Yara International ASA, Oslo, reported a 23% increase in net income attributable to shareholders of the company to $664 million ($2.61 per share) on revenue of $6.45 billion for the second-quarter ended June 30, up from the year-ago $539 million ($2.10 per share) and $3.95 billion, respectively.
EBITDA excluding special items rose 90% to $1.48 billion, up from $775 million the previous year, beating analysts’ average estimate of $1.35 billion (Bloomberg Consensus). Revenue was up 63% and was on par with analysts’ average estimate of $6.45 billion. Second-quarter operating income was $1.22 billion, compared with the year-ago $477 million.
Yara reported higher selling prices and a particularly strong financial performance from overseas assets, which more than offset higher European feedstock costs and lower deliveries, according to its July 19 results statement. The Americas, Africa, and Asia segments accounted for approximately 55% of the company’s EBITDA in the second quarter.
However, this was partially offset by currency translation loss, which the company noted was driven mainly by the impact of a stronger U.S. dollar on its debt portfolio, which is primarily held in U.S. dollars.
Total Yara second-quarter deliveries were down 18% at 8.06 million mt, versus the year-ago 9.78 million mt. Second-quarter fertilizer deliveries fell 21% year-over-year, to 5.79 million mt, down from 7.35 million mt. The company noted premium products were more resilient with a year-over-year decline of 14%. The drop in deliveries was largest in Europe and Americas, each down by 22% on a year ago.
Yara said it has currently curtailed several of its production plants, amounting to an annual capacity of 1.3 million mt of ammonia and 1.7 million mt of finished fertilizer, and warned that more cuts may come. The current curtailments in ammonia and finished fertilizer production equate to around 27% and 18%, respectively, of the company’s European capacity, according to a Dow Jones report.
Of the finished product curtailments, roughly half is urea for fertilizer, while the rest is nitrates and NPKs.
Company-wide ammonia production in the second quarter was down 11% at 1.69 million mt versus the year-ago 1.89 million mt, while first-half output was 7% lower at 3.41 million mt compared to 3.68 million mt.
In addition to curtailments due to increased gas costs, Yara reported reliability issues in Pilbara, Australia; Ferrara, Italy; Brunsbuttel, Germany; and Cubatão, Brazil, and also turnaround delays at Hull, U.K., and Cubatão, impacting its second-quarter ammonia production.
Production of total finished products (fertilizer and industrial, but excluding bulk blends) fell by 10% to 4.47 million mt, down from 4.98 million mt in second-quarter 2021, and also by 7% in the first half, to 9.33 million mt from 10.04 million mt.
There were also reliability issues within finished products, with Yara noting “the major impacts” in Tertre, Belgium; Porsgrunn, Norway; Babrala, India; and at Cubatão.
Yara highlighted that there is no material impact on the company’s finished product volumes “so far” due to lack of raw materials, as it has increased its phosphates and potash sourcing from existing suppliers and entered into contracts with new suppliers to offset lost volumes from suppliers linked to sanctions.
The company also highlighted the ability of its NPK plants to adapt to both raw material sourcing and NPK grades produced in response to significant market disruptions, both in terms of raw material supply and customer demand.
“Seasonally lower Northern Hemisphere demand, combined with the recent European gas price surge, is leading to significant curtailments in Europe, including Yara,” said Yara President and CEO Svein Tore Holsether.
The company sees gas costs for the third and fourth quarters of 2022 respectively at $1.1 billion and $920 million higher than a year earlier, based on current forward markets for natural gas and assuming stable gas purchase volumes.
In Europe, Yara noted that nitrogen deliveries for the industry in the 2021/22 season are estimated to end 19% behind a year earlier, as higher fertilizer prices have shifted optimal application rates lower. It said nitrate inventories in Europe are at a historically low level, and new season buying has been limited so far.
“Despite a recent correction in grain prices, farmer profitability remains high. But there is a clear risk of nitrogen shortages and further price spikes if buying is delayed, especially if natural gas availability in Europe continues to deteriorate,” said Holsether.
Yara said it will continue to adapt to market conditions and – where possible – use its global sourcing and production system to supply customers, but said it cannot produce at negative margins.
In an interview on Bloomberg TV on July 19, Holsether said the company is “on constant watch” in case it needs to further lower production.
For Europe, second-quarter EBITDA excluding special items was $150 million higher than a year earlier, as higher prices more than offset lower deliveries and increased feedstock costs. Deliveries decreased by 22% to 1.58 million mt, down from the year-ago 2.03 million mt, mainly reflecting lower demand due to high market prices.
For the Americas, EBITDA excluding special items was $406 million higher in the second quarter than a year earlier, mainly reflecting significantly higher nitrogen upgrading margins in North America.
Deliveries were down 22% to 3.01 million mt, with Yara citing the sanctions imposed on suppliers from Russia and Belarus impacting deliveries of commodity fertilizers for blending and distribution. However, the company said premium product deliveries were relatively strong with a decline of only 2%.
For Africa & Asia (which also includes Oceania), second-quarter EBITDA excluding special items was $55 million higher than a year earlier, driven – Yara said – by higher production margins on ammonia. Total deliveries were 18% lower at 1.21 million mt as high fertilizer prices and weaker farmer profitability in several core segments of the region impacted demand.
Yara’s Global Plants & Operational Excellence (GPOE) business posted a second-quarter EBITDA excluding special items $72 million higher than a year earlier. The result was mainly driven by increased nitrogen and phosphate prices, which more than offset increased energy costs and raw material price increases.
The Clean Ammonia business posted EBITDA excluding special items in the second quarter $9 million higher than the previous year, as increased margins linked to higher ammonia prices more than offset lower volumes. The lower volumes mainly reflect a stop in sourcing from Russia and reduced ammonia production at Yara’s plants in the quarter.
The company highlighted the margin improvement for the Clean Ammonia segment, reporting a net $900 million improvement despite gas cost increases amounting to more than $1 billion.
For Industrial Solutions, second-quarter EBITDA excluding special items was $57 million higher than a year ago, mainly due to strong margins in Brazil and higher market prices in Europe reflecting increased production costs and supply shortages due to sanctions on Russia and Belarus. Second-quarter deliveries were flat on a year earlier, at 1.86 million mt.
Yara on July 19 published its first Green Financing Framework, rated medium green by CICERO, a green bond rating service.
Potential financing proceeds will be used for eligible green projects such as green ammonia, premium fertilizer production assets, and carbon capture and storage projects, the company said.
It sees these green projects creating substantial environmental benefits by decarbonizing the food chain, including fertilizer production and application, and by limiting the need to expand farmland.
For the first half of 2020, the company posted a 192% increase in net income attributable to shareholders of the parent company of $1.61 billion ($6.31 per share) on revenue of $12.37 billion, up from the year-ago $551 million ($2.30 per share) and $7.09 billion, respectively.
Six-month EBITDA excluding special items increased 107%, to $2.82 billion versus the prior year $1.36 billion, while revenue was up 74%. First-half operating income was $2.26 billion, compared with the year-ago $799 million.
Yara said its resilient business model continues to generate robust returns, leading to strong dividend capacity going forward, in line with the company’s capital allocation policy. The company paid dividends of $796 million in the second quarter, and the Board will consider further cash returns in connection with third quarter results.
Yara Production and Deliveries
| ‘000 mt | 2Q-2022 | 2Q-2021 | 1H2022 | 1H2021 |
| Production1 | ||||
| Ammonia | 1,688 | 1,891 | 3,411 | 3,684 |
| Finished fertilizer and industrial products (excluding bulk blends)1 | 4,466 | 4,983 | 9,328 | 10,040 |
| Yara Deliveries | ||||
| Ammonia trade | 404 | 589 | 847 | 1,047 |
| Fertilizer | 5,793 | 7,347 | 11,916 | 14,198 |
| Industrial product | 1,862 | 1,846 | 3,663 | 3,615 |
| Total deliveries | 8,060 | 9,782 | 16,426 | 18,860 |
1 Including Yara share of production in equity-accounted investees, excluding Yara-produced blends
Yara Deliveries
| ‘000 mt | 2Q-2022 | 1Q-2021 | 1H2022 | 1H2021 |
| Crop Nutrition Deliveries | ||||
| Urea | 1,317 | 1,802 | 2,695 | 3,170 |
| Nitrate | 817 | 1,173 | 2,232 | 2,764 |
| NPK | 2,043 | 2,281 | 4,124 | 4,729 |
| CN | 427 | 470 | 849 | 946 |
| UAN | 314 | 378 | 616 | 761 |
| DAP/MAP/SSP | 191 | 335 | 292 | 482 |
| MOP/SOP | 300 | 516 | 512 | 665 |
| Other products | 332 | 392 | 595 | 680 |
| Total Crop Nutrition Deliveries | 5,793 | 7,347 | 11,916 | 14,198 |
| Europe Deliveries | ||||
| Urea | 162 | 264 | 346 | 557 |
| Nitrate | 606 | 765 | 1,600 | 1,921 |
| NPK | 364 | 470 | 954 | 1,394 |
| CN | 98 | 126 | 191 | 261 |
| Other products | 346 | 407 | 734 | 819 |
| Total Deliveries Europe | 1,576 | 2,032 | 3,825 | 4951 |
| Americas Deliveries | ||||
| Urea | 499 | 787 | 1,118 | 1,418 |
| Nitrate | 197 | 304 | 509 | 670 |
| NPK | 1,292 | 1,306 | 2,450 | 2,421 |
| CN | 281 | 299 | 553 | 594 |
| DAP/MAP/SSP | 179 | 321 | 262 | 429 |
| MOP/SOP | 281 | 487 | 462 | 606 |
| Other products | 279 | 336 | 451 | 583 |
| Total Deliveries Americas | 3,009 | 3,841 | 5,804 | 6,721 |
| North America | 833 | 1,064 | 1,738 | 2,022 |
| Brazil | 1,755 | 2,213 | 3,243 | 3,678 |
| Latin America excluding Brazil | 421 | 564 | 824 | 1,021 |
| Africa & Asia Deliveries1 | ||||
| Urea | 655 | 750 | 1,231 | 1,196 |
| Nitrate | 68 | 103 | 123 | 173 |
| NPK | 387 | 504 | 720 | 914 |
| CN | 48 | 46 | 105 | 91 |
| Other products | 51 | 70 | 108 | 151 |
| Total Deliveries Africa & Asia | 1,209 | 1,474 | 2,287 | 2,525 |
| Asia | 966 | 1,151 | 1,835 | 1,962 |
| Africa | 243 | 323 | 451 | 563 |
| Industrial Solutions Deliveries | ||||
| Ammonia2 | 125 | 132 | 258 | 283 |
| Urea2 | 366 | 410 | 746 | 807 |
| Nitrate3 | 313 | 298 | 633 | 578 |
| CN | 49 | 48 | 101 | 97 |
| Other products5 | 439 | 420 | 809 | 826 |
| Water content in industrial ammonia and urea | 570 | 537 | 1,116 | 1,024 |
| Total Industrial Solutions Deliveries | 1,862 | 1,846 | 3,663 | 3,615 |
1 The Africa and Asia business also includes Oceania
2 Pure product equivalents
3 Including AN Solution
4 Including sulfuric acid, ammonia, and other minor products