Annual report 2018 Yara grows knowledge to responsibly feed the world and protect the planet, to fulfill our vision of a collaborative society, a world without hunger and a planet respected. To meet these commitments, we have taken the lead in developing digital farming tools for precision farming and work closely with partners throughout the whole food value chain to develop more climate-friendly crop nutrition solutions. In addition, we are committed to working towards sustainable mineral fertilizer production. We foster an open culture of diversity and inclusion that promotes the safety and integrity of our employees, contractors, business partners, and society at large. Founded in 1905 to solve the emerging famine in Europe, Yara has a worldwide presence with about 17,000 employees and operations in over 60 countries. In 2018, Yara reported revenues of USD 12.9 billion. www.yara.com We make a difference Our Mission Our Values Our mission is to responsibly feed the We believe knowledge grows and has the power world and protect the planet. to create positive global change. It defines our company’s purpose and role in Knowledge helps feed the world, creates the world and is balanced between two core profitable businesses, and protects the planet ideas. Feeding the world embodies knowledge, at a time when the population is expanding and economic empowerment as well as new, resources are becoming increasingly scarce. innovative ideas. Protecting the planet represents our commitment to sustainable agricultural In order to turn our mission and vision into a practices and reducing our carbon footprint. At reality, our values are a reflection of our belief that Yara, we believe that success can be celebrated our actions can grow knowledge to change the only when it is achieved in the right way. world: Ambition, Curiosity, Collaboration and Accountability Our Vision Our Actions A collaborative society; a world without At Yara, we have our sights firmly set on hunger; a planet respected. developing the next generation of sustainable crop nutrition solutions that meet the Our founders faced and overcame the challenges of our time and beyond. greatest food challenge of their time. Through curiosity and collaboration, they combined We are actively advancing our and grew their knowledge to help save the operational excellence to develop a lives of millions of people during the European culture of continuous improvement and famine that swept over the continent in improve our production efficiency. the early part of the 20th century. In line with our farmer centric strategy, we are Our vision for the world is based on ensuring developing scalable solutions, such as digital a sustainable future and a collaborative farming tools, that can be applied and customized community that overcomes cultural, around the world to all types and sizes of farmers. environmental and economic barriers to create solutions that lead to a world free We are driving innovative solutions from hunger and environmental impact. within existing and new business areas, spearheaded by investments in green ammonia production and Circular Economy. Where we are As the industry’s only global player, we have production facilities on six continents, operations in more than 60 countries – and sales to about 160 countries. Countries with sales Head office Sales offices and R&D sites Yara Plants Phosphate mines 1) Yara operated terminals and logistical production sites Smaller sites 1) Joint ventures 2018 numbers Employees by region Sales by product Revenues by region Share of employees Share of sales volume (thousand tonnes) Share of revenues (USD billion) Europe , % Fertilizer , % Europe , % Brazil , % Industrial products , % Brazil , % Latin-America , % Ammonia trade , % Latin-America , % Asia & Oceania , % Asia & Oceania , % North-America % North-America , % Africa % Africa % Number of employees 1) Total sales Revenues 16,757 Globally 38.6 Million tonnes 12.9 USD billion 1) Includes permanent, temporary, interns and apprentices. 1 Annual report 2018 Content Introduction 04 Performance overview 06 CEO message 09 Segment introduction 10 A story about a coffee farmer from Colombia Chapter 01 12 Report of the Board of Directors Chapter 02 27 Governance and risk management Chapter 03 49 Financial review Financial statements 60 Consolidated financial statements 140 Financial statements for Yara International ASA 2 Performance overview Yara Annual report 2018 How we performed in 2018 2018 2017 Financial performance Revenue and other Income USD million 13,054 11,400 Operating income USD million 402 457 EBITDA 1) USD million 1,523 1,348 Net income after non-controlling interests USD million 159 477 Investments 2) USD million 2,080 1,505 Debt/Equity ratio 3) 0.43 0.25 Net cash flow from operations USD million 756 791 CROGI 4) % 7.3 7.0 ROCE 5) % 3.7 4.0 Basic earnings per share 6) USD 0.58 1.75 Total Equity USD million 8,910 9,505 Share price on OSE NOK at year-end 333.50 376.70 Social performance Employees 7) Number at year-end 16,757 15,527 TRI rates 8) Per million hours worked 1.4 1.8 Environmental performance GHG emissions 9) Million tonnes CO₂ eq. 16.6 15.1 Energy use 9) Petajoules 301 266 1) EBITDA, as defined by Yara, includes operating income, interest income, other 4) CROGI: Cash Return on Gross Investment (12 month rolling average). financial income and share of net income in equity-accounted investees. It 5) ROCE: Return On Capital Employed (12 month rolling average). excludes depreciation, amortization and impairment loss, as well as amortization of excess values in equity-accounted investees. 6) Yara currently has no share-based compensation program that results in a dilutive effect on earnings per share. 2) Investment in property, plant and equipment, long-term securities, intangibles, long-term advances and investments in non-consolidated investees. 7) Includes permanent, temporary, interns and apprentices. 3) Net interest-bearing debt divided by shareholders’ equity plus non-controlling 8) TRI: Number of Total Recordable Injuries per million hours worked, contractors interests. included. 9) Including new acquisitions, Babrala, India and Cubatão, Brazil. Crop nutrition Industrial Production Deliveries Deliveries Production 28,471 million tonnes 7,653 million tonnes 30,193 million tonnes (increase of 4% compared with 2017) (increase of 9% compared to 2017) (increase of 9% compared to 2017) EBITDA EBITDA EBITDA 544 USD million 247 USD million 792 USD million Yara changed its operating segments effective from 1 January 2019. The financial reporting in this annual report is based on the segment structure that was effective until end of 2018. More information about the new structure is provided on page 9. Yara Annual report 2018 Performance overview 3 Yara’s strategy Over the past year, we have rigorously Through it, we will respond to the in the whole organization and entails examined the internal and external challenges facing our industry and our a clear commitment to sustainability aspects of our business. We have planet, bringing our Mission, Vision through everything we do. analyzed where we create the most and Values to life. Our ambition is to value, where we are most challenged, be the Crop Nutrition Company for In addition to our Mission, Vision and the global trends that will shape the Future. Throughout our history, and Values, the strategy is based our industry in the long-term. For more we have transformed the lives of on four unique strengths we have than a hundred years, we have created millions of people through our global identified, which differentiate value by sharing knowledge. For Yara scale and integrated business model. us from our competitors: to continue to grow, we must answer new challenges with new thinking. The strategy will help us deliver on our mission to “Responsibly feed the Our new corporate strategy will guide world and protect the planet”. This our growth for the years to come. has been recognized and embraced Knowledge network Responsible business Unrivaled understanding of crop Uniquely positioned to develop business solu- nutrition and farming, allowing us to tions that contribute to solving major global sell premium products. challenges. Global presence Passionate people Unrivaled worldwide network, allowing All of us working at Yara are dedicated us to optimize production and distribution to the same purpose, driving both to match market conditions. innovation, productivity and profitability. 4 Performance overview Yara Annual report 2018 Three strategic priorities going forward Advance operational Create scalable Drive innovative excellence solutions growth We will build on Yara’s strong culture We will continuously develop and renew To be the Crop Nutrition Company and commitment to excellence to innovative and sustainable solutions. for the Future, we will continuously continuously improve how we work. To As consumer preferences shift towards evaluate value-creating opportunities for compete in the challenging markets of sustainable and ethically produced food, M&A and new builds. Our approach the future, Yara must reduce complexity food companies are requiring farmers will be more targeted than earlier, focus- and improve the sustainability of our to meet stricter quality and traceability ing on strengthening premium positions, practices to lower our carbon footprint. standards. Yara is uniquely positioned moving down the cost curve, and secur- We must also continue the work to drive this transition to