Yara International ASA reported second-quarter net income after non-controlling interests of NOK699 million (NOK2.56 per share), compared with the year-ago NOK3,072 million (NOK11.23 per share). Revenues were NOK23,471 million, down from NOK25,866 million.
“Yara reports a weaker result than a year earlier, primarily reflecting lower commodity margins,” said Svein Tore Holsether, Yara president and CEO. “Our industry is facing strong over-supply of urea and other commodity nitrogen products, and we have expected this development for some time. We are therefore focused on improving our operations, and making growth investments primarily within premium fertilizer and industrial applications where margins are more stable. The Yara Improvement Program and growth pipeline [are both] on track to deliver minimum NOK17 per share of annual earnings improvements within 2020.”
Yara said strong urea capacity increases outside China are weighing on global urea prices, as non-Chinese FOB prices are reduced in order to displace Chinese exports. Yara expects this situation to persist into 2018 given the number of new plants expected to enter the market over the next year.
Excluding net foreign exchange gain and special items, the result was NOK2.90 per share, compared with NOK6.29 per share.
Second-quarter EBITDA excluding special items was NOK2,873 million, down 27 percent compared with a year earlier.
Total fertilizer deliveries were 3 percent lower than in second-quarter 2016. Adjusted for the divestment of Yara’s CO2 business last year, Industrial deliveries were 8 percent higher than a year earlier.
Yara said margins were impacted by both higher gas costs and lower realized prices. Yara’s average realized fertilizer urea prices decreased 7 percent, while realized nitrate and NPK prices were 1 and 5 percent lower, respectively. Yara’s average global gas costs were 24 percent higher than a year ago.
Yara said ammonia production was off 7 percent during the quarter due to a major turnaround at the Le Havre plant in France and a fire at the Porsgrunn, Norway, plant, in April. The Porsgrunn plant is expected to start up again toward the end of the third quarter.
Six-month Yara net income was NOK2,392 million (NOK8.75 per share) on revenues of NOK46,106 million, down from the year-ago NOK5,872 million (NOK21.45 per share) and NOK50,919 million, respectively.
Yara Deliveries (000 mt)
| 2Q-17 | 2Q-16 | 1H-17 | 1H-16 | |
| NH3 trade | 1,803 | 1,929 | 3,683 | 3,937 |
| Urea | 1,239 | 1,326 | 2,404 | 2,499 |
| Nitrate | 1,136 | 1,363 | 2,671 | 2,836 |
| NPK | 2,304 | 2,256 | 4,709 | 4,443 |
| CN | 355 | 343 | 655 | 626 |
| UAN | 465 | 483 | 785 | 837 |
| SSP | 410 | 298 | 522 | 411 |
| DAP/MAP | 178 | 227 | 358 | 493 |
| MOP/SOP | 366 | 383 | 535 | 552 |
| Other | 253 | 243 | 453 | 452 |
| Fert Total | 6,707 | 6,921 | 13,092 | 13,148 |
| Industrial | 1,736 | 1,784 | 3,537 | 3,501 |
| Total | 9,070 | 9,277 | 17,679 | 17,759 |
Yara noted that the global farm margin outlook and incentives for fertilizer application remain supportive overall, and the price trend for cereal, meat, and dairy has been positive year to date. It said that in Europe, Yara is seeing a normal rate of order taking at the start of the new season at higher prices than a year ago, and expects roughly stable European nitrogen consumption for the 2017/18 season. 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 NOK225 million higher than year-ago levels.