Hello everyone, and welcome to Yara's fourth quarter results call. Please note that this call is being recorded. I'll now hand over the call to Maria Gabrielsen, Head of Investor Relations in Yara. Please go ahead.
Thank you, operator, and welcome to everyone for joining us for this conference call for our fourth quarter results. I am here together with the representatives in Yara's management, our CFO, Thor Giæver, our CEO, Svein Tore Holsether, the Head of Market Intelligence , Dag Tore Mo, as well as other representatives from Yara. We're not planning to give a presentation or further opening remarks, as we hope you all just watched our webcast. So we will therefore go straight into questions, and I will ask operator, if you may please open the first line.
Our first question comes from the line of Joel Jackson of BMO Capital Markets. Your line is now open.
Hi. Good afternoon, everyone. Thanks for taking my question. I'll ask a couple questions, maybe one by one. Can you talk a little bit about the difference in Q4 between Europe and the Americas? You had a lot of buying in Q4 in Europe. Was that ahead of CBAM, and then Americas was flat, was that weather? Can you talk about that, please?
Yeah. Yeah, in Europe, we had a strong Q4, both when it comes to our own sales, but also the market in general, both up, because we think a large part of that was due to positioning ahead of CBAM. Already from November, in particular, there was quite strong interest in buying, importing as well as from domestic producers, to avoid the CBAM charge from January first. And it's actually led to a price increase all across the products, like, already in Q4, because of that, so partly then reflecting the CBAM charge already in Q4.
In the U.S., I think it's more, there has been now the norm of the recent seasons has been quite a lot of late buying in North America and U.S., with the, with a lot of the imports focused in, let's say, the February through April period, and this season looks to be similar. It's just slightly ahead, but, I would say that's, that's not more than just more or less random variation. I have not seen anything kind of specific or any structural when it comes to that. There's a lot of buying from the U.S. that remains.
Okay, and then I'm trying to reconcile your comments around Q1. So you talk about how, because there was some pre-buying in Q4 in Europe, your, you know, Q1 is ahead of the season. Then you kind of talk, well, yeah, but there's lots of products still to buy in Europe. So on one hand you're kind of saying like, "Oh, people have bought ahead, but oh, they haven't bought enough." I'm just trying to understand your comments, and then can you, as part of that, you know, with, with some of the uncertainties around CBAM, you know, whether there might be some offsets or not, you know, can you try to sort of talk about that and how it's affecting the market and your strategy?
I can start with some comments, and then Magnus can add if it's your wish. First of all, and given that we estimate that deliveries are 7% ahead as of end December, compared to last year. Even if not, you would think that the first application for the farmers are generally already purchased, and now we still have winter, so until there is a kind of movement in the fields, there is no real need for farmers to replenish their inventories or further buying in order to, for the subsequent applications. So, also, as you hint, that there is now a CBAM in force. There's some political uncertainties that has kind of surfaced through January around this.
So, so we, it's logical then that as we start the new year, that we have a relative slowdown, a little bit of a slowdown in the market after Christmas. But, you know, 7% ahead, almost half of the seasonal demand has yet to be bought, and we think that imports is slowing now in Q1. So that's where we are kind of coming from, that, yes, it's a little bit slow start. It... No, we are kind of depending a little bit on spring arriving, and then it could be a very, quite, quite a busy period, actually, and it depends a little bit on how much will be imported. Just for your reference, urea is the main product on the nitrogen side that is imported, less so for nitrates. And Q1 last year, EU imported 2.2 million tons of urea. That's quite a lot.
So even if imports is down, there is quite a lot needed. So that's, that's kind of... I can understand that you are a little bit puzzled by the formulations, maybe. But, so yes, the market is a little bit back ahead by the end of December, but it's a lot that remains, and we'll see how that plays out in a market where imports is now more expensive.
Yeah. No, I think that's the key point. And obviously with, you know, with the prospect of CBAM in Q4, there was some, you know, a bit of a rush on the import side, which is also reflected on the pricing or in prices. But I think it's also key to remember that CBAM is still in force. I mean, every ton that goes into Europe now-
... faces CBAM. And of course, by the time any changes to that would be in place, of course, that product will have been sold and probably applied long time ago. So, I mean, we don't really see that from a market perspective this spring, that any CBAM changes would impact anything on prices as such. And then also, you know, we believe it's highly questionable that there will be any changes to the CBAM at all.
Okay, just to fit one more in. Would you expect 2026... for ammonia production, would you expect 2026 to play out largely like 2025 and 2024, where you're producing 1.7-1.8 million tons a quarter, except for Q3, where you produce, you know, significantly more? Should it be similar kind of ranges across the quarters this year?
I think, if you're referring to Yara's ammonia production, I mean, we-
Yara.
Yeah, I mean, we-
Just Yara, 1.7, 1.8 a quarter, except for Q3, where you produce more.
Well, I mean, we run our facilities 24/7 all year round if there's a positive cash margin. So, of course, there are some turnarounds that impact that schedule. Of course, you know, now and then there's an unplanned stop as well. But in general, our uptime is very, very strong. So, I think our plan is to produce at sort of the practical production rate that we have. Right now, there's
Okay, do you think?
Strong. Right, right now, there's good cash margin in all our, all our production facilities.
Do you have any special turnarounds or any additions this year in 2026 that'd be significantly different than 2025, excluding unplanned outages?
No. No, I mean, I think we distribute our turnarounds fairly evenly, so there's nothing special compared to other years.
Thank you very much.
Next question comes from the line of Christian Faitz of Kepler Cheuvreux. Your line is now open.
Yes, thanks. Two questions, please. First, your scheduled maintenance CapEx for 2026 is some $200 million higher versus 2025. I'm aware of the phasing that you mentioned in the webcast, but can you elucidate this a bit? For example, which plants are mainly concerned? And the second question would be, can I ask whether the sequential property plant equipment increase over the past few quarters is largely US dollar driven? Thanks very much.
Yeah, no, I think on the, on the first question, our maintenance schedule is basically driven by the turnarounds. So we do have a few turnarounds this year, which have a bigger scope. I think in referring to the previous questions in terms of sort of how much we will produce this year or not produce because of turnarounds, that's pretty stable. But some turnarounds are more expensive than others because, you know, scope change from turnaround to turnaround. So that's why the maintenance for 2026 is somewhat higher than the sort of the upper part of the range that we've given from sort of $700 million-$850 million per year.
And that includes a small portion of that includes a little bit of phasing from 2025 as well, but that's not much. And could you repeat your question on PP&E, please?
When your property, plant and equipment in your balance sheet seems to be going up sequentially over the past three quarters or so, is that largely U.S. dollar driven?
Yes. Most of the increases-
Yeah.
Most of our assets is, are booked in euros across Europe-
Yeah.
So that would likely reflect the currency, right?
Okay. Yes. And that's the largest explanation for that. Thanks very much.
Your next question comes from the line of Lisa De Neve of Morgan Stanley. Your line is now open.
Hi, thank you for taking my questions. I want to follow up on the first question around spring demand. If you can give us an idea of what you think current channel inventories are across the Americas and Europe? Some idea on that would be great. That's my first question. And my second question would be around CBAM. I mean, to which extent have you been involved with European policymakers around what your view is on the importance of CBAM? And what sort of variables are being discussed to make the potentially move ahead with banning CBAM for fertilizers or maintaining that structure? Thank you.
On your first question, when it comes to North America, I mean, players supplying nitrogen to the US or North American markets are normally coming down with their feet on the ground, playing this out quite well. And you can see that already now, US Gulf pricing for urea is up at $500, which is kind of sufficient to attract quite a lot of tonnage. So it seems to us, it seems like it is fairly normal. One of the reasons why the market globally is so tight, it's $500 basically, is part of that reason is this outstanding US demand.
... And there is also activity into Europe from North Africa in particular. You've probably seen last week there was quite a substantial volume that was bought. So there is also that going on in anticipation of the spring that will come. So I would say it's fairly normal, both in North America and Europe in that sense. And then now you have India, in addition, that is trying to fight for March availability by announcing a 1.5 million ton tender, as you probably saw. So it's fairly busy in the very short term.
On CBAM, I think what's important, first and foremost, is to kind of, you know, be accurate on what's actually happening, right? So, right now, CBAM, as per EU legislation, is in force. Then there is a proposal, paragraph 27A, which, if passed, would open for temporary suspension, or give the Commission a temporary suspension opportunity, if there are unforeseen impacts on the single market, or something like that. For that to even be a possibility, that paragraph has to be passed by the European Parliament, which is obviously not a given. So this is not something that either the Member States or the Commission can decide on their own.
So, obviously, referring to your question, we are, of course, in close contact at the political levels, both in several member states, with the EU Commission and also the EU Parliament, to voice our view on that. And, I think our CEO has been very clear on that, that of course, there is absolutely nothing with CBAM that is unforeseen. I think it should be evident that prices will go up equivalent to the import tax you put on a good. So, it's very difficult from our perspective to see any logic in implementing such a paragraph. But of course, politics is politics, and this will then... we will see what the mood in European and how receptive the MEPs will be for that.
But as a reference, in the same event where this was introduced, the Commission also, and the member state agreed on Mercosur, which was later rejected by the MEPs. So, there is certainly no guarantee that the proposal from the EU Commission is approved by the European Parliament.
Okay, thank you very much.
Your next question comes from the line of John Campbell of Bank of America. Your line is now open.
Yeah. Hi, everyone. Thanks for taking my questions, 2, if I can. Maybe sticking with CBAM. So do you have a sense within Yara of the potential timeline for when the EU could pass or not pass this modification to the suspension tool, et cetera? Number one. Number two, on your Air Products project, sort of what confidence do you have at this stage that it can be delivered within the $8 billion-$9 billion budget? You know, I think it's probably fair to say the project has seen numerous cost increases. You know, Air Products, I think, are quite clear on their calls that there's a lot of construction market labor bids from data centers. I think Air Products has tried to basically split up the construction into several different tenders, et cetera. Maybe you could tell us how that's going.
I can tell you, at least from the Air Products call, they said 90% of the missing puzzle piece to reach FID relates to the cost. So is there any reassurance you can offer that, that $8 billion-$9 billion figure will be achieved?
Yeah, no, I think on, on your CBAM question, I mean, it's, it's difficult for us to sort of, you know, give a, give a sort of a firm estimate on how much time the EU need to, to, you know, pass this through, through Parliament. So that, that's of course, something that we are, watching closely. However, as you know, we do note that there is significant resistance, both in the European Parliament but also from several, you know, member states, as well as the industry, as well as Commissioners, you know, against, this, you know, proposal of, of opening, for a possibility of suspension. So, so at least, you know, I think it's, it's fair to say that it's gonna be a, a fight, a political fight.
I think, and whether that sort of comes in time, or, you know, how that sort of matches up with our timeline for the Air Products project is of course equally difficult, to say. But of course, next month will hopefully provide some direction at least in, you know, in terms of what the political mood is and where this is going. On the cost increases, we don't have any sort of further updates to what we and Air Products have stated earlier in terms of the range that we are looking at.
I think, of course, as you say, from the original outset of that project from Air Products side, CapEx has gone up, but it's also important to remember that the technical maturity of the work, detailed engineering, et cetera, has developed a lot as well, right? So I think sort of cost estimates—comparing cost estimates is not like comparing apples and apples necessarily, right? There's a big difference between cost estimate after detailed engineering and the cost estimate that you do on your first FID, as an example. So, they are working diligently to, you know, to get these estimates in place. We are supporting that as well with our expertise.
As you say, there is competition for this, but there are also not many ammonia plants being, you know, actually being built in the US. So, we will see how that works out over the next month, and that's, of course, a very important element in the decision-making, as Svein Tore Holsether pointed out, and of course, that's the case for us as well. Thank you. That's very helpful.
Question comes from the line of David Simmons of BNP Paribas. Your line is now open.
Hi, thank you. So 2 questions from me, please. Firstly, you mentioned strong demand fundamentals, but you're showing optimal nitrogen application on slide 29 for a wheat farmer, as being 4% lower versus this time last year. I think if you scale that up to the whole nitrogen market, it's the equivalent of losing maybe 5 million tons of urea demand in 2026, ex-China. Now, I know you're not just selling to wheat farmers, but soy and corn economics are very weak as well. So could you comment on expectations for supply and demand balances in 2026, based on current farmer economics, as opposed to the long-term averages that you show on the slide? That's question one.
And then question 2, so NPK margins have come down, and you mentioned that's normal in a tight nitrogen market, but I noticed that compound NPK inventories also look like they've built in the 3Q and 4Q. So are you seeing farmers downtrading to straight nutrients, or what's behind that larger than usual inventory build in compound NPKs? Thanks.
Yeah, as you mentioned, the example we show there is kind of a little bit of a, of course, a little bit of a theoretic issue. We have a yield curve that we have kind of based ourselves on from a research center in Germany. And it, as you say, it's if a farmer already is at optimal application rate, it does show what all that optimal application rate is changing with the price ratio between wheat and fertilizer. And fertilizer is clearly expensive. I mean, affordability issues are, is high on the agenda, both on nitrogen, even more on phosphate. So it's a limiting factor.
I think that, if not for relatively modest or poor, or low grain prices, we will have even higher prices for N and P than what we have today. And if you look at, as you said, the demand, has this led to lower global demand, this pressure on affordability? It hasn't, and that's, of course, maybe you can be more or less surprised by that.
If you look at 2025, with that increase in Chinese exports of 5 million tons, even if you then take away some production outside China due to India producing less, due to Iran and Egypt producing less due to the conflict and also gas diverted to other purposes, I think you will find a fairly healthy supply growth for nitrogen in 2025 and into 2026, and even despite of that, we are having $500 urea prices now. So, and I think that has taken some players by surprise. If you look, let's say, a year ago at forecasts for 2025 and 2026 pricing from most players, consultants, et cetera, they would be considerably lower than what we have been realizing.
So, yes, we have a very strong and tight supply-demand balance, despite relatively poor affordability.
On the NPK side, I think what's important to remember is that most of our NPKs goes into what we call premium products, where of course the value of those products on yield quality and you know several other aspects is kind of what determines the price and the willingness to pay. Which is of course then the absolute price that the farmers pay. When we talk about premiums, you know, we refer to that price less the sort of commodity value of the three nutrients in you know in the product.
So, in that scenario, even though sort of NPK prices go up when NPK go up as well, when they go up as much as they do now, it's natural to sort of see some contraction in the premium, in the way we measure it. And I think if you look at, you know, across nitrates and NPKs, you know, premiums have actually held up very well, I would say, considering the high commodity price environment that we have. But we have, as we reported, seen some tightening on the premium side, particularly in Asia, whereas sort of margins, which is, I mean, Yara margins, are not down in the same way.
When it comes to inventories, actually, our sales in Q4 and in the year in total are slightly up. But our production levels are also significantly up due to improvements in productivity in our production system. So that has led to—I would say a fairly slight inventory buildup, which we believe that we, or which we are working hard to, of course, sell the additional tonnages that we get out of our plant now in the spring.
Thanks. That's very clear.
Your next question comes from the line of Bengt Jonassen of ABG Sundal Collier. Your line is now open.
Thank you very much for taking my questions. I have two, if I may, both related to Q4. If you take your EBIT bridge year-over-year, prices had a tailwind of $140. Looking at your nitrate price realization, it was 358 versus your own pre-quarter material list price is at 370. Could you talk a little bit about the price realization and if it's timing or discounting? Thank you.
Yeah. So, the prices for fourth quarter realized is slightly lower than publication prices, but it actually was last year as well. So we typically, that's why I typically recommend using the delta for publication prices or delta realized prices. I think you would end up with roughly the same impact in the EBITDA bridge. But then, the other part is also that if you look at the publication prices for CAN, it's not a fully liquid reference in the sense that publications aren't able to capture the exact price that every trade goes on. I'm sure that we could expand on that, and also there aren't volume weighted, so it means that you will always have these deviations a bit between publication prices and realized prices, which are also linked to how they make their estimates and not only commercial performance.
The biggest impact in the price margin compared to the outside in, if you use pure publication prices, is really related to the NPK premiums that were pressured, especially in Asia, China, and Thailand, and that we estimate it to be roughly $20 million-$30 million impact this quarter compared to same quarter last year.
Yeah. And then I think it's fair also to say that the impact there is in Europe is mostly due to timing in the quarter.
Yeah. Okay. But last, let me ask the question the other way around then. If you take your official publication prices, your list prices to your clients, it's much higher than your price realization implies. And then back to the question, why are realized prices so much lower than the prices that you're actually announcing to your clients? It seems to be some kind of either increased competition or discounting or timing, independent of the EBIT bridge year over year.
The biggest factor in that regard is timing, right? That's in a way difficult to predict from year to year for us as well as for you guys, of course, as well. I mean, depends on a lot of different factors when the markets move, right? When buyers step in to buy, when imports come in and so on. So there are a lot of factors there that impact, you know, what how we have... I mean, how our sales team have to determine what's the optimal volume to sell at each point in time.
We can have our ideas of, you know, where we think prices are going or will go, but if the market moves, you know, you have to move with it to some extent in order to, you know, to stay a part of the market. So I think, of the factors you mentioned, I would say sort of timing is the key one.
But you're right, when we announce prices, which we do from time to time, but it depends a bit on how often we do it publicly through official announcements and how much it's just we announce at a certain point in time ongoing negotiations. So and that's really typically based on Germany and France, right? And then there can be other deviations from that in the other markets, which can lead us to deviate from those list prices you're correct, if you ask that way.
Mm-hmm. Yeah, sure. Thank you. And on the, on that topic, how should we view current publication prices? Are they a reflection of the actual market, or, is the softness that you are communicating, maybe delaying some purchases on the price realization for the current quarter?
Yeah, no, I think the list prices we have are a reflection of the current market.
Yeah.
CAN around EUR 350, that we think is pretty close to where it actually is. Yeah.
Okay. Thank you. Thank you for taking my questions.
Your next question comes from the line of Angelina Glazova of J.P. Morgan. Your line is now open.
Hello, thank you very much for taking my questions. I will also have two, and my first question is on free cash flow dynamics. We have noticed that in the past couple of quarters, there was a sizable working capital buildup, and I'm wondering how you expect the working capital to develop into 2026. And we, of course, know that the working capital trend is impacted by seasonality, but it can be patchy on a quarterly basis. But I'm just wondering in general, if you could give us some color on next year, and also because you now have a free cash flow target. So just wondering how you think of working capital as a variable in achieving that target. And my second question would just be a follow-up on CBAM.
Apologies again on this topic, but I just wanted to make sure I understand correctly what you have said earlier in the call. I believe you have mentioned that you doubt that there will be any meaningful changes to CBAM in, in principle. So I just wanted to understand, you know, is this something that you, you're saying based on the discussions that maybe you have had with regulators so far, or what is this view based on? Thank you.
Yeah. No, thank you for your questions. I think on the first one on working capital. So, I mean, first half is, you know, the season in the Western Hemisphere, Northern Hemisphere, right? And that's, forget to talk about how, that's the biggest part of the global-
Yes.
Application as well, right? So, you know, so that's clearly where we have, you know, higher deliveries and so that. In that, you typically see a buildup of inventories somewhat and working capital before season and then, you know, we typically see a release in the season. So that's kind of the, I would say, the price-neutral view. But then, of course, when prices go up or down, that impacts working capital as well. And when prices go up, like they have done, you know, through Q4, which is, of course, very good for Yara. But that, of course, also means that the, you know, the value of receivables and so on is higher as well, so then working capital goes up.
But there, there's nothing uncommon, you know, on, you know, credit days or inventory days or anything like that, that, that sort of constitutes a change. So, so this is kind of purely seasonality as such. And then, of course, there are, from time to time, some sort of changes on, you know, when prepayments happen and so on. So I think, you know, as, but, well, as season starts, and also, you know, let's see if sort of prices stabilize at this level, you know, it's fair to think that everything else equal, you see a release of working capital.
If you know, if prices go up, you will, you know, there will be a buildup, but also, of course, a release from sales done in Q4. But nothing uncommon compared to previous years. And that, of course, also plays a little bit into when you talk about improvement or how to sort of think about working capital from a value perspective. Then you, of course, think about sort of the average for the year or average for the season, which is kind of what matters. That being said, of course, working capital improvement in itself is an important topic, but that's not something we sort of improve by moving things around between the quarters.
That's more a question of working on the different aspects of working capital, such as reducing credit days, you know, optimizing product flows based on, you know, inventory days, obviously, products we sell closer to our plant generally typically tend to have lower working capital and so on. So that's clearly something that we work on as well. And which, of course, we have to measure against the premiums we achieve for some of these products, you know, in markets far away from the plant. On CBAM, just to pres...
Be precise, because I think, you know, I've seen a lot of different comments on this, and I think it's, you know, you sometimes read it as if either CBAM has been suspended, which is absolutely not the case, or you know, as if it's something that the EU Commission or a member state could just decide on their own, tomorrow. So what I said was that the Commission has proposed a new paragraph, which does not exist today, or is, you know, it's not in part of the legislation today, that allows them to suspend CBAM, not only for fertilizer, for any product, temporarily if there are unforeseen and negative impacts on the on the single market.
Now, for them to even have that possibility, that paragraph needs to be included in the legislation, and that will require sort of the full legislative process, including an approval by the European Parliament. And then when it comes to sort of what's the likelihood of that happening, that's of course anybody's guess, but if you read the media, there have been both several members of the European Parliament who've spoken out against these changes. There have been people from the Commission, you know, stating that CBAM is a cornerstone, is the cornerstone of the European decarbonization policy, and so on. So, I mean, there's clearly in all as, or, you know, in all camps, strong resistance of even you know contemplating this, even though the proposal is fair.
But of course, as with any politics, it's very difficult to sort of predict what that outcome could be. But I think what's important also to emphasize is that even if that was implemented, then, you know, unforeseen consequences, it's very hard to see how a price increase equivalent to a tariff could be unforeseen. That's... So, I mean, at least, you know, judging by the letter of the law, even, you know, even if it was implemented, you know, that shouldn't really open the opportunity for any suspension of CBAM on a product like fertilizer, due to the grounds of being unforeseen. But of course, that's my personal interpretation and not necessarily the interpretation of the European Commission.
Understood. Thank you very much for clarifications.
... Your next question comes from the line of Tristan Lamotte of Deutsche Bank. Your line is now open.
Hi, thanks for taking my questions. Kind of CBAM adjacent, but I'm just wondering on proposed changes to ETS and the phase outs of free emissions. Could you just remind us of your position there? And I think you mentioned in the past that you have credits that you could sell at some point. So could you also talk about your exposure to the need to buy credits over time? And then second question is, just given where the net debt is now sitting, which I think is below your range, what's your view on kind of capital allocation and buybacks? Thanks.
Yeah, no, when it comes to ETS, we have, as we stated before, around six million credits in our bank, so to speak. And then, I mean, the way it works, of course, is that we get a certain free allowance quota per year that, you know, matches, so far has matched or exceeded our need to buy ETS quotas, and then now free allowances will be, you know, gradually phased out, at least according to the current plans.
And I think, I mean, you can think about the credits that we hold in different ways, but, you know, just sort of measuring it physically, that kind of takes us to 2029 or something like that. Through 2029, you know, kind of where we could cover our need for actually buying credits, with what we have in the bank. And, of course, I mean, given that your question was adjacent to CBAM, obviously, we would, we'd almost assume that in the event that the EU Commission would take away or suspend CBAM temporarily, I would also, you know, almost take for granted that they would suspend or extend free allowances for the same period.
Of course, if not, it would be, you know, treating domestic industry very, very unfavorably compared to imports. And could you repeat your second question, please?
Can I just add a comment-
Yeah.
To the EU? So if you, if we have then a slower phase out, Tristan, right? So basically it means that the deficit we expect in 2029 or 2030, that won't increase as much as we-- it would have otherwise done until 2034, right? But whether we, we use those quotas in the bank or whether we sell them, that's a purely financial decision, ultimately depending on where, what, where prices are and where we think they're going, because they have a cost to be valued. So when we materialize the cash effect related to them.
Hmm. Thanks. And yeah, the second question was just around your net debt to EBITDA level, which I think is below the range, and your thoughts around kind of buybacks or what you would do with extra headroom.
Yeah, no, I think we outlined our capital allocation policy in, you know, in our CMD a month ago, and our main priority on the investment side or in the, on the growth investment side is clearly U.S. projects and in reducing our energy costs, so investments into ammonia. I think sort of beyond that, capital discipline will be very strict. Of course, if we have smaller, you know, value, very value accretive opportunities, that's of course something that we'll always consider. And then we sort of or we stick to our dividend policy of 50% cash dividend of net income.
Of course, as we also said earlier today, if there is a headroom or availability for it, we will always also consider additional buybacks, as depending on what we believe is the most accretive for the shareholder.
Thanks very much.
Your next question comes from the line of Magnus Rasmussen of SEB. Your line is now open.
Thank you for taking my questions. I have 2, if I may. Firstly, when you announced the Air Products project, you said that you could do that within your $1.2 billion CapEx frame. I assume that implies you have to be quite a bit below that level towards 2030. Still you guide for $1.2 billion in 2026. I'm just wondering, sort of, what's your thinking here, and how should we think about that beyond 2026? And the other question I had was whether you could talk about a bit about the factors impacting your earnings, which are not captured in your sensitivity, such as NPK premiums, phosphate, phosphate margins, et cetera. Where are we now relative to 2025, and how does 2025 compare to sort of historical averages? Thank you.
Yeah, I'm not sure I captured the full, your full first question, but I think, what we've said is that the Air Products project is within our capital allocation policy. We both indicated that, you know, we see sort of CapEx spend in real terms, around $1.2 billion next year. Sorry, in the coming years. And then, of course, if you sort of deduct the maintenance level that we've indicated as well, that, you know, there should be within that also sufficient space for the project portfolio that we've, that we are looking at.... to, you know, towards 2030.
And then, yeah, of course, as in the previous question, you know, that also opens up for the dividend policy that we have, and of course, evaluating buybacks versus very accretive opportunities that might arise in addition. But I think again, US projects would be the priority and of course, also CapEx discipline will be critical. In terms of variables beyond the one that we give in the sensitivities, I'll give the word to Maria.
Yeah, just to mention, I think the largest one, we have the phosphate upgrading margins, which we used to have a sensitivity on but don't have currently, but it has had an impact in 2025 compared to 2024 in general, on the positive side, even though of course have been falling for the latter half. NPK premiums, for example, it tends to be fairly stable, but we do see some variations like we did in this quarter, so that will also impact even though not covered in the bridge as such. And then you could also because we have gas exposure, mainly to TTF and Henry Hub, but we have some plant exposed to other gas costs, which tends to be more stable, but to the degree they vary, they wouldn't typically be reflected in our sensitivities.
And fixed costs, for example, which obviously have been a factor for the years. I think I'll leave it at to be the main drivers, where most of them have contributed positively for 2025 as such.
I don't know if it's helpful, but you have this, you know, the phosphate upgrading depends on sulfur as a raw material for most production processes, and sulfur has been so volatile. So for, let's say, for a phosphoric acid base, which is a normal route, a phosphate upgrader, there's been a very strong cost increase on the sulfur part, which we don't have with our nitrate phosphate process. That is the NPK plants in Norway. So that may also make it a little bit more complicated for you to make that assessment, because phosphate upgrading margins are a little bit different depending on which processing route you are using.
Yeah, we could also, since we are talking a lot about CBAM, today. So for 2026, that will also have an impact. So CBAM cost doesn't impact our EBITDA, as long as we're utilizing credits that we have, but the price effect will be there, of course, and dependent on whether it's in Europe or outside Europe, that will have different effects. So as we mentioned in CMD, we will get update, well, in pre-quarter package, we will update sensitivities to reflect that in due course before 1Q.
Our final question comes from the line of John Campbell of Bank of America. Your line is now open.
Yeah, thanks for coming back. Just had a one or two follow-ups, if I could. Could you maybe give a sense on your view in terms of the potential resumption of Chinese urea exports in 2026? You know, how many million tons, basically, you're expecting, number one. And number two, coming back, I guess, to Air Products, you know, have you—presumably, you've done some sort of levelized cost analysis in terms of delivering that ammonia, assuming the project can be built for $8 billion-$9 billion or whatever it is.
And I thought, you know, maybe one way to think about it is how that compares to something like the, the gray cash cost of delivered US ammonia, and maybe what carbon price would be required or sustained to actually kind of make the blue ammonia projects look cost competitive with just importing, gray ammonia and, and just paying for the CBAM. Have you kind of got a view on that? I think I came out to $160. Of course, that's just a ballpark figure, but, you know, do you have a sense maybe on the longer-term carbon price?
On your first question, I think we don't have a very specific opinion exactly how much that will be exported. We have just said that it's certainly a very important factor in the global balance, how much that volume will be. But we are also referring to some external opinions around this in the press, where last year it was, let's say it was in second half April, that this was addressed initially by the Chinese government and NDRC. So I think it would be logical for something similar, that when it gets to second half April, maybe there will be that will be on the agenda of the Chinese government.
We observe that some of the consultants are working on a kind of baseline, around 6 million tons, maybe a little bit, little bit higher than 2025. But of course, that nobody knows how that is going to play out.
Yeah. And I think, I mean, obviously, it's that's very difficult to predict exactly what they're gonna do, right? But I think more important than the actual number of tons as such is, you know, what will it potentially do to the global market and global pricing, right? And then I think it's just important to keep in mind that at least so far, it seems that the main policy from the Chinese government has been to keep urea prices low. And obviously, the more you export, you know, the more you're impacted by global pricing. And if you export to the extent that you impact global pricing, then, of course, it's very likely to assume that it will impact domestic prices as well.
And as we've talked about in our Capital Markets Day, and as we can see, there's nothing that would point to sort of a softening supply-demand balance outside China, meaning that sort of any opening to exports would sort of face a quite high price environment globally. And I think it's sort of safe to assume that they would sort of control exports to the extent that it doesn't impact domestic prices very much. And of course, I think it's also logical to assume then that, you know, at least from a planning perspective, that shouldn't impact global prices too much either. But of course, things are difficult to predict.
Mm. Okay, that's good.
And on the Air Products project question, of course, or the US project questions, yes, I mean, we have, of course, our internal views on sort of what different levels of CBAM would do to ammonia pricing into Europe and so on, and how that impacts the project. But that's not something that we, you know, can share publicly. But I think as we have said before, it is... I mean, it is an ammonia, it is a regular ammonia plant with very high scale and inherent advantages that we talked about in our Capital Markets Day . And sort of there's a gray sort of price comparison to that, and then there's an added premium, obviously, from CBAM as well.
I think as we've said, also that, you know, the, just from a, from a total project perspective, the sort of the CO₂ capture part in itself is more than covered by the 45Q tax credit. Just from that perspective, you know, this is something that, even without a CBAM premium, you know, should be, should be profitable, but obviously the, the CBAM adds it up to the profitability of building a decarbonized, plant.
Great. Thank you.
Thank you. Again, if you'd like to ask a question, please press Star followed by one on your telephone keypad. That's Star followed by one on your telephone keypad. Thank you. Your next question comes from the line of Jillian Gaillard of PGGM Investments. Your line is now open.
Thank you. I have two questions. First, in your capital allocation framework, you highlighted maintenance and growth CapEx, but there was no explicit mention of sustainability or the transition CapEx. Could you explain how decarbonization investments are reflected and prioritized within that framework?
Well, I think, as we've said, you know, the U.S. projects would be the lion's share of that growth CapEx, right? And sort of even though they represent lower gas costs, more scale, lower fixed costs per ton, they also are, you know, key to decarbonization. So I think, from that perspective, you can sort of say, I mean, the benefit that we have, right, is that a project like that in our position in the ammonia market means that we can do decarbonization profitably and have, you know, because we have the other benefits as well, right? So I think that part is fairly sort of, I would say, covering that.
And I think, when it comes to, to the maintenance CapEx, parts of that go into, you know, improvements in our plant that are also related, ESG related, such as energy efficiency, which, you know, also has a, a good monetary impact, by, by using less energy and lowering costs. But I think it, in general, Yara does not do ESG investments unless they are profitable. So there's no separate budget for, for that.
Okay. Okay, okay, that's, that's, that's clear. It would be helpful, though, if you would include a figure that would show that visually, 'cause now it's, it's just, a maintenance and growth. Onto my second question. It stated that Yara's capital allocation policy is based on maximizing shareholder value while maintaining a mid-investment-grade profile. I'm wondering, how do you operationally ensure that capital allocation decisions are still consistent with either a 1.5 degrees aligned pathway or a 2... well below, 2 degrees aligned pathway ?
Yeah. No, I think we have set targets for 2025, which we achieved, and 2030, that we're, you know, working hard to achieve. And, you know, these are based on exactly that. And then we in our CapEx allocation, we, I mean, or to put differently, to achieve those targets, like we have done for 2025, we have a portfolio of different projects, and of course, the US ammonia investments being by far the biggest one, but also other projects-
Mm-hmm.
like electrification project. We have our CCS project in Sluiskil that we complete this year, and so on. So we look at our portfolio in totality, and then we look at whether our CapEx or sort of the capital investments that we do provide a you know sufficient return or a strong return to our shareholders, as well as how we sort of meet targets such as the ones we've set, right, on the on the ESG side. But I think what's important to remember is that in order for that to be possible, there needs to be a firm sort of economic value drivers, right?
So, of course, our investment in Sluiskil CCS, which contributes significantly to our targets, would not have been possible unless there was the carbon pricing in Europe, right? And I have to say, if, you know, these type of uncertainties, even though we believe firmly that CBAM will remain in place, I would, you know, I think it's safe to say that if this kind of uncertainty would have come exactly when we were to do our investment decision on that project, you know, it's just no guarantee that we would have actually approved that. So I think that's important to keep in mind, as well. However, we do believe that, you know, that project will make us very competitive in the European context.
That's kind of the basis for all the projects they need to be. They need... So basically what I'm saying is that, you know, the regulatory side needs to be in place so that these projects are profitable. Some of them are profitable no matter what, because saving electricity is typically possible. But some others will not be profitable unless the regulatory side is in place.
Clear. Thank you.
Our next question comes from the line of Mazahir Mammadli of Redburn Rothschild. Your line is now open.
Thank you. My question is on CBAM. Basically, I wanted to ask, so we saw the benchmark values published by the EU on CO₂ intensity of nitrogen production in various countries. When you compare those benchmarks to the CO₂ intensity of your own production, do you see any advantage? If so, how big is it? Thank you.
Yes. So for both urea, we will have a variation between our plants naturally. Some will be very efficient, and some will be less efficient, but in general, Yara's plants will be more efficient than both the average European, but more so the global averages and the benchmark for imports.
Yeah.
It's a short answer.
Absolutely. And I would say, you know, particularly in the nitrate production, with the investments that we've done there over a long period of time, we are significantly more advantaged on, you know, the carbon footprint side. So that's, of course, a huge advantage on nitrates in Europe, particularly, you know, when you compare to imports of urea. And I think, since this was the last question on CBAM, of many of the questions on CBAM, which, of course, is a very hot topic these days.
I think it is also sort of, you know, in its place to add that we are very concerned about sort of the impact on the farmer, obviously, not only from CBAM, from increased cost on fertilizer, but also on a lot of the other regulation that's put on the, particularly European, farmers. But I think it is a very easy way to solve that problem for the EU, particularly when it comes to CBAM, and that would simply be to give that, you know, the CBAM revenue as, you know, as a subsidy back to the farmer who buy the fertilizer. I can see no better use of that money than that.
Sort of the train of thought that you would sort of suspend CBAM so that dirty imports from outside Europe can outcompete European industry, you know, is clearly not the best route of achieving that. So I think, you know, there is a very easy way for the EU to help farmers and not negatively impact European industry as well.
Thank you.
We have reached the end of our Q&A session. I'd now like to hand the call back to Maria for final remarks.
Thank you to everyone for joining. No further comments from our side, but investor relations is available for further questions for those of you who have follow-up. Thank you, and goodbye.
Thank you for attending today's call. You may now disconnect. Goodbye.