Yara reported strong deliveries and production, but lower margins

 

Yara International ASA delivered weaker underlying second-quarter results compared with a year earlier. EBITDA excluding special items was 22% lower, as weaker fertilizer prices were only partly offset by positive energy and currency translation gains. 

 

"Yara reports strong deliveries and production, but margins declined due to lower fertilizer prices globally. The challenging market situation underlines the need to further strengthen our operations," said Svein Tore Holsether, President and Chief Executive Officer of Yara.

 

"As communicated earlier we are establishing a program to drive and coordinate existing and new improvement initiatives. I am pleased to announce that we have so far identified at least USD 500 million of annual improvement potential," said Svein Tore Holsether.

 

Yara reports second-quarter net income after non-controlling interests of NOK 3,072 million (NOK 11.23 per share), compared with NOK 2,916 million (NOK 10.59 per share) a year earlier. Excluding net foreign exchange gain and special items, the result was NOK 6.37 per share compared with NOK 9.58 per share in second quarter 2015. Second-quarter EBITDA excluding special items was NOK 3,958 million compared with NOK 5,055 million a year earlier. The reported EBITDA for second quarter includes a gain of NOK 1,553 million from divesting Yara's European CO2 business.

 

Global Yara fertilizer deliveries were in line with second quarter 2015, but with deliveries of Yara-produced products 8% higher than a year ago, mainly driven by higher nitrate deliveries in Europe.

 

In Europe, fertilizer deliveries were 4% higher than a year earlier, with deliveries of Yara-produced nitrates and NPK 14% and 3% higher respectively. Adjusting for the divestment of the CO2 business (effective from 1 June) Industrial segment sales volumes were in line with second quarter 2015.

 

Yara's margins declined compared to second quarter last year, as sales prices fell more than input costs. Yara's average realized urea and nitrate prices decreased around 25%. NPK premiums measured in absolute terms were in line with second quarter last year. Yara's average global gas costs were 33% lower than a year ago.

 

The global farm margin outlook and incentives for fertilizer application remain supportive overall, also due to lower prices for fertilizers and other agricultural inputs. In Europe, pre-buying incentives are improved given significantly lower nitrogen prices, and Yara enters the third quarter with a stronger order book than a year ago. Yara sees continued fertilizer demand growth in Brazil, where improved agricultural export competitiveness and credit availability have positively impacted fertilizer demand in 2016. Based on current forward markets for oil products and natural gas, Yara's spot energy costs for the next two quarters are expected to be approximately NOK 900 million lower than a year earlier.