Yara International ASA beat analyst expectations for fourth-quarter adjusted EBITDA at $1.07 billion, up 39% from the year-ago level. The average analyst estimate, the Bloomberg Consensus, was $932.3 million.

Yara shares climbed as much as 5% after the news, the largest intraday rise since October, according to Bloomberg, which also noted that the company proposed a dividend hike.

Yara exceeded analyst expectations in several categories, including revenue, operating income, net income, adjusted net income, and earnings per share.

Yara posted fourth-quarter net income of $766 million versus the year-ago net loss of $26 million, mainly reflecting improved margins and currency translation gains, in addition to an impairment loss of $250 million in fourth quarter 2021.

Yara cited improved margins, with higher selling prices more than offsetting increased production costs and lower deliveries. Fourth-quarter revenue and other income grew by 9% to $5.46 billion, up from the year-ago $5.03 billion.

Crop nutrition deliveries in the quarter were down 25% compared with a year ago, to 5.11 million mt from 6.82 million mt, which Yara said reflected delayed purchasing by distributors and farmers amid recent price declines. The biggest year-over-year declines were seen for Europe and the Americas, and were mostly on the commodities side, the company said.

European deliveries in the quarter fell 23% year-over-year to 1.66 million mt, while North American deliveries were down 20% to 641,000 mt and Brazilian deliveries dropped by 38% to 1.41 million mt.

However, the company highlighted price declines that have led to improved farmer affordability at the start of 2023 and profitability metrics ahead of the main application season, and sees catch-up demand potential in all regions, except the Americas. According to Yara, farmer affordability is almost back to the historical average and is up more than 50% compared to a year earlier.

For Yara’s Europe business segment, the company reported that higher nitrate premiums and sales prices continued to offset the lower deliveries and higher feedstock costs. In the Americas segment, higher production margins in North America more than offset lower margins and deliveries in Latin America.

In Yara’s Africa and Asia business segment (which includes Oceania), the company said EBITDA was positively impacted by higher ammonia production margins in Australia and higher sales in Africa, while margins were lower in Asia.

For Industrial Solutions, Yara reported strong production and commercial performance continued as demand remained healthy and the production units achieved reliability improvements.

However, the Industrial Solutions segment saw 13% lower deliveries in the fourth quarter compared with a year-ago, at 1.65 million mt. The company noted the fall was mainly in the base chemicals unit, which saw lower demand due to reduced industrial activity in Europe, and in the Transport Reagents unit compared with the “record deliveries” a year earlier, when customers bought higher volumes to secure supply.

On the production side, Yara highlighted that it saw reliability improvements in the fourth quarter on ammonia in particular, although it said total production is still impacted by proactive curtailments to “optimally manage” market conditions.

Ammonia production in the quarter was down 11% year-over-year, falling to 1.57 million mt from 1.76 million mt. Yara’s Pilbara ammonia plant has returned to production after having recently been down due to a natural gas pipeline problem. Finished fertilizer production was 13% lower than in fourth-quarter 2021, declining to 4.40 million mt from 5.09 million mt.

Yara said adapting to market conditions, it curtailed in the fourth quarter 0.35 million mt of ammonia capacity (30% of its European capacity) and 0.57 million mt of finished fertilizer capacity (14% of its European capacity).

As of the end of January 2023, it said it had curtailed an annual capacity of 1.7 million mt of ammonia (35% of its European capacity) and 4.7 million mt of finished fertilizer capacity (28% of its European capacity).

The company said the curtailments are frequently adjusted according to market conditions, and that it will, where possible, continue to use its global sourcing and production system to import ammonia to Europe and supply global customers.

But it reiterated that it will not produce or sell at negative margins.

However, Yara expects its first-quarter gas cost to be $320 million lower than a year earlier on current forward markets for natural gas and assuming stable gas purchase volumes. The company noted that the lower gas prices in Europe have led to some nitrogen capacity coming back online. Industry consultants, it said, are now indicating European ammonia production running at 70% of capacity.

For the full year 2022, Yara reported a net income of $2.78 billion, compared with just $384 million in 2021.

Full-year EBITDA excluding special items came in 69% up, at $4.89 billion versus $2.89 billion the previous year. Revenue and other income increased 45% on the year, reaching $24.05 billion, up from $16.61 billion.

Yara’s Board is proposing an ordinary dividend for 2022 of NOK55 per share (approximately $5.34 at current exchange rates), bringing total cash returns paid and proposed for 2022 to NOK65 per share, the company said. The dividend will be proposed for approval at the Annual General Meeting to be held on June 12.

Among analysts commenting on the results, Norne analyst Tomas Skeivys, as cited by a Bloomberg report, described the fourth-quarter report as “very strong,” while the proposed dividend hike to NOK55 per share “surprised positively,” offering an attractive 12% yield.

While Skeivys noted that energy costs had started to fall and catch-up demand is likely, he said the report did not make him bullish on the company, as “long-term worries remain.”

Credit Suisse analyst Samuel Perry noted that the earnings beat was offset by negative commentary around continued curtailments, nitrogen price volatility and supply growth.

Citi analysts, including Mubasher Chaudhry, said waning gas cost concerns suggest the industry is entering a new phase of demand dictating the market, moving away from a steep cost curve trend.

Yara Production and Deliveries

¹ Including Yara share of production in equity-accounted investees, excluding Yara-produced blends

Yara Deliveries

¹ The Africa and Asia business also includes Oceania