Yara International ASA (YAR) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Yara's First Quarter Results 2021 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Thor Giæver. Please go ahead, sir.

Thank you. Hi. This is Thor. Then so as -- for those who don't know you -- know me, sorry, is I'm responsible for Investor Relations in Yara. We have had a presentation just an hour ago that hopefully many or all of you have watched. So from our point of view, we would just like to open up for questions. So -- and yes, I'll at this point hand over to the operator to give you the instructions on how to enter your questions into the system. Thank you.

[Operator Instructions]

Yes. So operator, we are not seeing any questions in the queue yet. So if you can see them at your end just go ahead.

Your first question comes from the line of Joel Jackson, BMO Capital.

I had a few questions. I'm going to ask them one by one. I was going through all your different releases. And I couldn't really tell how you feel of the nitrogen market right now. I think you talked about nitrate level -- inventory levels being low. But how do feel of the nitrogen market right now? Are you positive? Are you concerned about the short-term seasonality? How do you feel about it into the rest of the year?

Yes. This is Terje Knutsen, EVP, Farming Solutions. I think I would actually start a little bit with the fundament of basically the whole ag sector because we do see a very strong backdrop now. If you follow some of the broad-acre or extensive crops, with wheat, corn, soy, they are all at a very high level. Even if we take the overall food price index, I think we are now, during the first quarter, 17% higher than a year ago and actually 10% above the 10-year average. And this obviously means that we have gone from a supply-driven market to a demand-driven market. We have had a sharp increase in prices, as I'm sure you all follow, with a slight adjustment lately. But fundamentally, we are seeing a strong nitrogen market for the time being. And of course, the Northern Hemisphere now is finishing off the season with then a typical adjustment in the market, but the fundamentals are strong.

Okay. I was going through your website for the Agoro carbon alliance. And I saw some of the projections or some of the dropping farmers for pilot tests. Could you talk about that -- of the Agoro carbon alliance program? What benefits you can offer farmers? And what kind of metrics can you prove to farmers right now that you can get them more value?

Yes. So as was said in the presentation earlier today, we will have a commercial launch a bit later in Q2, where we will go more into you could say the details of our Agoro carbon alliance. But we have a lot of work now with our pilot in North America. We are also positioning ourselves for other key geographies such as Brazil, Europe and India. And concretely, we work with a combination of the sequestration cover crops. And also where I think we are unique at Yara, that we can have an optimized nitrogen management, coupled with the sequestration and cover crop programs. So this is then scaling as we speak from a pilot level for the time being.

And this is Svein, so just to add to that. We're very excited about Agoro and the opportunities in that. And that's one of the promises within agriculture, that not only is it possible to reduce emissions, but by using the deal with the pharma region also do carbon sequestration and reducing CO2 in the atmosphere. With -- our farmer-centric approach has been developed over our 116 years of history, gives us a unique opportunity to work directly with the farmer utilizing our agronomic competence. But of course, also linking that with the data and using digital tools, technology to verify and to equate that marketplace. And that falls -- or is part of the solution to reducing emissions, but it's also providing farmers with additional income. So we're very excited about this, and we had very good discussions, both with the farmers and the science community around how to develop this. And we'll get back with more on that and the commercial launch of this later on this quarter.

Okay. And finally, obviously, seasonal declines in urea -- like sharp decline in urea are a normal part of the business. You can't predict the future perfectly, but -- or the exact timing of that. But do you have a sense of where floor prices relatively could shake out this year versus the last few years? Like I'm not going to ask you if it's necessarily $50 a tonne, $10 a tonne lower. But can you maybe provide some building blocks to say where floors might be relative to last year and last few years?

Yes. First, I think it's important to say that we have geographical differences. If you take inland grain belt U.S. versus coast versus Africa versus China, there are differences. And what I think we have seen, which is promising, is that both domestic demand in China, domestic demand in India, demand in Brazil, which are all obviously key and high -- of key importance in the ag sector have been strong to the extent that we have had an increase of export -- modest increase, I would say, of export from China, which we see positively. Because that basically means that there is a demand out there, and still, let's say, positive for the price level. We have seen in -- particularly from the North African producers in the last couple of weeks, again, a strengthening in price based on basically the last part of the season of the Northern Hemisphere. And yes, again, fundamentals are strong. So we are quite positive on how we finish, let's say, the season in the Northern Hemisphere this year versus what we have seen in previous years.

We will now take our next question. And the next question comes from Jaideep Pandya from On Field Research.

The first question really is on India. So basically a lot is sort of hanging around the India tender and sort of reading that China utilization is very high right now. So the market could actually just be absorbed from the Chinese supplier, the India tender that is. And if I combine that with what is happening with COVID cases in India, how do you see the India tender sort of developing and the market sort of in terms of the supply dynamic reacting to it, please? That's the first question.

So we, as Yara, we do not participate in the India tenders as such. But obviously, we follow it, like I'm sure all of you do. Again, I think key here is that we have had a quite strong -- the Indian season is, as you probably know, April to March. And we saw a 4% increase in the urea sales. We have now seen for the second consecutive year a strong planting, which should indicate also, let's say, a continuation of a positive trend. In the same period, we have seen a 1% increase in production, which means that India increasingly is important for the -- if you like, the trade balance on urea. And again, we see all of these factors positive. Yes. Right now very short term, there are some -- at least as I read from publications, issues around COVID and, let's say, those authorities that are responsible for the tenders. But again, we think that the underlying fundamentals are positive and that India will be back in the market.

The second question is just around supply. So if I stick to sort of that topic, there was lot of supply expected to come from India. And then just your comments around the coal-based supply in China with the coal prices going up. Have you seen sort of a fundamental shift in the cost curve with regards to the Chinese producers? And then, yes, any thoughts around new supply additions this year from that region?

Maybe I'll start and then if you have anything to fill into. Well, first, to -- the urea production in China is actually fairly stable. It has been according, again, to external sources up around 2% to a year earlier. And as normal in the winter season, there are -- there is, let's say, an allocation of the energy sources, which has meant that the availability has been relatively limited from China. Also, the domestic price has been up for urea in China. In dollar terms, a bit more than 20% according to our market intelligence. And again, that leads up to a situation, which is quite strong for the domestic market. We do not foresee that we will have significant changes in the utilization of the Chinese capacity going forward. But I don't know if you have on that, Thor?

Yes. No, I think, as Terje said, it's -- the higher prices globally so far have not sort of resulted in significant increases in China, which is, from our point of view, obviously, good news. I think you asked also about new projects in general. And as we say in our report and presentation today, we note that consultants like, for example, CRU do have a number of projects penciled in for this year, but we haven't seen much from these so far. And we also observe, partly from our own experience, that executing projects during a pandemic is harder than normal. And even in normal times, there's -- it's very normal to see delays. Empirically, we've seen about 2/3 of projects experience delays. And -- but it's clearly even harder right now. So we would not be surprised if the supply is -- new supply is lower for the time being than the projections space.

Just -- and just my final question is just around your carbon deficit. If you can just update us as of 2021, what is it? Like how much CERs are you buying? And then you expect that this will remain sort of stable in the '21 to '25 time period? Or do you expect it to go up with the new quotas on nitric acid and ammonia?

Yes. So as of now, we are roughly in balance in terms of the credits in the -- within the EU ETS system. As you may know, the sort of quotas and frames for future years are not published normally -- well so far until often around the turn of the year, right? So we got the 2021 numbers, I think, early this year. And that's what I'm referring to. We are roughly balanced on those. I think it's fair to assume that these quotas will tighten, and that's one of the many reasons why we are working to decarbonize our whole value chain really longer term, both in terms of products and infield practices and through the whole chain.

We will now take our next question, and the question comes from Adrien Tamagno from Berenberg.

First question is, why was your ammonia production down year-on-year and sequentially, please?

Sorry. Can I kindly ask you to repeat the question?

Yes. I was asking why your ammonia production was a bit down sequentially and year-on-year?

Yes. So if you look at the improvement program, which we measure on a rolling basis, we are actually up on our performance on the improvement program. Also, then out of that definition had some turnarounds in the first quarter related to Babrala, [ Umberson ] some smaller turnarounds. And then we've had some volatility and reliability on certain sites, but on a trend basis, trending positively, both on ammonia and non-finished products.

One factor to just add is that we did close the Trinidad plant, so roughly a year ago. So that's one factor that isn't, if you like, included in the improvement activity, but that reduces the absolute volumes.

Okay. And on the Digital Farming, you report this 5 million hectares under management. Can you just clarify how much do you think it represents compared to the acreage you serve? And how are you going to double this area under active management this year?

Yes. So we are presently focusing significantly on growing this. I think we have gone from a -- let's say, a typical early development stage to having somewhat more maturity in some of the digital solutions that we are developed constantly -- I would say, developing. And we are now into a phase of scaling, both in the smallholder segment, where we typically focus more on, you could say, sharing knowledge and enabling the farmers to grow a better crop and in the professional markets where we concentrate more, relatively speaking, on tools like optimizing the nitrogen application, as an example, as mentioned in the presentation today with an example of ag farm. You could say that when we talk hectares, we are typically more into the professional market segment. While in the smallholder segment, we typically talk simply a number of active farmers on the tools that we develop.

Okay. But in terms of revenues, how much does it represent now for Yara, such initiatives?

This is a number we do not specifically refer to. But again, I would say that our focus right now is to scale and ensure that we deliver on the farmer connectivity, which we think has a significant value going forward. Yes. So present focus is on scaling the connectivity to farm.

And then we should add -- it's Svein Tore. We should add on the digital side, another upside longer term is by using technology. And through the digital connectivity, we're able to measure more than just the crop yields, but also the impact on emissions both in field, but also efficiency and other parameters that over time will become value streams as the food system is working to reduce its total environmental impact. And I'm sure you've seen numerous new targets being set by both retailers and food producers. And a large portion of that will have to be done by the farmer and in the field. And this will, in turn, mean that our premium products are well positioned to help on that combined with our agronomic competence at scale through digital.

And your next question comes from the line of Andrew Stott, UBS.

So a couple of things. I just wonder if you could spell out the impact in Q1 of the NPK margin dilution. So is there an EBITDA number you can pull out of that bridge? And then related to that, how quickly can you catch up and get back to what you might see as more normal margins in NPK? Second question is more longer term. Just wondering where you are with Porsgrunn, with some of your engagements with the government and other third-parties? And just any other updates you have on your plans to introduce green hydrogen into your production?

Yes. Maybe I'll start with a more general comment to NPK. I think those of you who follow us and have followed us for quite some time will see that in a period that we have behind us with sharp price increases, we tend to have a lag on the premium. And this is really, you could say, maybe a weakness in a situation right now, but, generally, a strength in the sense that we have less volatility into our premium products simply because being very specific on how we segment the market and position those products in. But it clearly also means that we do obviously follow the price trends and we expect to be back to a normal premium situation like we have seen in the recent past. And this time lag is somewhat longer on our NPK typically than what it is on the nitrate side simply because how those markets operate. I think you will see that we will swing this back in a relatively short time.

Yes. I mean, I can just briefly add, this is Thor. The NPKs are most global volume products. We sell in a very high number of markets and segments, crops, et cetera, and it's value selling. So these are prices that don't move as fast as the pure nitrogen prices, including nitrates. As you know, the -- it's more of a fewer markets and more kind of list-price type increases. So yes, just to reinforce what Terje said, that this is very normal. That Yara's NPK prices do not -- are nowhere near as -- have a much more stable development, but they are rising now as well. It just takes a bit more time. And then it's very -- as we've touched on in the presentation, the higher crop prices we're seeing now are very positive for our premiums, in general, not least for the high-quality products like the NPKs. And also, the last point that -- a reminder, that premiums and margins are 2 different things. But the premium we show because it's a measure -- a market measure of how our prices compare to the commodity alternatives. But just because the premium is squeezed short term does not mean that the margin is. As you can see from our results, the margins are improved.

And Svein Tore here. Regarding your question on the green ammonia project, as you saw in our last -- or for the fourth quarter presentation, we established Yara green ammonia as a separate entity. And a couple of months ago, we launched the project to look into converting our Norwegian plant, Porsgrunn, to green hydrogen to produce green ammonia, together with Statkraft and Aker. And the work on that is progressing well, and we're in dialogue with the relevant stakeholders for how to structure that as it obviously needs support in its initial phases. So we're really excited about the opportunity that green hydrogen and hydrogen is when it comes to zero-emission energy. And with our existing competence in ammonia production, in ammonia trade, also logistics with our own fleet, with our tanks and so on. Yara represents an infrastructure that could enable the hydrogen economy. So I think, in many ways, we need to think differently about Yara going forward than what we've done in the past. At -- where we were then a Crop Nutrition solutions company. We will be that going forward as well, but it also means that we will be a major player in supplying clean energy. Because the ammonia right now in the world is mostly used for fertilizer production. In the future, this is a very promising fuel for the shipping industry as well is -- for them to reach their emission targets clearly stated by IMO. And this will change our company as well.

Your next question comes from the line of Chetan Udeshi from JPMorgan.

I've got 3 or 4 questions. First one is simple. Can you maybe -- sorry, if I -- sorry for my ignorance, if this was discussed in the presentation earlier this morning. But what is actually sitting within the Clean Ammonia segment? What is Clean Ammonia at the moment? Just intrigued by the nomenclature used for that segment. The second question was just in terms of volume growth. There was hardly any growth in deliveries in Q1. So just wanted to understand. I think the backdrop is supportive and you guys talked about it, the pharma economics, et cetera, et cetera. So why did we not see any volume growth in Q2? The third question was just going through a slide which talked about Farm to Fork proposals. And I think, at least from my understanding, one of the proposals there was to reduce the consumption of fertilizers by 20% by 2030. And I don't see any mention of that. So I was just trying to understand, has anything changed as far as that proposal goes? And the last question was you mentioned about number of clean hydrogen and ammonia projects, which you probably need some government funding. Even with government funding, will those projects be within the target framework that you guys have for Yara as a whole?

Yes. Thanks a lot. So we'll try to divide it a bit between us there, and it's Lars starting a bit. Clean Ammonia, obviously building on a fantastic position that we, as Yara, have. We have a world-leading position in ammonia production, but also in ammonia logistics, trading shipping. So in the Clean Ammonia unit, you have our global operation of ammonia trade and shipping, which was previously in global plants in addition to the very interesting project portfolio within hydrogen ammonia projects, as Svein Tore also alluded to a bit earlier. And what that means is that in addition to a very interesting project portfolio, we actually have a running business with running earnings here, which we think is a very good starting point. And also then due to already having the infrastructure in place and the competitive edge that, that represents in the market when we know the attributes of ammonia to transport hydrogen from the point of production to the point of utilization. So that's a little bit on the context of Clean Ammonia. So I think I'll pass it on.

Yes. On the -- this is Terje again. On the volume growth, I think as you can see from the presentation, we have had growth in the premium products segment. I would even add quite consistent growth. And this is very much to the core of where we focus. We -- as a company, we are moving from, you could say, a pure product sale to really selling solutions. And in those solutions, we have our premium products, but we also have, let's say, more solutions around how we share the knowledge we have in Crop Nutrition and in basically improving productivity and also sustainability at strong level. This means that we are, relatively speaking, less focused on pure commodities. And as you have seen in the recent past, we have also stepped out of some of the more commodity fertilizer projects that we historically have been in.

If I'll just add a short comment also here, this is Thor. If you look at the region split, you can find this on our Slide 28 in the presentation, Europe is down, but it was a record quarter last year with an early spring. If you look at the last 4 years average, the deliveries in Europe were up 8%. And then all the other regions are up except Brazil, which is down 1% outside of main season, but with a significant premium growth. So I think it's actually quite a good performance overall volume.

So I take the Farm to Fork question. So this is Tove Andersen, EVP of Europe and I'll fully endorse what Thor said, is that we actually see this as a strong quarter, but last year was a bit exceptional. In the Farm to Fork strategy, the EU target is actually linked to nutrient use efficiency, not on absolute reduction of fertilizer. This has been very important for us in discussions with the EU because the important thing is to produce the food as efficient as possible. So the target of nutrient use efficiency, which is to then reduce the nutrient's losses with 50%. That is the target that is set, which is very positive for us because we know that it will then drive demand for premium products. It will drive demand for balanced nutrition because that's how you are going to get the high nutrient use efficiency. So that's very supportive for our nitrate position. The EU has done some calculations based on that if you guess is the increasing nutrient use efficiency, and if you get to nutrient losses, what would that mean for fertilizer consumption. And that is where the 20% figure comes from as an estimate that the impact on fertilizer consumption as a result of this could be 20%. But the actual target is on nutrient use efficiency.

So I would say based on this, I think it's very much supportive of this strategy of Yara to think about the totality of the food system and where precision farming is key to that. And keep in mind -- and I encourage you to read the [ fair values ] collection report that state that the annual global value creation in the food system is $10 trillion, but the hidden cost of the food system is $12 trillion. Negative impact of the food system is $2 trillion. But through the solutions that Tove just went through, we can approach new value I think. Today, I have the [Technical Difficulty] farmers today, but also combining with our digital solutions to provide opportunities both for us and for the farmers to create value from this and also supporting the -- amongst others, the European Union in their work to reduce emissions, but also globally, to do something positive for the climate. With regards to ammonia and green ammonia, clearly, today, it's a more expensive production method than using gas. Talking about 2 to 4x as high variable cost. And that's not something that we can expect that farmers will pay in isolation. It's important to see the food system in total. And to provide a perspective, if we were to produce green ammonia and, say, translate that into the impact of the price of bread combining with green ammonia. With changes in agricultural practices, we can reduce the target footprint of a bread by 30% at a cost of EUR 0.01. So from a food systems perspective, this is very much possible to absorb. It's not set up like that today, and that's the reason why we need to think a full value chain and to work together with the regulators to facilitate this transition to a future ag sector that is reducing emissions.

And your next question comes from the line of Thomas Wrigglesworth from Citi.

Kind of a couple of points of classification. Am I missing something? In the presentation, you make the point that you've got continued premium product growth, and the volumes look to be higher net across the premium products. And yet the volume bridge is volume 0. So I'm just trying to think, is there a mix positive, but a volume negative embedded in that? Can you help me with that? That's the first question. Second question, are we to take away from the comments you've made -- you said that you would catch up on the NPK premium. But am I to interpret that's more of a 12-month view than a 1 quarter view that you're trying to share with us there? And is there any particular components of NPKs? Is it really the phosphates that are driving that challenge? And last question, just housekeeping. The buyback -- will that just start immediately after the AGM, assuming it's approved, the new buyback?

Should I start on the bridge part? This is Thor. This is -- I mean overall, first of all, these are fairly in line. And I understand the question. One, we are down on premium products in Europe, mainly because of the nitrates because, as we mentioned, it was a record overall volume quarter a year ago in Europe and also record nitrate sales. But we are up, as you pointed, overall in premium products, but I think 2% or 3%, if I recall correctly. So -- and I think another factor here is the -- it's -- we also have good margins on commodity products, so that it's not -- and we are down in some areas there. So this is all very close overall. There is one other factor that we also mentioned in the report, but it's maybe not obvious that, that goes into the volume part. And that is the maritime business within industrial is down on a year ago, which is basically first quarter last year was the last, if you like, normal quarter in terms of our maritime business, and that's an effect of roughly $10 million.

Yes. So on NPK, again, let me at least start with a few sort of general statements on how we run that business. Because it's really not, let's say, a typical cost-plus business. The whole model, which we are trying to run, is to segment markets carefully, look at types of crops where we see that our crop program can give increased productivity, increased quality and lately more and more focused on increased, if you like, sustainability around how growing that crop. Based on that benefit, we price the product more as a benefit minus than relative to a cost plus. But obviously, we work in a real-world with competitors and where we have the underlying commodity prices. We have seen a sharp increase in broad-acre crops, and that is very positive. We -- also significant when we talk NPKs is that many of the more, if you like, niche type of cash crops in which we are strong. You could take crops like coffee, citrus. Yes, many of the more cash crop types of crops, potato is another one. We have also seen recently a very firming trend. And this is important for us when it comes to when and how we position pricing on NPK, exactly when we will, let's say, match the recent past. I'm not sure we will give guiding on that. But just to emphasize that we remain positive. This is something we work on very actively. And we see clear improvements in the work with you.

Yes. And just on your last question there, Thomas. I mean just -- let me start by the general statement that we are extremely committed to strict capital discipline and through our capital allocation policy. And I think during 2020, we paid out or committed NOK 52 of shareholder returns. What we're doing now is that the Board is asking the AGM for an authorization for a 5% buyback frame. And then the Board has that at hand. And if you look at our capital allocation policy and also what we've said is that we have dividends as our primary lever with share buybacks as a supplement. Hopefully, our track record will show that we're very committed to the 1.5 to 2 range. And I think we also in the presentation today indicated that we will evaluate further cash returns in the coming quarters.

And your next question comes from the line of Frederik Lunde from Carnegie.

I was wondering if you could share some light on milestones and time line for green hydrogen at Porsgrunn? And also, when you think you could be in a position to FID the project, assuming that funding is in place?

Yes. So we're still actively in -- working at full pace with that project. So -- and it's progressing according to our expectations. When it comes to -- from the point where we have all the pieces in place, I think we're talking about sort of 5-year time horizon on that. But at the same time, we're looking at smaller project as well to produce that we have volume of green ammonia available somewhat earlier than that. But for a large product, we're talking about a 5-year time horizon, which is necessary as well. This is a large product. And in the meantime, we're working on to develop the markets for the product.

Just to clarify. I guess, you mean 5-year construction or modification time, right?

Yes.

Not 5 years to -- until we can take the final investment decision on the conversion?

Yes. That we might -- we'll be able to sell you green ammonia at the end of that time, so yes.

When do you think the project can be ready for the investment decision, for the conversion?

Still multiple stakeholders that we're working with. So these are ongoing discussions. And I can't really give you a firm time frame for that. But I do expect that we will be able to -- in a rather short time frame be able to be more concrete on smaller projects, which will enable us to have green ammonia available in a 2- to 3-year time frame to start to build the market.

Your next question comes from the line of Rikin Patel from Exane.

Just firstly on CapEx, keeping with the $1.3 billion guide for this year. Can you just help us on start to phase into Q2 and H2? And then secondly, just following up on the topic of Clean Ammonia. You said in your presentation that you're generating around a 21% ROIC in that new segment. Just curious if you think that is sustainable, and where you think that return can end up mid- to longer term?

Yes. So I start the first point. This is Lars. We're not guiding on CapEx in quarters in isolation. But I think if you look a bit back and look at our profile over the -- and in between the quarters, you will see that, normally, we have a higher share of CapEx in the second half of the year than we have in the first half of the year.

And with regards to the returns within green ammonia, we'll get back to how that is going to be structured. If you look at how price in the renewable space have been structured, it will have several components. One, of course, the equity side by the owners, but also through support mechanisms, whether that's contracts difference or other ones and then green bonds or similar to use debt financing. As well as I think for most these types of projects, it will be more relevant to look at the return on equity and exactly how that will be structured, where we have to get back to when we have the total framework in place for the green light of that. The income that you're seeing today is based on the operations that we already have ongoing in this space, where we are the world's largest trader of ammonia, and it represents the income that we're generating from our market positions currently.

Your next question comes from the line of Lisa De Neve from Morgan Stanley.

I have 2. I'll ask them sequentially. So over the performance, I wanted to follow-up on Chetan's question. So you demonstrated again good progress on the premium product deliveries. And I'm just trying to understand how we should think about this in the midterm. I mean what are really the drivers to sustain growth in premium product categories? Is it -- do you need strong farmer economics? Do you need acreage expansion in cash crop? Do you need digital access to your farmer customers or distributors or cutting out the distributor? Do you need more agronomists on that? I mean what are the drivers that are going to deliver that ongoing growth that you're striving for in driving your premium product portfolio? That's my first question.

And I can start. Terje will add. But it's all of the above for what you mentioned, plus some additional one. And thanks for your for comments. But I think what we will see going forward is that there will be additional components coming into this, whether that's done through expectations from food companies that they will pay a different price for more sustainably produced crops. That's something that we're already starting to see, but it's the only way for them to reach their targets. So to pay the farmer for the actual footprint of the crop, it could be through also what we mentioned on Agoro, on carbon sequestration, which creates an additional revenue stream. And if you look at the premiums that we're achieving today, to a great extent, that's a function of farmer profitability, given the crop yields that we can increase today based on today's crop prices. So when you get more components being built into that premium, you will additional value buckets that potentially could be larger than what the yield component is today. Terje, perhaps you'd like to add to that.

If we look back where, in a way, as -- where have we had, if you like, the bottom like in growth, it's very much linked to our ability to create demand. This is a segment where we are not, let's say, taking market share from someone else. We have to go out there and demonstrate that investing more will also yield and bring more. And this is a quite sort of thorough job that needs to get done in the farming segment, which typically is traditional and might not jump on the sort of a quick sale. So it's a lot about demonstrating the benefit. Historically, we have done that very much linked to yield and quality, which is where the farmers have had the incentive because that's basically what they have been paid for. Now we are increasingly working with channel transformation. This is one of the reasons why we work very actively now with the food companies because we see more and more that the targets set by the food companies, which obviously reflect the ask from us, as consumers, can only be reached if they actually make a change at farm and field level. And this is where we work very close now with the farm -- sorry, food companies to achieve that as, if you like, leveraging on the communication that has been very farmer to farmer oriented. I would also add that our investments into digital is significant because cost to farms, so to say, if this is face-to-face over time, has been an issue. How can we optimize our cost of reaching that farmer with the right product, with the right knowledge? And digital clearly opens up new avenues for us to do that in a more efficient way, which then also leads to a continued growth. Yes. So at the bottom, obviously, farming economy is crucial, so -- which is, again, why we are segmenting the market carefully and also dependent on, let's say, gaining market share in those crop segments where we see that we are able to give the most value to the farmers and, let's say, harvest the most margin back to Yara. This is something we do very systematically, which is also why I think you see a quite consistent growth, where the presence in our 60-plus markets around the world, combined with what we now do in digital, has a significant value.

Okay. That's super helpful. And then maybe following up on that, I mean a more holistic question. I mean, how do you think about your long-term portfolio composition? I mean, on the one side, you've mentioned and reminded us that your strategy is to reduce the commodity parts of your portfolio and particularly to grow on the premium side. And we've always seen that with, for example, the exit on cash crops. And on the other side, you've also established Clean Ammonia units in the aspiration of greening. That's a clear commodity chemical, at least today. So long term, how should we think about Yara as piece of 8.5 million tonnes of rough ammonia? I mean how should we think about the portfolio? Is it premium plus green ammonia? Or should we think about it in a different way? Any comments would be helpful.

I think you need to think differently around ammonia more as -- part of it is feedstock going into fertilizer production, but the other part is the potential for it to become a source of energy to reduce emissions across a number of sectors. And we partly touched upon it before, but with everything that is happening in the hydrogen industry and the promise of hydrogen is it can really help to transition to lower emission energy system. But the problem with the hydrogen is that it's not only light, it's the lightest molecule, which makes it very difficult to transport economically over distances. And with adding the nitrogen molecule to it, then we change the characteristics so that it is easier and more economical to transport all businesses. So the opportunity that we see in the ammonia space is more linked to what we can do in the energy space. And that's the reason for establishing rather Clean Ammonia that we do see ourselves as a major contributor of infrastructure to enable the hubs and economy.

And if I could just add. I think here, there are very, very clear synergies. We have been very clear that we are strong today on nitrates, and we believe in nitrates going forward. And there is a significant difference that urea -- you cannot produce it without the carbon, while the nitrates can be produced 100% decarbonized. And our positions in agriculture, our position towards the food companies, our position into premium, here, we see a very, very clear synergy of being able to provide decarbonized solutions that will decarbonize although the food value chain. So both the energy and the maritime sector on decarbonizing fuel, but also very much linked to creating a new food system based on the climate smart agriculture.

I will now hand the call back for closing remarks.

Okay. Thank you very much. So we had a good hour, I think, covering a lot of questions on virtually all parts of Yara's business. So thank you very much to everyone who's contributed. And we'll look forward to hopefully staying in touch with all of you as we even go forward. So thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.