Yara International ASA posted third-quarter net income attributable to shareholders of $402 million, compared with a net loss of $143 million in the same year-ago period, beating analysts’ average estimates of $373.1 million (Bloomberg Consensus). Earnings per share were $1.57 compared with a negative $0.56 per share the previous year.
Third-quarter EBITDA excluding special items increased by 31% to $1 billion, up from $765 million, also higher than analysts had estimated. The average estimate had been $821.5 million. Revenue rose 39% to $6.22 billion from the year-ago $4.49 million, versus the analysts’ average estimate of $5.38 million.
“Yara’s business model has proven its resilience for decades and continues to perform well despite a challenging operating environment with extreme price volatility and plant curtailments in Europe,” said Yara International President and CEO Svein Tore Holsether. “Our margins are up, with strong margins more than offsetting lower deliveries.”
Amid a continued “challenging operating environment” primarily due to “unprecedented gas price volatility in Europe,” Holsether said Yara continues to adapt to market conditions and currently has production curtailments at several of its production plants, amounting to annual capacity of 1.7 million mt of ammonia and 0.9 million mt of finished fertilizer.
European ammonia production in the third quarter fell to just 57% of the regional capacity total of 4.8 million mt/y, down from 81% in the second quarter, Yara said in a webcast earnings presentation on Oct. 20.
In late August, Yara had said it was implementing further curtailments that would reduce its total European ammonia capacity utilization to around 35% (GM Aug. 26, p. 1). At that point, the company had curtailed an annual capacity equivalent of 3.1 million mt of ammonia and 4.0 million mt of finished products (1.8 million mt urea, 1.9 million mt nitrates and 0.3 million mt NPK) across its production system in Europe.
Yara this week reiterated that it will continue to use its global sourcing and production system to supply customers, where possible, but reiterated that it cannot produce at negative margins.
Holsether told analysts that the company’s current curtailments on finished fertilizer are “quite limited” as the situation in Europe has improved with significantly lower gas prices. He said the only significant market-related finished fertilizer curtailments in Europe are currently at Yara’s Italian plants.
He added that the planned turnaround at the Belle Plaine plant in Regina, Sask., in the third quarter took longer than planned. However, Holsether confirmed Belle Plaine would be back to full production in the fourth quarter.
Third-quarter ammonia production fell 81% from the second quarter, to 1.53 million mt, and was down 16% from the year-ago 1.82 million mt. Third-quarter finished fertilizer output was also down 16%, to 4.6 million versus 5.45 million mt in last year’s third quarter.
Total deliveries in the third quarter fell by 20% year-over-year, to 7.94 million mt from 9.98 million mt. Fertilizer deliveries were down 26%, to 5.63 million mt from the year-ago 7.59 million mt, while deliveries of industrial products were 3.5% lower at 1.85 million mt versus the prior year’s 1.92 million mt.
While Yara is seeking to protect its margins in Europe, the tight global nitrogen market boosted profits in the Americas, Africa, and Asia. Yara proposed an additional dividend of NKr10 per share (approximately $0.95 at current exchange rates), which will be paid in the fourth quarter. It said it will also consider further cash returns including share buybacks in the coming quarters.
Carnegie analyst Morten Normann said Yara’s lower-than-planned curtailments point to higher volumes in the fourth quarter and through 2023, Bloomberg reported. Norne analyst Tomas Skeivys said Yara’s “very strong” third quarter proves the company’s flexible business model, and its “ability to source cheaper ammonia globally is bearing fruit.”
Credit Suisse analyst Samuel Perry, however, noted that Yara is “overweight” in European gas, which he estimates as an $800 million headwind in 2023, prior to the impact of curtailments. Perry noted the company would need a ~30% increase in nitrates pricing from “already high levels” to offset this.
Based on current forward markets for natural gas in October, and assuming stable gas purchase volumes, Yara said its gas cost for the fourth quarter is estimated to be $540 million higher than a year ago.
For the nine-months, the company posted a net income attributable to shareholders of $2.02 billion ($7.88 per share), up from $410 million ($1.59 per share) the previous year. EBITDA excluding special items increased by 80%, to $3.82 billion from $2.13 billion, while revenue rose 61%, to $18.59 billion from the prior year $11.58 billion.
Yara Production and Deliveries
| ‘000 mt | 3Q-2022 | 3Q-2021 | 9M-2022 | 9M-2021 |
| Production1 | ||||
| Ammonia | 1,531 | 1,819 | 4,942 | 5,503 |
| Finished fertilizer and industrial products (excluding bulk blends)1 | 4,601 | 5,463 | 13,929 | 15,687 |
| Yara Deliveries | ||||
| Ammonia trade | 457 | 471 | 1,304 | 1,518 |
| Fertilizer | 5,629 | 7,588 | 17,535 | 21,786 |
| Industrial product | 1,851 | 1,919 | 5,514 | 5,535 |
| Total deliveries | 7,937 | 9,979 | 24,353 | 28,639 |
1 Including Yara share of production in equity-accounted investees, excluding Yara-produced blends
Yara Crop Nutrient Deliveries
| ‘000 mt | 3Q-2022 | 3Q-2021 | 9M-2022 | 9M-2021 |
| Crop Nutrition Deliveries | ||||
| Urea | 1,000 | 1,467 | 3,702 | 4,637 |
| Nitrate | 1,183 | 1,327 | 3,415 | 4,091 |
| NPK | 2,212 | 2,966 | 6,333 | 7,695 |
| CN | 341 | 405 | 1,185 | 1,351 |
| UAN | 242 | 297 | 859 | 1,058 |
| DAP/MAP/SSP | 150 | 280 | 442 | 762 |
| MOP/SOP | 261 | 534 | 772 | 1,200 |
| Other products | 234 | 312 | 827 | 992 |
| Total Crop Nutrition Deliveries | 5,629 | 7,588 | 17,535 | 21,786 |
| Europe Deliveries | 1,979 | 2,104 | 5,793 | 7,055 |
| Americas Deliveries | 2,688 | 4,149 | 8,492 | 10,870 |
| North America | 436 | 643 | 2,173 | 2,665 |
| Brazil | 1,763 | 2,904 | 5,006 | 6,582 |
| Latin America excluding Brazil | 489 | 602 | 1,313 | 1,623 |
| Africa & Asia Deliveries1 | 963 | 1,336 | 3,250 | 3,861 |
| Asia | 715 | 987 | 2,550 | 2,950 |
| Africa | 248 | 349 | 700 | 912 |
| Industrial Solutions Deliveries | 1,851 | 1,919 | 5,514 | 5,535 |
1 The Africa and Asia business also includes Oceania