Yara says 1Q results strong despite weaker prices, lower volumes

Yara International ASA reported first-quarter net income after non-controlling interests of NOK2,800 million (NOK10.22 per share), compared with the year-ago NOK729 million (NOK2.65 per share). Excluding net foreign exchange gain and special items, the result was NOK9.14 per share, compared with NOK10.51 per share in first quarter 2015. First-quarter EBITDA excluding special items was NOK5,050 million, compared with NOK5,742 million a year earlier. The year-ago figure also included the results of Yara’s 50 percent stake in the UK GrowHow business, which was later sold to CF Industries Holdings Inc., as well as a NOK929 million impairment on the Lifeco assets in Libya.

“Yara reports strong results in a challenging market environment, even as weaker fertilizer prices and lower deliveries impacted earnings,” said Svein Tore Holsether, president and CEO. “Our operational performance improved compared with the fourth quarter, with both ammonia and finished fertilizer production running at high levels. In addition, lower natural gas cost in Europe continued to improve Yara’s competitive position during the quarter.”

The company said its Crop Nutrition unit had operating income of NOK1,498 million on revenues and other income of NOK19,098 million, down from the year-ago NOK1,578 million and NOK20,761 million, respectively.

Global Yara fertilizer deliveries were 5 percent lower compared with first-quarter 2015, mainly reflecting lower nitrate and compound NPK sales. All regions except Brazil saw lower sales.

In Europe, fertilizer deliveries were 9 percent lower than a year earlier, with nitrate deliveries down 18 percent and NPK compound deliveries down 5 percent. Industrial segment sales volumes were in line with first-quarter 2015.

Yara’s margins declined compared to the first quarter of last year, as realized prices fell more than input costs. Yara’s average realized urea prices decreased around 20 percent, nitrate prices were 15 percent lower, and compound NPK prices decreased on average 12 percent compared with first-quarter 2015. Yara’s average global gas costs were 32 percent lower than a year ago.

Yara said going forward, the global farm margin outlook and incentives for fertilizer application remain supportive overall, and agricultural export profitability in Brazil is higher than a year ago due to currency depreciation. In Europe, Yara expects a catch-up in deliveries during the second quarter, with full-season industry deliveries close to last year’s level. 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 NOK2.2 billion lower than a year earlier.

Yara also said that China’s current FOB urea prices are just above $200/mt and likely close to break-even. It estimated that Chinese urea exports were only 2.1 million mt in January-February, down from the year-ago 3 million mt. However, Yara noted that new capacity has come online in the U.S., Algeria, Saudi Arabia, Iran, and Egypt.

Analysts were also upbeat on the Yara performance, noting that they were an improvement over fourth-quarter 2015 results (GM Feb. 12, p. 14). Fourth-quarter net income after non-controlling interests was NOK434 million (NOK1.58 per share) on revenues of NOK25,722 million.