, many years. So that’s, I mean, implemented and, I mean, companies are are claiming tax credits for CO two capture over today and have have done for a long time. So so so that in itself is I mean, there’s there’s therapy around that now. Whether there will be any changes to that is, of course, I mean, an unclear question per se. We don’t know what what kind of changes the administrations have in mind.

But what we do know is that there is strong bipartisan support for for forty five q in particular. It’s there’s significant benefits to to several states and, you know, both Democratic but also Republican led led states. And an indication so far is is that that that score is is strong. And then, of course, we’ll see, and this is a key thing, of course, that we’re we’re also paying close attention to over the next year, what kind of developments that will come and what kind of intentions the new administration have in terms of 45 q.

Sven Kuden Horseti, CEO, Yara: Great. Thank you for taking my question.

Maria Gabrielsson, Head of Investor Relations, Yara: Your next question comes from the line of Hans Erik Jacobsen of Nordea. Your line is now open.

Sven Kuden Horseti, CEO, Yara: Thank you, and good afternoon. I have another question on the the market share. Several of competitors have closed quite a bit of capacity over the past couple of years. To what extent has this impacted your ability to raise the market share as we saw in the first quarter? And even have the impact that is this a sustainable development?

In other words, could we see your market share increase in Europe for the long term? And also, if you could comment on the market share in European market that Russia has gained from the increased exposure, I would appreciate it. Thank you. Yeah. Hi, Anthony.

I think I think the main point is what Magnus and or I had said already that for us, I mean, the the the key competitor is imports. So we we run our we run our plans that almost exclusively all PP production that we own produced products that we sell in Europe. It’s a matter of selling what we produce, basically, and then you get a certain market share Actually, lower than higher the market is. So that that is the key driver here, but your comment on the rest of the industry is actually correct that we have now almost kind of returned to a level that we had before the energy prices and the war hit.

But the rest of the industry has not done that for very substructural downward shift in nitrogen production in Europe. So that which is likely to be sustained. So they will actually let’s say, if you if you have to have Yara now, it’s close to where it should be or based on our assets. Then so similarly with imports in a way and and to your on the market share growth, all the questions that have come on that, I think most of the market share gain has been against imports, but from Moscow versus versus the rest of the industry in Europe. Yeah.

Magnus, CFO/Strategy and Corporate Development, Yara: No. And and I think just just to add to that, I mean I mean, obviously, it’s also a question of of strong commercial performance from our team. But but also, I would say, you know, important to highlight the strength of the portfolio that we have and the flexibility that we have on the ammonia side, which, of course, is important for finished fertilizer production output side. And that’s and that’s as you point to, I mean, there has been curtailments in Europe even even in this season, but but we have not curtailed. But what we have done over the last, you know, last year, given all, you know, all the volatility and all the challenges in European European market is that we have adjusted our portfolio.

And and even though, of course, our efforts continue in in in that field, we have achieved, I would say, a stronger portfolio now than than what we had before. And and and that also contributes to to to sort of returning to a more normal situation when it comes to market share.

Sven Kuden Horseti, CEO, Yara: Great. Thank you very much.

Maria Gabrielsson, Head of Investor Relations, Yara: Your final question comes from the line of Thomas Werner of S and P. Your line is now open.

Sven Kuden Horseti, CEO, Yara: Thank you very much indeed. I really appreciate all of your time and insights today. I’ve got a question coming from a colleague of

Magnus, CFO/Strategy and Corporate Development, Yara: mine specifically about green ammonia. He’s very interested in how you see European demand for green ammonia through to 2030. And as a little bit of a follow-up, what plans you have to meet that demand yourselves, whether or not you’d be

Sven Kuden Horseti, CEO, Yara: importing or getting it from somewhere or making it? Thank you. Yeah. No. I think I think I assume

Magnus, CFO/Strategy and Corporate Development, Yara: that I mean, for green ammonia, I assume we mean our SMBO compliance ammonia. I think, as you may know, we have we have developed our own pilot project in in our plant in Portugal. It is now running fully, which is, of course, is a is a small contributor of 20,000 tons of of green ammonia. But, of course, that’s given us significant both in technical insights and and market insights in into that field. As you may have seen, we’ve also entered into some collaborations on green ammonia uptake from from producers in in in The Middle East, among specifically, which which we have announced.

And then we are exploring portfolio of of other uptake opportunities worldwide that we sort of evaluate and match up to the demand we see for that in in in Europe. We don’t have we don’t have a specific target for our FNBL ammonia ecosystem per se.

Sven Kuden Horseti, CEO, Yara: Okay. Alright. Well, thank you very much.

Maria Gabrielsson, Head of Investor Relations, Yara: I’d now like to hand the call back over to Maria Deb Wilson. Please go ahead. Just like to thank you for all the questions and for participating in today’s call and wishing you a nice day. Bye. Thank you for attending today’s conference call.

You may now disconnect. Goodbye.

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