Yara sees Europe fertiliser demand pick up

Yara, the world's largest nitrate fertiliser maker, reported first-quarter core results just shy of expectations and said European deliveries had picked up in the latest months after a slower start to the season.

"As expected, northern hemisphere fertiliser demand is strengthening following a slow first half of the buying season," the Norwegian firm's chief executive, Joergen Haslestad, said.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell to 3.94 billion Norwegian crowns ($687.1 million) from 4.26 billion crowns a year earlier and behind analysts' mean forecast for 4.03 billion.

Revenue rose 8 percent to 21.3 billion crowns, above analysts' expectations for 20.6 billion.

Yara said fertiliser deliveries in Western Europe in January-March - the months when farmers in the northern hemisphere normally stock up on nutrients ahead of the spring application - fell 5 percent from a year earlier.

"Substantial winter crop damage and a late spring with continued dry conditions have negatively affected European demand for fertilizer in the first quarter," it said.

It said full-season deliveries were likely to fall short of the previous season, as cold and dry spring planting conditions are likely to impact overall consumption.

"However, Yara saw record European deliveries in March and satisfactory deliveries so far in April," it added.

In the United States, nitrogen deliveries were down an estimated 10 percent in the quarter, it added.

The euro zone crisis and falling food prices depressed demand from farmers in the second half of last year and fertiliser prices plummeted as a result, but have since bounced back, supporting Yara's margins.

"The main driving factor has been strong northern hemisphere demand for spring application, as purchasing activity was low earlier in the season," Yara said.

Fertiliser prices are closely linked to food prices as farmers, otherwise exposed to risks mostly related to weather conditions, tend to be more willing to apply nutrients when they can count on healthy margins from the investment.

Food prices have risen so far this year, and the United Nations' Food and Agriculture Organisation (FAO) index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 215.9 points in March, up 2.3 percent from December.

Although below the Feb. 2011 peak of 237.9, the index is still higher than during a food price crisis in 2007-08 that raised global alarm.