Yara International ASA reported second quarter net income after minority interest of NOK 1,122 million (US$172.1 million) and NOK 3.88 per share (US$.595 per share), compared with the year-ago NOK 4,354 million (US$857.1 million) and NOK 14.93 per share (US$2.94 per share). Excluding net foreign exchange gains and special items, the result was approximately NOK 1.19 per share (US$.18) compared with NOK 12.44 per share (US$1.91) in second quarter 2008. EBITDA for the quarter was NOK 1,259 million (US$193 million) compared with the year-ago NOK 6,215 million (US$1.22 billion).
Revenues sank to NOK 16.129 million (US$2.48 billion) from the year-ago NOK 24,038 million (US$4.73 billion).
“In a challenging quarter, Yara generated a strong cash flow once more by competing well for deliveries and increasing its European market share, cutting production and thereby reducing inventories further,” said Jørgen Ole Haslestad, Yara president and CEO. “Sales volumes including third party sourced products were below last year, but sales of Yara-produced products were up 4 percent. The new season nitrate prices kick-started deliveries in Europe where June volumes came in 25 percent above last year.
“Global fertilizer consumption is estimated to have declined more than 5 percent the last season. This will have a negative effect on grain production in a situation where global grain inventories remain at low levels, and will support future demand for fertilizer,” said Haslestad.
Second quarter fertilizer deliveries were down 13 percent on last year, but up 7 percent on first quarter this year. Fertilizer volumes in stock were reduced by 30 percent through the quarter as sales picked up and production was curtailed, giving a net cash flow from operating activities of NOK 4,272 million (US$655.2 million). Fertilizer margins declined due to lower prices and further inventory write-downs, primarily related to potash and phosphate, only partly offset by lower energy costs. The industrial segment delivered strong results with improved margins, benefiting from pricing time lags. Fixed costs declined from last year, reflecting synergies from the Kemira GrowHow acquisition.
Yara said inventories of third party products were written down by NOK 185 million (US$28.4 million) to reflect lower local market prices, while Yara-sourced products were written down by a further NOK 191 million (US$29.3 million), primarily for NPKs made with potash and phosphate bought earlier. The total write-down for the quarter was NOK 616 million (US$94.5 million), which includes NOK 240 million (US$36.8 million) related to depreciation of the U.S. dollar versus the Brazilian real.
As for potash, Yara said demand has been extremely low due to high prices. It said prices were around $600/mt in most markets at the end of the second quarter and noted that sales into India are now being reported at $460/mt CFR.
Yara also said an interim settlement has been reached for the Burrup insurance claim related to the second half 2008 natural gas disruption with a NOK 218 million effect on second quarter EBITDA.
Second quarter fertilizer sales were 5.2 million mt, with total volumes sales at 6.08 million mt, versus the year-ago 6.02 million mt and 7.02 million mt. Yara said the ammonia market was fundamentally weak, mainly due to low demand from the industrial sector, but also because of phosphate production curtailments. Yara said high potash prices negatively impacted NPK sales.
European volumes declined 15 percent but Yara said it increased its market share by 4 percent. European NPK sales were down 42 percent; however, Yara said it maintained full nitrate plant utilization, and European sales were up 9 percent over last year.
Second quarter volumes outside Europe were 12 below last year, primarily due to Brazil where deliveries were off 46 percent. In North America, volumes were up 43 percent, mainly due to the Belle Plaine acquisition. Volumes were up 24 percent to Africa.
Six month fertilizer sales were 10.09 million mt, down from the year-ago 12.3 million mt. Total sales volumes were 11.8 million, down from 14.3 million mt a year ago.
Six month income was NOK 2,009 million (US$308.1 million) on revenues of NOK 33,248 million (US$5.1 billion) compared to the year-ago income of NOK 7,162 million (US$1.41 billion) on revenues of NOK 44,819 million (US$8.82 billion). EPS was NOK 6.94 (US$1.06) versus NOK 24.56 (US$4.84). EBITDA was NOK 3,295 million (US$505.4 million) versus the year-ago NOK 10,203 million (US$2 billion).
Going forward, Yara says it will benefit further from lower European energy costs, estimated to be NOK 2.8 billion (US$429.4 million) lower in the second half compared with last year. To mitigate lower NPK sales, Yara says it has minimized purchases from third parties and plans to curtail NPK production by 30 percent in the third quarter.