Annual Report 2019 Crop Nutrition Company for the Future Contents 02 CEO Message About the Report 07 Strategy Review This is Yara International ASA's 2019 Annual Report. It represents Yara’s 08 How we create value first step in integrated reporting, 10 Global Megatrends building on the guiding principles set 12 Our Strategy out in the International <IR> 14 Strategic Priorities Framework from the International 22 Managing outcomes and value creation Integrated Report Council (IIRC). The 24 Engaging with stakeholder report outlines Yara's business model 25 Topics material for our value creation and strategy, describes how we create value, and documents our 29 Performance Review financial, environmental and social 30 Environmental performance performance in 2019. 32 Social performance More on integrated reporting in the 34 Financial performance inside cover in the back of the report. 40 The Yara Share 43 Risk Management 44 Risk Management 46 Risk Appetite 48 Risk Factors 54 Corporate Governance 55 Corporate Governance 66 Board of Directors 70 Executive Management 72 Directors’ Report 85 Financial statements 86 Consolidated Financial Statements 168 Financial Statement for Yara International ASA 190 Auditor's Report About Yara 241 million people fed Yara grows knowledge to responsibly feed the world and protect the planet. Our target is to help feed Supporting our vision of a world without hunger, we pursue a strategy more than 275 million of sustainable value growth, people by 2025. promoting climate-friendly and high- yielding crop nutrition solutions for the world’s farming community and food industry. 6.6% return on invested capital Yara’s ambition is to be the Crop Nutrition Company for the Future. We are committed to creating value We aim to achieve a for our customers, shareholders, and ROIC above 10% society at large, as we work toward through the cycle. Mid- establishing a more sustainable food cycle value chain. To achieve our ambition, we have taken the lead in developing digital farming tools for precision Total Recordable farming, and work closely with Injuries rate: 1.4 partners throughout the food value chain to improve the efficiency and sustainability of agriculture and food We strive for zero production. accidents and a TRI rate below 1.2 by 2025. Founded in 1905 to solve the emerging famine in Europe, Yara has established a unique position as the industry’s only global crop nutrition company. With our integrated business model and a worldwide presence of around 16,000 employees and operations in over 60 countries, we offer a proven track record of responsible and reliable returns. In 2019, Yara reported revenues of USD 12.9 billion. How we performed 2019 2018 Financial performance Revenue and other Income USD million 12,936 13,054 Operating income USD million 989 402 EBITDA 1) USD million 2,095 1,523 Net income after non-controlling interests USD million 599 159 Investments 2) USD million 1,134 2,080 Debt/Equity ratio 3) 0.42 0.43 Net cash flow from operations USD million 1,907 756 Basic earnings per share 4) USD 2,20 0.58 Social performance Engagement rate Percent 75 NA TRI rates 5) Per million hours worked 1.4 1.4 Environmental performance GHG intensity 6) 7) GHG / tonne produced 3.0 3.0 Energy use 6) Petajoules 285 301 1) EBITDA, as defined by Yara, includes operating income, interest income, other financial income and share of net income in equity-accounted investees. It excludes depreciation, amortization and impairment loss, as well as amortization of excess values in equity-accounted investees. 2) Investment in property, plant and equipment, long-term securities, intangibles, long-term advances and investments in non-consolidated investees. 3) Net interest-bearing debt divided by shareholders’ equity plus non- controlling interests. 4) Yara currently has no share- based compensation program that results in a dilutive effect on earnings per share. 5) TRI: Number of Total Recordable Injuries per million hours worked, contractors included. 6) Including new acquisitions, Babrala, India and Cubatão, Brazil. 7) The GHG intensity indicator covers scope 1, 2 and parts of scope 3 emissions from suppliers, but does not represent a complete carbon footprint. Measured against tonnes nitrogen in Yara's products. 1) Countries with sales Yara Plants 2) Smaller sites Head office Phosphate mines Joint ventures Sales offices and R&D sites Digital Hub 1) More than 10,800 Yara-branded retail outlets around the world 2) Yara operated terminals and logistical production sites Yara Annual report 2019 Theme H Global presence Yara is the industry’s most global player. We combine production of premium products with a farmer-centric approach, turning a century of agronomic knowledge into value for millions of farmers around the globe. 60 160 28 200 10,800 Operation in more Sales to about 28 production More than 200 terminals, Yara-branded retail outlets than 60 countries 160 countries plants warehouses, blending plants around the world and bagging facilities 2 CEO message Yara Annual report 2019 A defining year for the food industry 2019 was the year that agriculture reached the top of the world agenda. It is no exaggera- tion to say that we will not be able to solve the climate emergency and meet the Paris Agreement, unless we are able to fix the broken food system. This means that we have to produce enough food with lower carbon emissions and with less waste. Yara will play a key role in doing so, and we are taking significant steps to deliver on our strategic targets. On track, but still not there ever-stronger base to capture the growth model is outdated. Growth 2019 can be summarized as a year value creating opportunities ahead. has expanded beyond what natural where Yara materially improved its systems can sustain and we are now performance, but where there is still a The challenges might seem facing a climate emergency. The global lot to be done. Coming out of a large overwhelming, but we are reduction in emissions is not at the investment program and challenging already responding to them: right trajectory and we also see severe markets, we improved our capital • Agriculture accounts for 23 percent loss of biodiversity. The fact is that 1) performance throughout the year, of the global CO2 emissions - our cheap food has come at a high price. expanded our improvement program, contribution is complete solutions demonstrated the resilience of our dis- to optimize yields on existing In August 2019, the IPCC launched tribution business in Sales & Market- farmland, to prevent deforestation their special report Climate Change ing and established a new capital allo- • Agriculture is responsible for 70 and Land and in September, the Food cation policy and initiated shareholder percent of freshwater usage – our and Land Use Coalition (FOLU) pub- distributions of more than USD 0.75 contributions are precision farming lished its Growing Better report. Both billion since the start of 2019, equal to tools and fertigation products that reports put agriculture at the center an average dividend yield of approx- provide more crop per drop of what must be done to transform imately 4% per year. In addition, we • 1/3 of all food is wasted – our contri- how we produce and consume food. are expanding our innovative growth butions are crop nutrition solutions within digital solutions where we have that increase quality and shelf-life Cause for realistic optimism already reached the 2020 goal of 10 • More than 800 million people go The FOLU report put forward some million hectare under management. hungry to bed every night – our astonishing – and worrying – numbers: Two other important positives are the contribution is to support farmers the total market value of the global continued reduction and best-in-class to increase their yields and profits, food system is USD 10 trillion (2018 performance on safety, with a TRI and helping them to produce enough prices). However, the hidden cost is rate of 1.4, and our systematic work food for a growing population USD 12 trillion. These costs relate to improve on diversity and inclusion. • Approximately 2 billion people are to health, environment, food waste undernourished while 2 billion suffer and rural welfare. From a societal However, there is still a lot to be done. from obesity related diseases – our point of view, this means that the A return on invested capital (ROIC) contributions are solutions for nutri- food system is destroying value. at 6.6% is below the target of +10% tious food, including micronutrients through the cycle. This is a main to adjust for nutrient deficiencies, A main reason for this is that there concern for me, but we know the steps and leading the way in transforming are no incentives in place for farmers that need to be taken to achieve the to a more just food system through to produce in a more environmen- target – and we are taking those steps. partnerships and innovation tally friendly way. We know that sustainable farming practices leads to Cheap food at a high price For decades, the growth in yields increased costs at the farm, but the As a company, we must balance has provided more food and reduced farmer isn’t compensated for this. the short-term with the long-term, the number of people starving meaning tackling the challenges by hundreds of millions. Today, Basically, we are asking the farmer in front of us while building an however, we see that the traditional to pay the price for climate change, 1) including forestry and land use change Yara Annual report 2019 CEO message 3 CEO message Our knowledge improves production returns Yara Improvement Program has identified opportunities for improving turnarounds and reliability performance.