Sensitivities

Last updated December 8, 2011

Annual sensitivities for each value driver

The sensitivities are based on Yara's capacities as stated in the capacity table assuming a 95% utilization. Sensitivities assume stable value-added margins and no inter-correlation between factors. EPS sensitivities are based on 287.2 million shares and assume 30% marginal tax rate on underlying business.

All products have been converted into urea equivalents to derive the urea price sensitivity taking into account both tax effects and gas price effects of price changes in the associates.

The nitrate premium sensitivity applies to the capacity that carries a nitrate premium above urea and is quantifying the earnings effect of a change in the premium above urea and not effect of a change in the nitrate price. Products that carry this premium include the fertilizer nitrate capacity and the NPK capacity converted into CAN equivalents.

The currency sensitivity only relates to Yara's net fixed cost position in EUR and NOK and does not include the translation effect of converting USD earnings into NOK. The magnitude of the translation effect depends on the EBITDA level in USD.

The European hub gas sensitivity is based on Yara's gas consumption in Europe linked to hub pricing.

How to use the sensitivities:

The sensitivities are based on Yara's capacity and a utilization of 95%. If sales differ from this assumption, the estimated effects using the sensitivities can be misleading. This is especially relevant when using the sensitivities on quarters when sales volumes, for various reasons, could differ from both actual production and the stated capacity.

Sensitivities do not include Yara's phosphate upgrading activities. Yara upgrades phosphate rock into NPK, which depending on the price development of both DAP as the finished product and phosphate rock and ammonia as the key raw materials, can generate significant value. This upgrading activity is not included in any of the sensitivities but can be estimated by looking at upgrading margins in the phosphate value chain.

The nitrate premium sensitivity reflects the effect in changes in the premium achieved on the nitrogen in nitrates compared to urea. The sensitivity is to be used  with the premium measured in absolute terms, comparing the CAN price with a urea price adjusted for the difference in nitrogen content.

There is an average time lag of approximately one month before changes in fertilizer prices affect Yara's bottom line. For changes in oil prices to be fully reflected in the P&L the lag is approximately four months.

35% of Yara's European gas contracts are linked to the oil products such as low sulphur fuel oil price (LSFO), heavy fuel oil (HFO) and NAPHTA. When fuel oil prices deviate from the crude oil price, the oil price sensitivity may be different.