Okay. Good morning. Welcome to the presentation of Yara's second quarter results. Our presentation today will be by our CEO, Svein Tore Holsether, our CFO, Lars Røsæg, and our EVP, Sales and Marketing, Terje Knutsen. With that, it's my pleasure to introduce Svein Tore Holsether.
Thank you very much, Thor. Good morning to all of you. We will start, as always, with safety and where we show total recordable rate at 1.5, which is slightly higher than 1.4 where we were a year ago. Our performance has improved significantly over time. We have reached a level now where we have to accept that we cannot improve at the same rate each and every month. It is just as important to focus and to work on preventing accidents with high severity potential. I am pleased to see that the severity level of the accidents that we've had so far this year, is lower than the same period last year. Still, we have had 53 accidents year to date, and we definitely do believe that it is possible to get to zero, and we will continue to push towards that.
Now, let's take a look at our second quarter results. EBITDA, excluding special items and IFRS 16, is up 62% year-on-year. Deliveries were up, especially for Yara-produced products, and energy costs were lower, improving our margins. Our premium product deliveries were 7% higher, which is in line with our strategy. Our earnings continue on an improving trend, as you can see on the left-hand side, and so are our capital returns. Further improvement is needed in order to generate satisfactory returns, and achieving this is a top priority for Yara. Yara-produced deliveries increased across all main product groups as you can see here. Our growth products generate increased volumes and revenues. This has a significant positive mix effect on our earnings as average margins for our own production is higher than in the rest of the portfolio.
Definitely achieving this in a situation where margins are improving is of course even better. Before we go into the results, let me provide some comments on market developments this quarter. Starting with our production cost, gas prices in Europe are down 37% compared to a year earlier, and U.S. gas prices were down 4% in the same period. In total, our earnings improved by $103 million in the quarter as a result of this. Nitrogen price developments were positive, as prices in most locations move up to a level where Chinese exports were again pulled into the global market. Yara's realized nitrate and NPK prices were also higher. The publication prices on the chart here are lagged by one month to better reflect Yara's P&L, where deliveries today typically are contracted one month earlier.
Following a year of higher investments in 2018, our investment level is significantly reduced in 2019 and 2020 as our growth projects reach completion and strict capital allocation rules are enforced for any new proposals. We maintain our NOK 1.3 billion guiding on currently committed CapEx for 2019. We have three major projects still under execution. Sluiskil in Netherlands, with completion in second half of this year. Salitre in Brazil, with completion in first half of 2020. Rio Grande, also in Brazil, with completion end of 2020. Going forward, our priority is to deliver existing investment commitments, and we have a high bar for initiating new investments and have preference for smaller, high return, short payback projects.
I should also note that for 2021, our committed CapEx is in line with what we communicated at the Capital Markets Day. Even if we have not yet reached a satisfactory return level, we are pleased to see that we are on an improving trend. This is our highest second quarter EBITDA for four years, and our return on invested capital has improved for the last four quarters. I would now like to hand over to our CFO, Lars Røsæg, who will dive deeper into our financial performance. After this, our EVP, Sales and Marketing, Terje Knutsen, will provide an update on our commercial activities. Over to you, Lars.
Good morning, everybody. Let me start by the EBITDA, excluding special items, which landed at $546 million, representing an improvement of 62% when adjusting for also IFRS 16. The EBITDA growth is also the key driver for the increase in EPS and also for the increase in cash flow from operations, the latter which landed at NOK 680 million, a 30% increase from one year ago. As communicated, reduced investment activity is currently our focus and ramping up the committed investments and CapEx at the end of the first half was consequently NOK 490 million. The committed CapEx is unchanged at NOK 1.3 billion for the year as a total. The increase we have in earnings and in capital returns is positive, and we have return on invested capital of 5% on a rolling 12-month basis. The return in the quarter in isolation was just above 7%, which is positive.
However, these returns are still at unsatisfactory levels, and it indicates our path towards our target of a return, through the cycle, of above 10%. The improvements in the quarter were mainly driven by lower energy costs and increased deliveries of own produced products. We also had a positive effect from a stronger U.S. dollar, which is, of course, positive on our cost base, with the dollar strengthening 9% against the reais and 6% against the euro. Total deliveries, when excluding portfolio effects from Cubatao, was flat year-over-year. The volume improvement was mainly explained by a 9% increase in Yara-delivered products with higher margins than third-party products, as Svein Tore also mentioned. The price margin improvement is also reflecting the increasing underlying urea prices in the quarter compared to falling underlying urea prices in the same quarter last year.
The energy cost ended $103 million lower, which is in line with our guiding and of course, driven by significantly lower energy prices in Europe. The other item includes the IFRS 16 effect of $27 million and $8 million effect from Cubatao and Freeport year one. There, of course, remembering that Cubatao came into our books in the middle of the second quarter last year. Production saw positive contributions from the growth projects and improved reliability versus the first quarter. The profit growth was driven by increased nitrogen upgrading margins in Europe. The sales and marketing segment, which is less cyclical, was underlying in line with last year. Terje Knutsen will give more details on that in his presentation shortly. New business is positively impacted due to increased activity in the maritime business and the Cubatao acquisition. Remaining businesses were in line with last year.
Cash earnings and released operating capital funded both investments, Yara dividend payouts, and a net debt reduction in the quarter. The lower working capital was driven by seasonal increase of prepayments in Brazil, which is special to the second quarter. The net debt EBITDA was 2.2 at the end of the second quarter, down from 2.5 at the end of 2018. As presented at our CMD last month, Yara's revised capital structure target is a mid to long-term net debt/EBITDA range of 1.5 to 2 and a net debt equity ratio below 0.6. Under this revised policy, the improved market fundamentals, combined with our extended improvement program and increased hurdle rate for new investments, may lead to increased dividend capacity beyond ordinary payout ratio going forward.
Yara also repaid a $500 million bond maturity in June. As you've seen this morning, we have renewed our RCF incorporating a link to our carbon intensity target. We announced an extended improvement program at the Capital Markets Day, focusing on key operational metrics reported on a rolling 12-month basis to better reflect the underlying value creation. What is presented today hence contains no new targets compared to what we presented at the Capital Markets Day. We do report on the progress as such in the second quarter. The underlying production performance increased by 346,000 tons versus 2018 on a rolling basis, driven by increased finished products outputs, while ammonia was slightly down but with improved reliability compared to the first quarter. The output will vary on a quarterly basis, although the overall trend, as you can see, is positive.
The main focus for us is on turnaround performance and reliability improvements, as also discussed in detail at the Capital Markets Day. We have also, at this slide, indicated the breakdown of the targeted volume improvements on the main product groups. We've added some supporting material in the appendix in line with what was presented at the Capital Markets Day. Going forward, we will, as mentioned, only refer to this extended improvement program with the baseline of 2018. Looking at KPIs beyond the production KPIs in the extended improvement program, energy efficiency has been negatively affected by the recent outages on larger ammonia plants, mainly then in Q1, as previously described. The fixed cost development is improving. It is worth noting that fixed costs also on a reported basis decreased for the second quarter in a row.
Operating capital has increased slightly in the quarter, it is important to note that when we follow up on this KPI, we exclude prepayments. Hence, the prepayments in the second quarter in Brazil is not included in this rolling trend. By that, I'm pleased to hand over to Terje to shed some more light on the commercial operation.
Thank you, Lars, a very good morning to all of you. Sales and marketing increased the EBITDA with 12% compared to same quarter last year. Adjusting for the impact of the IFRS 16 and also currency, the results are in line with last year. Total deliveries increased by 2% as a 7% growth in premium products and also some small portfolio effects in Brazil, more than offset the lower sales of commodities in Latin America, where we have prioritized value over volume. Excluding portfolio adjustments, deliveries were slightly down compared to a strong second quarter last year. Realized prices increased for all the main product groups, although less than the commodity nitrogen prices realized in the main export hubs. Our nitrate premiums are therefore lower compared to second quarter last year. On the other hand, our NPK premiums are increasing as phosphate prices have declined.
I think it's important in this context to also underline that as a distributor operating really further down into the value chain, our realized prices will typically be less volatile and move slower than the price developments in export hubs. This also underlines the resilient sales and marketing earnings. European deliveries were in line with last year, concluding the season 3% below last season. Nitrates in isolation was up 12% versus last year in the core European markets. The 23% growth in Brazil needs to be seen in light of last year's truck driver strike that had a significant impact on second quarter deliveries. Also worth mentioning, the ongoing trade dispute between the U.S. and China supports market growth in Brazil, which our second quarter deliveries clearly benefited from.
Deliveries in Asia were down due to less urea trade volumes, also some reduction in premium products following a slower demand in China compared to last year. In North America, volumes were in line with a year ago, despite challenging weather conditions. Our deliveries in Latin America declined 22%, mainly by design, by reducing lower margin commodity business, also partly due to lower deliveries of premium NPKs in Colombia, where deliveries in the quarter were impacted by transport strikes in the country. The increase in Africa reflects, among others, an increased trade business to Ghana. At our Capital Markets Day, we presented our long-term targets, which include increasing the deliveries of premium products by more than three and a half million tons by 2025, also increasing the YaraVita deliveries to more than 100 million units also by 2025, not at least, to increase our EBITDA margin.
With the performance that we have seen so far in 2019, we feel we are on track and that we can reach our long-term targets. Maybe worthwhile mentioning that when it comes to YaraVita, we expect most of the increase in 2019 to come in the Southern Hemisphere, and that's where we now are entering into season. With this, I will hand back to Svein Tore, who will give his closing remarks.
Thank you very much, Terje. As presented at our Capital Markets Day on the 26th of June, our strategic execution is concentrated on delivering improved returns as a focused company along three main lines. Improvement, where we are increasing our improvement targets by 70%. Value, where we are increasing our sales and marketing margins by strengthening our crop-focused solutions and market positions. Growth, where we're increasing premium sales and adding revenue streams by scaling up digital farming services and developing food chain partnerships. In order to further strengthen our strategic focus on crop nutrition, we are evaluating an IPO of our industrial nitrogen businesses. We consider our prospects attractive. First of all, we see strong industry fundamentals where a growing population, as well as resource and environmental challenges, create business opportunities for Yara.
In addition, the market cycle is improving with the supply side pressure easing, while demand looks positive with a tightening situation for grains. Our cash flow is set to improve, both due to cyclical improvement and that our CapEx is declining significantly while our earnings improvement actions deliver higher volumes and higher revenues. Finally, we have a strong competitive position with a focused and sustainable long-term strategy to improve returns through operational improvement, margin improvement and innovative growth. With these closing remarks, I'll hand back to you, Thor, to manage the Q&A session. Thank you.
Okay. We are then assembling for Q&A, where all our presenters are available for questions. If you have a question or more, raise your hand and we will get the mic to you. Should we start with Nordea?
Hans Jakobsen, Nordea. Could you give us some more detail on the sharp increase in sales of all produced products, especially in relation to somewhat lower imports into Europe, and whether the increase is sustainable? Thank you.
Well, I think I will start by going back to the earlier part of the season. It's clear that we have had increased deliveries, particularly of nitrates in Europe. We have also seen that the consequence in Brazil, where we partly also are switching more of the sales of what we call YaraBasa, which comes from Rio Grande, has had an attractive start. This is very much in line with the priorities we have of growing the premium products. We think if you measure this on a seasonal basis, this is sustainable and according to our projected growth.
Thanks.
Okay, DNB next.
Thank you. Good morning, Eden. I'll do the second question, and then I'll hand over to Terje for the premiums. When it comes to reliability, as we said in the first quarter, we had a difficult start of the year and part of that also into April, with significant downtime at Sluiskil, Pilbara and Tertre. The production performance in the second quarter has been much better, and we've produced more than last year. Still, we're not at a level at all plants that we would like to be. I'd also like to highlight that we've set production records in several of our plants, and in particular, I want to mention Belle Plaine, which had record production both in the quarter and for the first half of the year. Going into third quarter, most of our operations are running on target.
There will be volatility going into the summer months also due to higher temperatures that could impact. At the moment, the plants are running well.
If we take the premiums, starting with Europe and the nitrates, I think first, again, to go back this season, we have had the season where we had a very much an upswing during the last part of the season. I think we are quite satisfied with how we have been working up the price. As you know, there is a time lag in the price setting, which has a certain effect. What is very important is that it's not only urea that we need to price according to, it's really the crop prices. If you take grain, for instance, the grain price is now at 11% below the 10-year average. Which means that the farmers are under some financial constraint.
Knowing that the stock of grain is low compared to that same average outside of China, I think very much will depend on the movement of grain prices going forward. When it comes to NPK, we are in much more markets. We are in much more of the high-value crop segments, where price typically is much more stable by design. In those markets, we have seen lately that the DAP price is down, which means that we have been able to maintain price and/or partly increase price, and therefore margin. Okay. Do we have a next question? Yes, we will go to ABG.
Yes, good morning. Bengt Jonassen from ABG. A couple of questions for the CFO. On the operating capital year-over-year, it seems less released than last year. Is it less prepayments into Brazil? Also on the full year CapEx guidance of 1.3, year to date 0.5. Is there downside in the guidance? The final question is on the bond announced today. We've seen other sectors introducing green elements in the debt financing is facing lower interest costs. Is the same valid for you compared to the previous RCF?