Yara has announced that it is expanding its improvement programme by 70%, evaluating an IPO of its industrial nitrogen businesses, and setting out clear principles for capital allocation.
Evaluating IPO of industrial assets
An IPO of the company's industrial nitrogen businesses would create the first integrated industrial nitrogen company. Such a company would take a prominent position in the industry, with the highest value proposition in core markets, a solid European platform and an attractive market portfolio balancing stability and growth.
The conclusion of a final IPO scope is expected early 2020. As part of the evaluation process, the business units Mining Applications (TAN), transport reagents and industrial nitrates will effective 1 July 2019 be organised in a separate entity. Yves Bonte, previously Executive Vice President, new business, will take up the role as CEO of this entity, reporting to an internal board of directors chaired by Yara’s President and CEO. Consequently, Bonte will no longer be a member of the the company's corporate management team.
“Yara is well underway to becoming a focused crop nutrition company, and the evaluation of an IPO is an important step in that direction,” says Svein Tore Holsether. “This would create significant growth opportunities, strategic focus and flexibility, for both a carved out business and for Yara. A new ownership structure would allow these businesses to continue to thrive and grow profitably, while continuing to provide healthy returns to Yara.”
Updated targets for capital allocation
Following a period of several significant investments, the company has stated that its focus is on strict capital discipline and capturing the full value of recent investments. The company has announced a targeted capital structure to maintain a mid-investment grade credit rating, targeting 1.5x-2.0x net debt/EBITDA and net debt/equity <0.60. The target for ordinary dividends is lifted to 50% of net income, subject to maintaining a mid-investment credit rating.
“Our updated targets for capital allocation reflect our commitment to a mid-investment grade credit rating, while offering competitive returns to our shareholders,” says EVP & CFO Lars Røsæg.
Increased improvement programme targets
The company has also announced a 70% increase in targeted earnings improvements from the Yara improvement programme, expanding the programme from 2020 to 2023. Key levers to achieve these targets will be higher production volumes and energy efficiency, a leaner cost base with clear fixed cost targets and improved working capital management. The improvement programme is on track to meet its original end 2020 target, representing an important milestone towards realising the expanded targets by end 2023.
“The Yara improvement programme is an important element in our culture of continuous improvements. Thanks to the quality of our organisation, we have realised significant savings over the last years, providing important support to our bottom line in challenging market conditions. This gives us confidence that we will reach also the expanded targets,” says President and CEO Svein Tore Holsether.
Read the article online at: https://www.worldfertilizer.com/nitrogen/26062019/yara-expands-improvement-programme-by-70/