Yara
International ASA, Oslo, reported a third-quarter net loss of $143 million versus
a year-ago net income of $340 million. The net loss includes a $355 million
impairment of the Salitre phosphate assets in Brazil – which are in the process
of being sold to EuroChem Group AG (GM Aug.
6, p. 1) – as well as a currency translation loss of $148 million.
Adjusted
for currency effects and special items, the basic earnings per share was $1.33,
compared with $0.88 per share the previous year.
Third-quarter
revenues increased 46 percent, reaching $4.49 billion, up from the year-ago
$3.08 billion, mainly reflecting higher product prices in the period.
Adjusted
EBITDA was 37 percent higher year-over-year to $765 million, up from $558
million, beating the average analyst estimate of $743.7 million (range $624.0
million to $845.0 million, Bloomberg Consensus).
The company cited higher product prices, which more than offset increased
energy costs and despite the recent ammonia production curtailments, as behind
the boost in adjusted EBITDA.
Yara in
recent weeks has curtailed production at several of its European ammonia
facilities as a result of soaring gas prices. As per its Sept. 17 announcement,
the company confirmed current curtailments amount to around 40 percent of its
European ammonia capacity, including both scheduled maintenance and
market-driven curtailments (GM Sept.
17, p. 1).
The
company’s third-quarter ammonia production was down by almost 7 percent, to
1.82 million mt from the year-ago 1.95 million mt.
Yara Ammonia Curtailed Production Capacity
(million mt)
|
Europe total capacity
|
4.8
|
|
In
operation
|
2.9
|
|
Curtailed
|
1.9
|
|
Other regions total capacity
|
3.6
|
|
In
operation
|
3.6
|
Source:
Yara
However,
at its earnings release on Oct. 20, Yara said the impact of its European
ammonia curtailments on its finished fertilizer production has been limited so
far. According to Yara International President and CEO Svein Tore Holsether
speaking at a company earnings call on Oct. 20, the company so far has been
able to maintain finished fertilizer production capacity in Europe “at
almost full capacity.”
Yara’s global
fertilizer deliveries in the third quarter were 2 percent lower than a year ago,
at 7.57 million mt versus 7.76 million mt. Third-quarter European fertilizer
deliveries were down 9 percent, to 2.11 million mt, versus 2.3 million mt a
year earlier.
Yara
reminded that its operational flexibility allows its unprofitable ammonia
production to be curtailed and replaced with sourcing from its own captive
plants outside of Europe, and from the company’s global trade network,
including third-party suppliers. Yara is the world’s biggest trader of ammonia,
and has ammonia ships.
Holsether
also reminded analysts that the company even in normal times is net short of
ammonia in Europe, meaning at any given time it sources ammonia from external
sources.
“Structurally,
the company is normally long in the range of 0.5 million mt to 1.0 million mt
of ammonia globally; with the European short-listing, that is probably a bit
larger than that. So let’s say around 1 million mt thereabouts, maybe a bit
more,” he said.
The CEO
said at the present time Yara is able to source all of the ammonia it needs.
But he
said the company is closely monitoring the situation going forward. “We
are committed to producing and supplying our customers with finished products,
provided sufficient margins are available,” Holsether told analysts.
“We
have been able to do that so far, but it is certainly possible that we will
need to make further adjustments going forward,” he said.
But
Holsether added that “the higher energy costs have come with higher
nitrogen prices.
“So
the situation can be both ways,” he said. “Even though the ammonia
margins in most cases these days are negative, the fully integrated margin so
far has been good enough for us to continue with the finished product.”
Based
on current forward markets for natural gas as of Oct. 17, without the current
production curtailments, Yara put its gas costs for the fourth quarter of this
year and the first quarter of 2022 at $850 million and $950 million,
respectively, higher than a year earlier. However, the company said its
European ammonia curtailments are reducing purchased gas volumes, and the cost
impact will therefore depend on the duration of the curtailments.
Yara
normally purchases around 40 million mmBtu per quarter in Europe. Responding to
an analyst’s question, Holsether said the company’s gas purchases in Europe are
roughly down around 40 percent due to the current ammonia capacity curtailments.
But
like many other fertilizer producers in Europe, Yara believes gas prices will
come down in the spring.
Responding
to an analyst’s question, Holsether agreed that the higher nitrogen fertilizer
prices on the back of soaring gas costs has led to some demand disruption. But
for more mature regions like Europe and the U.S., he believes this is probably
going to be more marginal than in some other parts of the world.
The
biggest impact of the current European natural gas prices will be in parts of
the world where fertilizer cost development “now could mean the difference
between applying fertilizer or not,” the CEO said.
Holsether
said the impact of not utilizing nitrogen fertilizer is “immediate and
huge. Annual nitrogen application is critical for crops. If you take grain, and
you don’t apply nitrogen fertilizer for the season, then the first harvest
drops by nearly 50 percent,” he said.
He noted
nitrogen fertilizer provides food for around a half of the world’s population.
“European
nitrogen production is essential to global food security, and we are concerned
about the impact the current high European natural gas prices will have,
especially on the world’s poorest regions,” the CEO said.
According
to Yara, European production of finished nitrogen products accounts for about
15 percent of global nitrogen production (in nutrient tons).
“However,
Yara will do its utmost to supply farmers and support global food production.
The current situation clearly demonstrates the need for more resilient food
supply chains, and I call on the authorities, international organizations, and
food value chain players to work together to secure global food supply,” said
Holsether.
Yara
reported an 8 percent decline in net income for the nine months to Sept. 30, to
$410 million, down from the year-ago $444 million. Revenues grew 32 percent, to
$11.58 billion, up from $8.80 billion. Adjusted for currency effects and
special items, the basic earnings per share was $3.54, compared with $2.32 per
share the previous year.
Nine-month
EBITDA adjusted for special items came in 29 percent up on the same prior-year
period, reaching $2.13 billion, up from $1.65 billion.
Looking
ahead, Yara said the global nitrogen outlook remains strong, driven by strong
demand fundamentals, low global inventories, and limited pre-buying so far this
season.
The
company noted industry consultant projections show increased nitrogen capacity
growth in 2022, but it said similar to 2021, actual production growth is
expected to be lower, below historical trend consumption growth.
Yara
sees sustained nitrogen curtailments in Europe over the winter as likely
leading to an even tighter market situation in 2022.
The
company on Aug. 1 signed a Share Purchase agreement (SPA) with EuroChem Group
AG, Zug, Switzerland, to sell its Serra do Salitre phosphate project in Brazil
for a cash consideration of $410 million, subject to final purchase price
adjustments (GM Aug. 6, p. 1). Brazil’s Administrative Council for
Economic Defense (CADE), the country’s antitrust regulator, gave the deal the
green light last month (GM Sep. 10,
p. 1), and Yara expects the transaction to be completed within six months from
the date of the SPA signing, subject to other local regulatory approvals and
customary closing conditions.
Yara
said the recoverable value of the Salitre assets was determined to be lower
than their carrying amount, and an impairment of US$385 million was recognized
immediately before reclassification to held-for-sale. At the end of the third quarter,
US$31 million of the impairment was reversed, mainly due to U.S.
dollar/Brazilian real currency development. The impairment for the third
quarter was therefore US$355 million.
Yara
has reduced its full-year 2021 capex guidance by about $200,000 from the
previous $1.3 billion for the 12 months, to $1.1 billion. However, it said this
is essentially phasing into 2022. Including the phasing, FY2022 capex guidance
is $1.4 billion. The capex guidance includes scheduled plant turnarounds as
well as some planned growth projects.
The
company said it will consider further cash distributions in the coming
quarters, in line with its capital allocation policy.
Yara Production and Deliveries
|
‘000 mt
|
3Q-2021
|
3Q-2020
|
9M-2021
|
9M-2020
|
|
Production
|
|
|
|
|
|
Ammonia
|
1,819
|
1,949
|
5,503
|
5,740
|
|
Finished
fertilizer and industrial products (excluding bulk blends)1
|
5,453
|
5,358
|
15,687
|
15,777
|
|
|
|
|
|
|
|
Yara Deliveries
|
|
|
|
|
|
Ammonia
trade
|
471
|
484
|
1,518
|
1,428
|
|
Fertilizer
|
7,565
|
7,756
|
21,770
|
22,185
|
|
Industrial
product
|
1,917
|
1,884
|
5,527
|
5,147
|
|
Total deliveries
|
9,954
|
10,124
|
28,815
|
28,759
|
1
Including Yara share of production in equity-accounted investees, excluding
Yara-produced blends
Yara Deliveries
|
‘000 mt
|
3Q-2021
|
3Q-2020
|
9M-2021
|
9M-2020
|
|
Crop Nutrition Deliveries
|
|
|
|
|
|
Urea
|
1,465
|
1,515
|
4,634
|
4,481
|
|
Nitrate
|
1,325
|
1,384
|
4,087
|
4,399
|
|
NPK
|
2,941
|
2,927
|
7,672
|
7,775
|
|
CN
|
413
|
372
|
1,371
|
1,233
|
|
UAN
|
297
|
291
|
1,058
|
1,152
|
|
DAP/MAP/SSP
|
280
|
353
|
762
|
802
|
|
MOP/SOP
|
534
|
575
|
1,200
|
1,141
|
|
Other
products
|
310
|
340
|
987
|
1,200
|
|
Total Crop Nutrition Deliveries
|
7,565
|
7,756
|
21,770
|
22,185
|
|
|
|
|
|
|
|
Europe Deliveries
|
|
|
|
|
|
Urea
|
203
|
204
|
760
|
757
|
|
Nitrate
|
895
|
1,043
|
2,815
|
3,353
|
|
NPK
|
557
|
593
|
1,915
|
2,064
|
|
CN
|
100
|
94
|
365
|
356
|
|
Other
products
|
350
|
368
|
1,171
|
1,259
|
|
Total Deliveries Europe
|
2,106
|
2,302
|
7,062
|
7,790
|
|
|
|
|
|
|
|
Americas Deliveries
|
|
|
|
|
|
Urea
|
620
|
693
|
2,036
|
2,030
|
|
Nitrate
|
296
|
257
|
965
|
850
|
|
NPK
|
1,935
|
1,884
|
4,358
|
4,438
|
|
CN
|
260
|
231
|
862
|
753
|
|
DAP/MAP/SSP
|
258
|
331
|
687
|
716
|
|
MOP/SOP
|
514
|
557
|
1,120
|
1,079
|
|
Other
products
|
239
|
251
|
816
|
999
|
|
Total Deliveries Americas
|
4,122
|
4,205
|
10,844
|
10,863
|
|
Of
which:
|
|
|
|
|
|
North
America
|
643
|
705
|
2,665
|
2,649
|
|
Brazil
|
2,878
|
2,960
|
6,556
|
6,715
|
|
Latin
America excluding Brazil
|
602
|
540
|
1,623
|
1,499
|
|
|
|
|
|
|
|
Africa & Asia Deliveries1
|
|
|
|
|
|
Urea
|
641
|
617
|
1,838
|
1,695
|
|
Nitrate
|
134
|
84
|
307
|
197
|
|
NPK
|
449
|
450
|
1,363
|
1,272
|
|
CN
|
53
|
47
|
144
|
124
|
|
Other
products
|
60
|
52
|
212
|
243
|
|
Total Deliveries Africa & Asia
|
1,337
|
1,249
|
3,864
|
3,532
|
|
Of
which:
|
|
|
|
|
|
Asia
|
989
|
976
|
2,951
|
2,664
|
|
Africa
|
349
|
273
|
913
|
867
|
|
|
|
|
|
|
|
Industrial Solutions Deliveries
|
|
|
|
|
|
Ammonia2
|
125
|
123
|
408
|
401
|
|
Urea2
|
421
|
407
|
1,227
|
1,170
|
|
Nitrate3
|
338
|
281
|
916
|
830
|
|
CN
|
53
|
50
|
145
|
134
|
|
Other
products4
|
454
|
525
|
1,280
|
1,196
|
|
Water
content in industrial ammonia and urea
|
527
|
498
|
1,551
|
1,416
|
|
Total Industrial Solutions Deliveries
|
1,917
|
1,864
|
5,527
|
5,147
|
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
