Yara International's (YARIY) CEO Svein Tore Holsether on Q4 2015 Results - Earnings Call Transcript

| About: Yara International (YARIY)

Yara International ASA (OTCPK:YARIY) Q4 2015 Earnings Conference Call February 11, 2016 3:30 AM ET

Executives

Thor Giaever - Head of IR

Svein Tore Holsether - President and CEO

Torgeir Kvidal - SVP and CFO

Dag Tore Mo - Head of Market Intelligence

Analysts

Thomas Lorck - Arctic Securities

Eivind Sars Veddeng - DNB Markets

Eirik Melle - Danske Bank

Anne Gjoen - Handelsbanken

Bengt Jonassen - Carnegie

Thor Giaever

Good morning and welcome to the presentation of Yara's Fourth Quarter 2015 Financial Results. Today's presentation will be by our CEO, Svein Tore Holsether; and our CFO, Torgeir Kvidal. After the presentation, we will have a Q&A session.

With that it's my pleasure to introduce Yara's CEO, Svein Tore Holsether.

Svein Tore Holsether

Thank you, Thor and good morning to all of you. It's been an eventful recent months both in the fertilizer market and not least inside Yara. You have no doubt seen several recent announcements reflecting, firstly, that we've had a challenging quarter both market wise and operationally.

But we also made positive steps forward in terms of developing our organization to strengthen our operations and sharpen our strategic focus and alignment. Having spent a lot of time visiting and learning about the organization and now recently concluding on the necessary organizational changes, I'm every bit as excited about the prospects for this Company. But let's start with the results and the market outlook and then I'll make some comments towards the end of the presentation on the recent organizational changes. Safety remains at the top of Yara's agenda. I am informed about each and every one of our accidents and all near-misses.

Incident rates are important to me and I monitor these closely. We have seen an improvement in our TRI rate during the quarter, moving from a 12 month moving average of 3.7 at the end of the third quarter to 3.4 now at the end of this year. This is a result of the relentless work on improving safety through our way of working Safe by Choice.

However, all accidents can be avoided and we will continue to strengthen our safety culture, with the ultimate goal of reaching zero accidents. In 2016 we will bring in OFD and Galvani into our statistics and this will increase our TRI rate based on their current performance. But we already see a clear positive development as we implement Yara safety standards. As we've seen also in all our recent acquisitions, such as the one of Bunge. An example of this is that Yara's annual safety award went to our operations in Brazil both in 2015 and in 2014. Operational excellence and safety performance go hand-in-hand and it's, therefore, a good example of synergies that Yara can typically realize through integrations.

Yara delivered a weaker fourth quarter result compared with a year earlier. The CROGI, excluding special items, was at 9% for the quarter in isolation and 12.2% for the year in full. The lower result reflects both tougher market environment and declining prices but also unsatisfactory operational performance, with significant downtime in several of our plants.

However, I am pleased to see continued growth in Brazil, especially for premium product deliveries, as well as another strong result from our industrial segment, with a CROGI of 18% for the quarter. As announced earlier, we have asset impairments in the quarter, mainly in Trinidad and Montoir, two of our smallest plants, where profitability is impacted by the tougher market environment. Both plants are continuing to operate, but with rather slim margins. The impact of the impairment of these two plants was 926 million in the quarter and the total impairment in the quarter amounted to NOK1.15 billion and Torgeir will cover this in more detail later on.

For the quarter Yara's underlying results were down significantly compared with the last year due to both market and operational reasons, as I already mentioned. In addition, reported earnings were impacted by the impairments of a total of NOK1.15 billion, partially offset by NOK362 million in foreign exchange gain.

Now to some brief comments, on the fertilizer market developments. Global nitrogen fertilizer prices have continued to be strongly influenced by China. This is the biggest producer and exporter of urea. So far this season we have seen higher production and lower export prices from China due to lower coal prices and a weaker currency.

In addition, we see increased export capacity in Iran and Egypt, and from new plants in the U.S., Algeria and Saudi Arabia, which in total have contributed to lower nitrogen prices compared to a year earlier. Both European and U.S. season to date nitrogen industry deliveries were lower than a year ago by 5% and 4% respectively. But in the context of a longer timeline deliveries were close to normal level compared with earlier seasons. In Europe lower deliveries primarily reflected lower domestic production while in the U.S. the decline was mainly due to lower imports.

Yara's production of finished products and ammonia was respectively 4% and 1% lower than a year ago, after adjusting for portfolio changes, the Galvani acquisition and the sale of GrowHow UK. The Pilbara plant in Western Australia was down for the most of the quarter, accounting for more than half of the unplanned ammonia production losses in the quarter. In addition, there were longer-than-planned stops in Belle Plaine in Canada and in Ferrara in Italy. The operational performance for our ammonia plants in particular was clearly below an acceptable level in the quarter. So while I'm happy to report that our production system today is back at full production, but we're working hard to learn from the various incidents that caused these unplanned stops. And I should add that we have also seen examples of operational excellence in the quarter where, for instance, at Sluiskil we have seen production at record level. But in total our production was weak for the quarter. Strengthening the operational performance is a key for Yara going forward.

While urea and nitrate production was also impacted by turnarounds, it was down 10% and 5% respectively. NPK and calcium nitrate production was up 4% and 18% respectively, in both cases mainly due to the production in the Porsgrunn plant. While own produced premium product deliveries were down in Europe due to lower nitrate sales, sales continued to increase outside Europe where cash-crop growers see even stronger benefits from switching to higher-efficiency fertilizers. Brazil accounted for the biggest increase, up almost 30%.

In Asia sales were lower, mainly in China, due a combination of phasing -- we had higher sales for the year in total but we had the bulk of that before September 1st, with the introduction of new VAT regulations and also we've had business-model changes, with more direct sales in China, which is something that we, a similar change to what we did in Thailand a few years ago and which has been very successful.

In Latin America, excluding Brazil, deliveries are down more broadly due to a combination of weather impacts, drought and local currency depreciation in a market where there's less export than, for instance, from Brazil.

In Brazil industry deliveries fell 7% in the fourth quarter, with a full-year industry deliveries of 30 million tonnes, which is down 6% compared to a year earlier. However, Yara's deliveries increased by 2%, excluding the effect of the Galvani acquisition, and with premium products, as previously mentioned, up almost 30%. The strong performance of our premium-products business in Brazil confirm the business case for expanding our footprint in the country and also for the ongoing expansions of our NPK production plans to grow our exports to Brazil and other cash-crop markets.

Yara's objective is to pay out an average 40% to 45% of net income in the form of dividends and share buybacks. However, Yara's Board will propose to the annual general meeting a dividend payment of NOK15 per share for 2015, which represents 51% of net income after non-controlling interest or 57% if you include buybacks and share redemptions we have carried out in 2015. And the above-target dividend is proposed due to Yara's strong financial position. We also believe the long-term policy of distributing 40% to 45% of the net income is and remains appropriate given the market outlook and Yara's expected pipeline of future growth opportunities.

Before I hand over to our CFO, Torgeir Kvidal, on the topic of strong industrial results, I would like to show you a short video on one of our many value-added product and technology offerings for the industrial market. In this case the product is Nutriox, using calcium nitrate with integrated technology solutions for preventive odor control in wastewater and sewage facilities.

[Audio/Video Presentation]

Torgeir Kvidal

Good morning to all of you from me too. I now have the pleasure then to present to you some more financial details on Yara's fourth quarter results. Before I start overall financial results, I will comment upon this video and the Nutriox sale.

As you see on this slide, we sell about 226,000 tonnes of Nutriox in 2015. That is about 3% of industrial sales but, as reflected in this video, this is not only our product sale but very much a concept sale, where we add competence and technical service in addition to this product. So these products have a significant higher profitability and margin than average sales from Yara.

So, to illustrate that, I could mention that, while this product is about 3% of industrial volumes, it's more than double of that in terms of profitability. And, as you see, it continues to grow steady having growing with roughly 5% per year over the last years.

If I then go over to the financials of Yara in total, you can see that we reported an EBITDA in the fourth quarter of NOK3.5 billion. That's down 24% from NOK4.6 billion a year ago, fourth quarter 2014. The full-year EBITDA was NOK21.4 billion compared with NOK16.4 billion a year ago.

Let me then provide you with some more details behind this development in EBITDA from fourth quarter last year to fourth quarter this year. The two main explanations for the decline in EBITDA. It's lower fertilizer prices. Fertilizer prices dropped with 20% on average for urea, 15% for nitrates and 13% down for NPK which gave roughly NOK2 billion lower EBITDA this year compared with last year.

The price drop was partly compensated by lower gas prices. So we had roughly NOK750 million in lower gas cost this year in the fourth quarter compared to last year. So you'll see the total margin effect was minus NOK1.3 billion. The other negative development from 2014 to '15 was volumes and Svein Tore already commented upon that sales volumes were down 7% for fertilizer, also due to production problem.

So if you look at this volume effect of roughly NOK700 million, you could attribute about NOK400 million of that to the production problems we had in Pilbara, the ammonia plant in Pilbara. And you can actually attribute the rest also of the total of 700 million to other production problems and extended turnarounds, among else in Belle Plaine this quarter. Then you have some pluses in the volumes. We had higher sales, for instance, in Brazil, and with the Galvani addition, that gave a positive volume effect of slightly more than NOK200 million. But that was offset by lower fertilizer sales in Europe, particularly for nitrates and urea.

On the positive side then, in addition to gas prices, continued to be the currency effect. The strong U.S. dollar and the strengthening of the U.S. dollar of the last year compared with currencies where we mainly have costs, like euro, Norwegian krone or Brazilian real, have given us an EBITDA effect in the quarter of close of NOK1.5 billion positive. And then you can say we have a negative other effect here, which is mainly related to increased fixed cost, as Yara continued to grow. And one element of this is the fixed costs in Galvani as we only had Galvani ownership for one month fourth quarter 2014 while it was consolidated fully all through the quarter of 2015.

Svein Tore also mentioned the write-downs and they are not hitting the EBITDA, but they are of course affecting operating income and net income. And we already sent out a notice two and a half weeks ago that we were going to do write-downs of NOK1.15 billion. And the two biggest elements, as shown here, is the NPK and nitrate plant we have in Montoir in France. It's a rather small plant with 300,000 tonnes of NPK and nitrates so it has less scale than some of our bigger and more competitive plants. It also has limited export opportunities. So it means that it mainly sell in the French market and do not have the same opportunity as a larger NPK and also nitrate plants, which are also benefiting from targeting higher-paying segments, cash-crop segments outside Europe. In addition, Montoir doesn't have the full upgrading margins, you could say, that our other NPK plants has because they don't base their production on phosphate rock. They base it on phos acid and as such lose one leg of the value upgrading.

The other major impairment we had was related to the Yara Trinidad, which is the smallest and oldest and less-efficient ammonia plant we have on Trinidad. And it's a non-integrated plant in the way it is only ammonia, not any upgrading to finished fertilizer. So there we had an impairment of NOK382 million while Montoir was NOK544 million. Of the remaining smaller impairments of 224 million, half of that is related to our TAN plant, our plant for technical ammonium nitrate, in France in Pardies, also a small plant with 130,000 tonnes of TAN capacity. And with a weaker mining market and as such a weaker market for explosives, as TAN, we also had to write down the remaining value of that plant.

If we then go on and look at the earnings and EBITDA per segment, you can see at industrial underlying is pretty much in line with last year, actually some improvement in EBITDA. And they show a strong CROGI, as Svein Tore already mentioned, of 18%. Crop nutrition, as you know, have renamed -- earlier named downstream also showed strong earnings, excluding special items. And the special item that you see dotted here on crop nutrition is contract settlement that we had with some distributors which we left in Latin America after the takeover of OFD, and as planned part of OFD. If you take away that, crop nutrition had a CROGI in the quarter of close to 16%. Then you can see that the result decline was related to what we used to call upstream which we now call production, where -- which has a CROGI in the quarter of 8%, as we then say characterized as non-satisfactory. And a big part of that is related to what Svein Tore already touched upon, on production performance, with several production problems, particularly in some of our more profitable plants like Pilbara and also like standard turnaround in Belle Plaine. But also of course they are influenced by the lower fertilizer prices, both ammonia and urea prices and the lower gas only then partly compensates for that.

Then to a more pleasant topic, and some of the more pleasant topics in Yara is the continued drop in gas prices. We were very pleased -- I would say if you go one year back we were pleased in a way with the gas cost we had one year back with an average in Europe of $8.5, because already that was a significant drop from 2013. But gas prices have continued to drop so in Europe now this quarter we had an average gas price of $6.2 so that gave us a saving in Europe of NOK588 million. When I was standing here a quarter ago, based on former prices, we then were forecasting that gas prices had evened out and were estimated to actually increase a little bit into the first quarter of next year.

We actually foresaw, at that point in time, that gas prices would be based on forward prices, $6.6 in the first quarter of 2016. I am now very pleased to say that based on the forward prices we now estimate a gas price for us in Europe of $5 which will give us a further saving year-over-year of NOK900 million in the first quarter of 2016.

And further drop in gas prices in the second quarter of 2016, according to the forward prices, down to $4.6 on average effective for our plants, which will bring another NOK1 billion in saving compared to a year ago. Then some comments on our upgrading margins, the value creation that we have above commodity prices. And this shows the margin development or premium development for our nitrates during the quarter and over the last years. And you'll see that the nitrate premium this quarter, fourth quarter, is pretty much in line with the nitrate premiums over the last couple of years.


This is reflecting of course the increased yield and better crop quality that farmers get from this product, but it also reflects that we gradually try to differentiate this product more and more. Among other things we have done with nitrates over the last years is to more and more extent sell it not as a pure nitrate but with a nitrate also adding sulfur, as the soil to a larger and larger extent lacks sulfur or the crop lacks sulfur due to less acid rain. So less acid rain, which is in itself of course an environmental good, is also good for us because sulfur is an increasing need in fertilization. So in Europe now roughly one third of the nitrate we sell has an added sulfur becoming even more of a specialty than pure nitrate.

Another important premium for Yara on top of commodity prices are the value we create in NPK. Our NPK value creation is on one hand, you could say, a commodity part as illustrated on the left side of this slide, where we upgrade phosphate rock to phosphate fertilizer. And phosphate fertilizers, commodity fertilizers like DAP have declined over the last year. But when we compare this upgrading margin this quarter with the quarter a year ago, fourth quarter 2014, actually that upgrading margin is roughly the same or actually it's slightly higher this year since we in the fourth quarter 2014 had a peak in ammonia prices, as you may see on this slide. So upgrading margins are roughly in line with a year ago. If you look at the premium we are able to get on top of these commodity prices by NPKs being a more precise product also adding micronutrients to it that premium is rather stable.

But I have to admit if you look closely at the figure it's a little bit of a decline because in some markets we see that the demand clearly for NPK has been slowing a little bit, farmers have been waiting a little bit since they have seen P and K prices dropping they have been waiting or maybe they are cutting down on P and K. So in some markets, so like the market for Montoir which sales to more commodity crops in Europe, demand had been a little bit slower in total. But we are able to compensate that by selling more in cash crop markets, also selling more outside Europe, like in Brazil as Svein Tore touched upon.

Then to a theme close to my heart then, the cash development of the Company. We started the quarter with a net interest-bearing debt of NOK4.4 billion, and we end the quarter, as you see, with a net interest-bearing debt of NOK11.9 billion. And what you see, the reason for that is that we have done significant investments through the quarter. We bought the remaining ownership in the Pilbara ammonia plant, the 49% there, for NOK3.3 billion. We paid a milestone payment on the Galvani acquisition. We had a milestone there if mining reserves in Salitre was proven according to requirements and they were, so we paid and we continue to develop that project, so that was a milestone payment of close to NOK800 million. And then we have further investments of about 4 billion, so it gives in total NOK8 billion of investment.

And other investments here is, slightly more than half of that is maintenance costs, turnarounds, smaller upgrading of our plants. We had quite a hefty maintenance activity in the fourth quarter which is also reflected in the production numbers, while the other half of those 4 billion is ongoing growth projects like the TAN plant we are building in Australia, like the debottlenecking we are doing in our Porsgrunn plant, the expansion we are doing in Sluiskil, the ammonia plant we built in Freeport U.S. and so on. But still with these investments and the share buybacks that we have done in the quarter of NOK364 million, we have a very strong balance sheet. The NOK11.9 billion gives a debt/equity ratio of 0.16. So it is a strong balance sheet, which continues to make us able to give a good cash return to our owners and being able to grab new profitable investments when we find the time right for that.

So with that slightly forward-looking introduction, I'll give the word back to Svein Tore for his prospects.

Svein Tore Holsether

Thank you Torgeir. To conclude our presentation for today I will round up with some comments on the prospects going forward.

The global farm margin outlook and incentives for fertilizer application remains supportive overall, especially for key crop-exporting regions such as Europe and Latin America, where local currencies have depreciated relative to the U.S. dollar. Chinese urea production and export costs look set to remain the main reference point for global nitrogen pricing, but the recent FOB China prices below $200 per tonne are likely below breakeven level for high-cost Chinese producers. We do expect a catch-up in European nitrogen industry deliveries during the first half of 2016 and we expect a further NOK2 billion improvement in European natural gas cost in the same period, as Torgeir just went through. Finally, we see continued demand growth for premium fertilizer in higher value crop segments. However, phosphate and potash demand in commodity crop sectors is impacted by lower crop prices as application of these nutrients in some cases can be reduced without an immediate yield impact.

Finally then, some words about the organizational changes. After having spent recent months visiting numerous Yara sites, meeting employees, customers, investors and other stakeholders as well as conducting business and organizational reviews, I concluded on the key organization changes needed and this was announced on Monday. My main objective for these changes was to strengthen the operational focus, improving our ability to execute and improve alignment, especially between corporate functions and the line organization. And I want to emphasize that the people changes I have made are forward-looking. I'm highly appreciative of colleagues who have brought Yara to where it is today and I thank them for their hard work and dedication to Yara. I'm very excited about the new people we have in place to take Yara forward and they will have an opportunity to properly present themselves and their priorities at our Capital Markets Day taking place on March 1.

So, with that, I thank you and on a positive and forward-looking note I hand back to your, Thor, to arrange the Q&A session. Thank you.

Question-and-Answer Session

A - Thor Giaever

Okay. We are then ready to have the Q&A, where Holsether and Kvidal will be joined also by Dag Tore Mo as Head of Market Intelligence. So if you have a question then please raise your hand and my colleague will hand you a microphone which we hopefully have somewhere nearby. Please introduce yourself with your name and company.

Thomas Lorck

Yes, I'm the first one. Thomas Lorck here, Arctic Securities. Two questions if I may. The first is related to the market outlook for nitrates in light of the softness in the quarter. Can you add some color on the outlook in light of the slightly higher inventory levels at industry level as well as the other economics you mentioned and, in addition, by nitrate premium pricing over the weakness in urea pricing? And the second question is maybe for Dag Tore. Do you have any comments related to the impact on the European market in light of the expected startup at OCI's plants? And maybe also the capacity additions in Turkey and Hungary and then the timing of this.

Svein Tore Holsether

I can start and then I'll hand over to Dag Tore. When it comes to the nitrate premiums, in fourth quarter they were in line with what we've seen in the last couple of years. Certainly as we come into first quarter, with the falling commodity prices the premium level increases. Still we are at the peak part of the season and it's a natural development that it increases at this point. And looking at our inventory levels, they are at level with last year. So if you want to continue on the more general market outlook, Dag Tore?

Dag Tore Mo

Yes, I think, as we said before, I think our main focus is to look at the pricing relative to the urea, as you mentioned, then not so much the nitrate balance itself. Nitrate market in Europe is very large, plus minus 15 million tonnes or so. So at plant plus and minus, whether it's in Turkey and Hungary, or whether it's OCI in Benelux, it's not I think shifting the dynamics that much. So the relevant point is that 30% of the nitrogen is imported into Western Europe so that's the kind of the competition we are seeing. And of course, as you mentioned, the nitrate premiums are getting relatively high, as you can see in the fourth quarter, in absolute terms. They are fairly normal. Of course that has increase a bit now in the first quarter, but we are also heading into the main season. So I mean it's hard for me to stand here and kind of explain them going forward but I think we are in an okay position.

Thor Giaever

I think next is DNB followed by Danske.

Eivind Sars Veddeng

Yes, thank you. Eivind Veddeng, DNB Markets. Maybe a question for Svein Tore. Will you at some point quantify the potential savings from operational excellence and the restructuring currently ongoing in Yara?

Svein Tore Holsether

As we said, we're not very happy with the production in fourth quarter and we are going through the improvement potentials in order to improve production efficiency. We have a number of ongoing projects in order to increase our profit levels but I would like to spend some more time before I set concrete targets on this, but that is still work in progress and will be presented at some point. But I will need a little bit more time before I give you the exact date for that.

Eirik Melle

Eirik Melle, Danske Markets. Just in general we've seen energy prices, not only yours but all over the world, declining and also giving the marginal producer, China, lower cash costs, but also elsewhere. How do you look at the outlook for urea and commodity fertilizers in general, including ammonia, when it comes to shifting capacity and curtail capacity being maybe profitable at a lower level? However, of course the prices are lower as well but do you see any shifts with the changing energy market prices?

Dag Tore Mo

Yes, that's a big question.

Svein Tore Holsether

Save some of it for Capital Markets Day.

Dag Tore Mo

I think the fact that when, as you say, when oil prices were above $100 not long ago and gas prices around Europe above $10, I would say on urea the Chinese exporters had quite strong competitor also from elsewhere when it comes to kind of taking [indiscernible] producer, and Ukraine being an obvious one and of course that picture has changed. So, as you say, many regions in the world have reduced their costs substantially and it stands even more clearly that high-cost production in China is more costly than most other production, even increasing the focus on that. And, as Svein Tore said, I guess that's what, also in the presentation, that's what most people are looking at and trying to guess at, and judge where exactly are these floors out from on China and most experts you ask, I would say today, say that that's probably somewhere in the range of $200 to $250. Let's see how that plays out.

When it comes to the fact that gas prices have been lower for quite some time, or over the last year, it's hard to see that that has triggered a lot of activity, let's say, in new investments. There was a period of new investments in U.S. and Russia, and Nigeria, other places, that were triggered by low gas prices in those regions already at that time. But now that fertilizer prices have been declining as well, even those projects I think look vulnerable in today's environment due to the very high investment costs basically. So I don't think that it has led to a huge shifts when it comes to investment. I think Yara now are in a relatively quiet phase when it comes to initiating new green and brownfield investments. I think maybe stop there.

Thor Giaever

Okay. We have Handelsbanken next.

Anne Gjoen

Thank you. Anne Gjoen, Handelsbanken. I have one question to Torgeir and one question to Dag Tore. Torgeir. First, fourth quarter, it was a particularly high tax rate and you commented that it's later expected utilization of the tax loss carry-forward. So could you give some more comment on that? Is that also something that we could see into this year? And then Dag Tore, when it comes to China, I read some comments that some of the anthracite coal users switch over to thermal coal because that has even lower cost. Have you noticed that that is possible to a much more significant extent than before due to technology, and what could be the difference between in cash costs for a thermal cost producer and an anthracite cost producer?

Torgeir Kvidal

I guess I could start as you again got the more difficult question, Dag Tore. On tax in Brazil, Anne, what we have done there is the fact that we have had significant losses on currency, on debt in Brazil. We are financing or have been financing our activity there with U.S. debt, which is in a way natural hedging since underlying we believe that Brazil to a large extent is a U.S. dollar business. But of course when the real has weakened and dollar strengthened, which is good for us underlying, we have had currency losses there and got a larger loss carry-forward there. And then there are limitations in how much loss carry-forward you can use every year in Brazil. You can only reduce your profitability before, taxable profitability, before loss carry-forward with 30% per year. So it may take some years to capture that back.

And then in IFRS there is no legal time limit to when you can use it; it never expires. But IFRS just say that you can only recognize in your P&L for some years. And with the losses we had, some of those tax loss carry-forwards went after those years in our projections. So you can say it has a lower net present value to some extent of course, but this is a tax effect, season effect based on the recent currency losses. And as long as I don't predict future currency changes, I would say that this is a one-time effect. But this of course gives some disadvantages being financed in Brazil based on a foreign currency since it takes time to recover our taxable loss there. So we have optimized this after this quarter, put in somewhat more equity into Brazil but also decided to do the financing there to a larger extent in reals, and then instead do the total positioning on dollar loans at the corporate where we are able to immediately have tax effects on it. So it's a one-time effect given currency, no currency changes, and we also reduce that exposure going forward. So that's a lengthy answer. I've probably given some time for Dag Tore to structure all his knowledge to a short answer on another difficult question.

Dag Tore Mo

I've even had time to invite Dag Willoch to the podium to give an even better answer. But, bottom line, we do not think that those kinds of initiatives will shift the dynamics of pricing. The anthracite based sector is very large. It's a lot of old inefficient plants that are not very well located and doing such a shift without having detailed technical knowledge, it requires quite a lot of investments.And these old plants will not be that greatly placed even if they were able to use some cheaper coal because in those part they are existing, also that type of coal is relatively expensive compare to let's say, where the new investments are in Inner Mongolia and [Tianjin] etc. where coal is very cheap. So given the whole, the massive size of all the anthracite based producers in China, I do not think that you will see any market effect, even if there are a few that may be looking at such a thing, which I guess would be relatively modern, larger ones in that case. I don't know if that's….

Thor Giaever

Are there any more questions? Yes, Carnegie.

Bengt Jonassen

Thank you. Bengt Jonassen from Carnegie. I have two questions, one for Svein Tore and one for Torgeir. On the CapEx guidance, you've taken that out of the slide set this time. Has there been any change in the CapEx guidance for 2016 to 2018 when it comes to growth CapEx? And the second point comes to the name change for downstream. Crop nutrition seems like a more expanded word. Downstream seems more like a distribution, but crop nutrition has more to it. Could we see a strategic directional change in the downstream segment including more than just fertilizer?

Svein Tore Holsether

I'll start with your last question and then I'll hand over to Torgeir afterwards. When it comes to the name change I think it was necessary to do that because we had upstream and downstream, and that makes a lot of sense for us here in Yara and those that follow us closely but it doesn't really externally describe what we're doing. So then we took what was upstream and renamed that to production and put mining in there, and for downstream that is now crop nutrition. And I think that's a better description of what we really do because one thing is making the products; something else is to give the advice on the right application of it in order to support our customers to get the best yield and I think crop nutrition better describes it. I don't see this is a shift in strategy it's just emphasizing and highlighting what we're really doing and I see that also going forward but at even greater speed.

Torgeir Kvidal

Yes. And you're right, Bengt, that we are not providing any new guidance on the CapEx today. So I could have stopped there, but I could comment a little bit more. We haven't done that also because we'll spend some more time on it on the Capital Markets Day, 1st of March, so that's another repetition of that announcement or promotion of that day. But what I could say then is that we will have some currency effects which Norwegian kroner have weakened towards several currencies since we made the previous guidance, so it will be an increase in Norwegian kroner there.

It will also be some delays in some of the projects. It's the technical ammonium nitrate projects in Pilbara that we hoped could be finalized by end of 2015 which is going into '16, so you have some creep there. We don't have any significant new projects to announce today. I don't neither comment if there will be any on 1st of March but not today. So it's the same kind of portfolio but it is developing in a way. Two projects that we have announced that we are in the development phase of like Dallol and the Salitre project in Brazil is progressing, but we'll give an update on the CapEx then at the 1st of March.

Thor Giaever

Any further questions?

Thor Giaever

There is another opportunity at our conference call at 2.00 PM Oslo time today and, in case you missed it, also on the Capital Markets Day on 1st of March. But otherwise, thank you very much for attending our presentation. Thank you.

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