Lower commodity margins impacted Yara International ASA’s second quarter results, with net income after non-controlling interests falling to NOK 699 million (NOK 2.56 per share) for the quarter, down from last year’s NOK 3,072 million (NOK 11.23 per share). Excluding net foreign exchange gain and special items, net income for the quarter was NOK 2.90 per share, compared with NOK 6.29 per share in second-quarter 2016.
“Our industry is facing strong oversupply of urea and other commodity nitrogen products, and we have expected this development for some time,” said Svein Tore Holsether, Yara president and CEO. “We are therefore focused on improving our operations, and making growth investments primarily within premium fertilizer and industrial applications where margins are more stable.”
Second-quarter EBITDA excluding special items was NOK 2,873 million, down 27 percent from last year, due mainly to higher energy costs and lower realized prices. 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 last year.
Yara said second-quarter margins were impacted by higher gas costs and lower realized prices. The company’s average realized urea fertilizer prices were down 7 percent from last year, while realized nitrate and NPK prices were down 1 percent and 5 percent, respectively. Yara said its average global gas costs were 24 percent higher than a year ago.
Looking ahead, Yara said its Improvement Program and growth pipeline are on track to deliver a minimum annual earnings improvement of NOK 17 per share by 2020. It said the global farm margin outlook and incentives for fertilizer application remain supportive overall, while the price trend for cereal, meat, and dairy has been positive year-to-date
Yara said it is seeing normal order rates in Europe 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 said its spot energy costs for the next two quarters are expected to be approximately NOK 225 million higher than a year earlier.