Yara has record year in 2010, takes write-down on Burrup stake

Yara International ASA reported record results in 2010, even exceeding the previous record in 2008. The company said deliveries rebounded quickly from 2009 in the agricultural business as demand continued to grow robustly even through the global economic crisis.

Net income after non-controlling interests was NOK 8,729 million (US$1.58 billion) on sales of NOK 65,374 million ($11.4 billion) for 2010, up from 2009’s NOK 3,782 million ($685.4 million) on sales of NOK 61,418 million ($11.13 billion). Earnings per share were NOK 30.24 ($5.51) versus the year-ago NOK 13.08 ($2.38).

Fourth-quarter income was NOK 1,564 million ($283.4 million) on sales of NOK 17,535 million ($3.18 billion), up from the year-ago NOK 1,424 million ($258.1 million) on sales of NOK 13,791 million ($2.5 billion). EPS was NOK 5.42 ($0.99) versus the year-ago NOK 4.93 ($0.90).

Yara said fourth-quarter nitrogen fertilizer deliveries in Western Europe were up 13 percent, and up an estimated 34 percent in the U.S. Yara noted that it deferred about 200,000 mt of sales in the fourth quarter to first quarter 2011 in order to take advantage of rising prices. It reported significant nitrate price increases in January, with good deliveries. Yara noted that urea prices were not negatively affected despite 3.3 million mt in urea exports by China in the fourth quarter, compared to the year-ago 1.5 million mt of Chinese exports.

Fourth-quarter realized prices were up 46 percent for nitrates, 26 percent for urea, and 17 percent for NPKs versus the year-ago quarter. NPK had significantly higher margins due to lower potash prices.

Yara’s fourth-quarter results were charged with an NOK 165 million ($29.9 million) write-down related to the balance sheet items in Burrup Fertilisers Pty Ltd. (BFL) following the findings in the ongoing Yara-initiated investigations of financial irregularities in the company. Absent the write-down, Yara said there would have been an NOK 53 million ($9.6 million) profit from Burrup. The remaining asset value for Yara’s stake in BFL is NOK 1,676 million ($303.7 million).

Yara said Burrup is running normally, and that it expects the receiver of the majority owners’ 65 percent stake to hold an auction in three or four months. Based on its current 35 percent stake in Burrup, and other agreements such as its long-term ammonia offtake agreement, Yara appears confident it can increase its stake in the company at an auction.

Yara said it gained NOK 38 million in the fourth quarter from the sale of its 20 percent stake in the Vietnamese port of Baria Serece. Also in the quarter, it completed the sale of its fertilizer retail business in South Africa, with little impact on consolidated income as agreed sales prices were mainly equal to carrying amounts. Yara will continue to sell fertilizer delivered to the harbor in the country.

Going forward, Yara said it plans to run all fertilizer plants at full capacity. Its Ambes nitrate plant in France has been down for an extended turnaround since September and is expected to come back up in March. Yara will be adding production capacity in 2011, with a urea expansion at Sluiskil that is expected onstream in June. Qafco 5 ammonia and urea production is due to start up in the fourth quarter.

Yara said higher fertilizer prices are offsetting stronger gas prices, which are expected to increase in first-half 2011 by NOK 1.45 billion above year-ago levels.