Thank you for standing by. My name is Bhavesh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Yara Capital Markets Day Q&A conference call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star followed by the one again. Thank you. Silje Nygaard, you may begin your conference.
Thank you very much. Hi, everyone. Thank you for joining this conference call on the Yara Capital Markets Day. I'm Silje Nygaard with the Yara Investor Relations Team. The topic for the Capital Markets Day was delivering growth and decarbonization with capital discipline. We'll assume that everyone have watched the webcast. We will go straight to Q&A today. With me today, I have the following representatives from Yara's management team. We have Svein Tore Holsether, our CEO, Thor Giæver , our CFO, Lars Røsæg , our Deputy CEO, Magnus Ankarstrand , CEO of Yara Clean Ammonia. We also have Rejane Souza , who are the SVP for Global Innovation, Bernhard Stormyr , VP Sustainability Governance, as well as other colleagues from the company. Together with us digitally, we have Chrystel Monthean , our EVP for Americas, and Fernanda Lopes Larsen, EVP of Africa and Asia.
operator, we're ready to take the first question. Could you please open the line?
Thank you so much. At this time, I would like to remind everyone, in order to ask a question, press the star followed by 1 on your telephone. Our first question comes from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead with your question.
Yes. Good afternoon, and good morning, everyone. Two questions, if I may. First of all, can you please elucidate your blue ammonia projects in the U.S. a bit, the planned ones? Thanks for giving us the basic figures during today's CMD. I still have a couple of questions on that, though. First, who's your partner for sequestering the CO2, and can you already also share who's doing the engineering, at least for project YaREN? Second, on that topic, would it have been possible to turn your existing Freeport facility blue and as such, also benefit from Inflation Reduction Act, or are any benefits out of that strictly limited to new investments?
My second real question is, also, since we have the benefit of discussing with management, could you please share with us your current insights into trading conditions? As for example, Brazil started well into the season, and what is your own view on the currently depressed pricing environment, given the probably sustainably higher farmer profitability? Thank you. That's it from my side.
Yeah, no, Magnus Ankarstrand here. I can start regarding the questions for in the U.S. As presented in the material, we have one named project with together with Enbridge in Corpus Christi. Then we are also planning for a second project and reviewing options, and then we'll get back to more detail around that and in terms of partners, et cetera, when the time is right. When it coming to concrete partners for CCS, that depends on the market or on the available suppliers in the respective regions.
As we did announce when we announced the one in Corpus Christi, is that Enbridge themselves, with their joint venture, is one potential candidate for that in that region. We also, of course, evaluate all potential suppliers there, and the same will be the case for the second project when that's more confirmed. In terms of engineering and also construction partners and so on, that we typically do not announce until we sign a final contract for the construction of the plant. We will hold back with that until we know. In terms of the question for Freeport, yes, it's possible to decarbonize Freeport as well. We are looking into various options for that.
There is, as you know, today, an external supply of hydrogen into that plant, which offers some flexibility in that regard.
Hi, Christian.
Yes, sure. Sorry, go ahead.
Go ahead, Christian.
I was just gonna ask, I mean, excuse my ignorance on the Inflation Reduction Act, but would it be possible to also take advantage of some IRA measures by turning Freeport blue?
Yes.
Okay, thank you.
Christian, this is Tore here. I'll try to address your last question, which I think had three parts. It was Brazil, it was general trading conditions, and also... Hello? Hello? Hello?
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Question?
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First of all, it's in terms of the sort of recent developments in the regions and in our business. We'll come back to that in our, in our results presentation in a few weeks. Generally speaking and referring to my presentation earlier or my section of the presentation, that we have had a lot of new urea supply over the last couple of years, well above normal trend demand growth, and that's, that has influenced the picture, in particular, in the last six months or so as energy prices fell. If you like, despite quite strong farmer incentives, price developments have been muted, but with a positive trend in recent weeks.
Really focusing on the long-term picture, we are then quite positive given the drop in new urea supply that is projected going forward, and still with strong farmer incentives. Of course, this is linked to also the broader picture that we paint and our strategy, and that there are... If you look at urea from a decarbonization point of view, it's quite a challenging case because the product actually does contain CO2 as opposed to nitrates and NPKs that is part of our strong strategic fit here, that we can decarbonize that production through clean ammonia that can be sourced from outside Europe and also be through carbon capture in Europe. Yeah, thank you.
Operator, back to the next question.
Thank you so much. Our next question comes from the line of Alexander Jones from Bank of America. Please go ahead with your question.
Good afternoon. Thanks very much. Questions. Two, the first on the CapEx outlook. You said a ceiling of $1.2 billion per year, but this is in real terms and also after disposals. On your current plans, can you give us any indication of nominal gross CapEx for 2024 and 2025, please? Then, second question, around disposals, actually, given that you've highlighted it's a net number, can you give us any sort of indications on how you're thinking about what assets in the portfolio might be considered non-core? Thank you.
Yeah, thanks, Alex. I'll have a stab at both of those. First of all, in terms of the CapEx, we do not have guidance at this stage for 2024 and 2025, but you can expect it to be in line with our policy, which, and I should add to your recap there, that it's not a ceiling per year, but it's an average maximum over time. As you see with our guidance, this year, we're above that level, but we've been below in recent years. Also, as we indicate that for the potential larger growth CapEx that we have in the pipeline, as we mentioned in connection with YCA, is that we do not foresee major expenditures before 2025.
In terms of what assets, that could be subject to portfolio optimization, we would come back to that when we have specific cases. In general, as you, hopefully in line with the messaging today, there are a few key elements that will typically be part of the consideration. One is decarbonization opportunities. When we talk about a sort of fit for future asset, that's an important part of it. It's about operational flexibility that would include, both on the sourcing raw material side, in terms of market access, whether you have many options, sort of both domestic and export-wise. Also in terms of the, scale can be a factor as well.
I mean, if you are strong on all those factors, then you have a head start in being a fit for future asset.
Thank you.
Our next question comes from the line of Rikin Patel for BNP Exane. Please go ahead with your question.
Hi, thanks for taking my questions. I have two. Firstly, on M&A, you said your targets both on smaller deals within the space. Just curious what sort of targets you're looking for, whether this will be more orientated towards the nutrition side, i.e., in fertilizers, or whether you'll look at industrial assets, maybe to increase your leverage to clean ammonia, for example. Secondly, just on the demand side of the equation, you covered a fair bit in your presentation, the impact that biostimulants, biologics, and more efficient fertilizer use could have on the markets going forward.
Just curious what impact you think this could have for the demand for chemical nitrogen fertilizers going forward, and whether this could actually materially disrupt demand for synthetic fertilizers like ammonia and urea? Thanks.
Yeah, I'll, hi, Rikin, this is Tore again. I'll try for both of these and others needed. First of all, on the M&A part, this is part of the mix, of course, for our strategy now. The last part of your question was around clean ammonia, that is very much where we intend to focus our resources and capital in the coming years. As we mentioned, you know, we're aiming for two world-scale projects in the U.S., that we hope to pass FID in the coming year or so. The bolt-on M&A is more as you mentioned, towards the crop nutrition side of the business.
We've done some of this in recent years. We've made smaller acquisitions, for example, within organic fertilizer. There could be more of that, but with the larger focus near term on the clean ammonia side, the world scale assets. Then your question about sort of improving efficiency across the ag space from a wide range of sources, biostimulants, improved seed technology, improved fertilizer products, and use.
I would describe this more as a long-term trend that we have been both living with and promoting ourselves and to make very clear, that is, our objective is not to maximize the tons of fertilizer produced and sold and used in the world, but rather a bit the opposite, to provide the most efficient sort of package to farmers and industrial customers, and our whole portfolio. That is. I mean, the answer to your question is yes, over time, this will and has already made the world more efficient, but that's exactly the business we're promoting and we.
We hope and work for both, in the other terms and globally for the world to continue doing that, because it's an important part of improving our footprint resource-wise, environmentally, and across all the other systems.
Yeah. No, this is Svein Tore, just to add to board's comments. We should think about this as a major business opportunity for Yara, taking into the consideration the type of fertilizer that we produce, and our global footprint and reach, and the agronomic competence. When we go through the whole value chain of the food companies and reaching consumer, the area that has the largest potential for emission reduction is really the field of the farmers. That's where, you know, we can utilize our competence to drive that.
We've enclosed some examples in the presentation pack as well on what we can do in terms of emission reductions, also think about water consumption, YaraRegen, what we can do there in terms of fertigation to reduce. 70% of fresh water in the world is used for agriculture. You can do a lot of improvements in that. How nutritious is the food that you eat? It's about soil health, availability of micronutrients, which makes a healthier food through the right practices. At a farm level, you have a soil that is more resistant to erosion, one that holds nutrients better, one that holds water better, one that secures biodiversity.
If we produce more food in less land, we can free up farmland today back into nature with the carbon sequestration, biodiversity as well. There are a number of elements here where we can create significant value for the planet, for society and farmers. Yet today, not enough of these are turned into revenue streams for the farmers, and that's where we need to continue the drive on this. That makes a lot of sense from an investment point of view.
If you, if you think now globally in farming, in the same way as Inflation Reduction Act does in the U.S., that incentives are created to drive change in farming practices, this is a significant business opportunity where I think Yara, with our platform and competence, is particularly well positioned to both support, shape, and drive this.
Thanks.
Reminder, if you would like to ask a question, please press the star followed by the one on your telephone keypad. Our next question comes from the line of Joakim Hellquist from Affärsvärlden . Please go ahead with your question.
Yes, thank you. Affärsvärlden , the Swedish newspaper, no, business magazine. Sorry. I was wondering about the IRA with the Yara Clean Ammonia. If there's a risk that you guys get too carried away, given that there is a presidential election next year. Because, you know, I hear more and more complaints about the elevated U.S. fiscal spending and how that will ruin Fed's inflation job. I was wondering, I mean, what if the IRA gets kind of rolled down significantly after the election, and how does that risk play into your business decisions with the YCA? Thank you.
Yeah, Magnus Ankarstrand, I can answer that question. I think, first of all, it's important to outline that the reason we look for blue ammonia, large scale blue ammonia project in the U.S. in the first place is the very advantageous energy innovation and energy pricing in the U.S., combined with the ability to build at significant scale, which is important as well for profitability. The fact that CCS in itself, so the sequestration part, is very competitive compared to other parts of the world. The project there are inherently competitive to begin with, compared to other places in the world. Of course, the Inflation Reduction Act is important.
It's important to keep in mind that there was already a Section 45Q section in the Internal Revenue Code prior to the IRAs, which offered support for CCS. Our projects are as advanced as they are because we started that work before the Inflation Reduction Act came along as well. Obviously, an important element to make these projects happen is that support. There's no doubt that it's important. Of course, the risk for a political change is of course a factor that we take into account when we analyze this. Also important to keep in mind that these are not the only projects we have in our portfolio.
We also have, we wage our bets other places in the world, as well, as also illustrated in the presentation. I think without going too deep into the political analysis of this, of course, the Inflation Reduction Act, and particularly the elements that surround CCS and hydrogen, seem to have a relatively strong support across the bench, in Congress as well, both parties. It's, of course, very important in many states, Texas, Louisiana, as an example. Which should matter for both sides of the political spectrum. We monitor the situation very closely, obviously.
We believe that this is very beneficial for the U.S., as well, particularly this part of the IRA, in terms of attracting investments and future tax revenues. We believe that this is good both for the environment, as well, for the U.S. economy.
Okay. Just one more on, given the large differences between the U.S. and European natural gas prices, I was thinking about this, divestitures and things like that. Is it, like, a fair assumption that you will try to, like, migrate more towards the U.S. because, you know, the supply, I mean, the situation is much more stable for natural gas? Thank you.
Yeah, yeah. it's, that's what makes these investments particularly interesting, because with our structure of where we have our assets and the flexibility that we have in our system, we're really in a unique situation that we can build capacity based on cheaper energy in the U.S., as well as a very supportive framework for capturing CO2. At the same time, we can transport that ammonia over to Europe and utilize that in production of finished products.
With the Yara Clean Ammonia infrastructure, with the availability of ammonia exports out of the U.S. and import points that we have in Europe, what we're doing now is transferring all the learnings and what we've seen now in the last year and a half in terms of flexing our production in Europe, when energy prices are too high, and turning that into a normal operating modus where volatility is the new normal. I think we're well positioned to, so to say, best of both worlds here.
Okay, thank you.
Thank you. There appear to be no further questions at this time. Silje Nygaard , I turn the call back over to you.
Yes, thank you, operator, and thank you for everyone for dialing into this call today and watching the Capital Markets Day presentation. Should you have any further questions, the investor relations team is, of course, available. Thank you for today, and speak again soon.
Thank you. This concludes today's conference call. You may now disconnect.
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