Higher fertilizer prices, lower energy costs, improved production performance, and a strong Brazilian market all helped propel Yara International ASA’s second quarter to record results. The company reported net income after minority interest of NOK 1,422 million (NOK 4.85 per share), compared with NOK 1,041 million (NOK 3.42 per share) in the 2006 second quarter.
Revenue and other income for the quarter totaled NOK 13,775 million, compared with NOK 12,200 million in the year-ago quarter. Second-quarter operating income came in at NOK 1,329 million, compared with NOK 924 million in last year’s second quarter.
“Yara made good progress in the second quarter, delivering strong results and new growth initiatives,” said Thorleif Enger, president and CEO. “We have taken steps to acquire Kemira GrowHow and establish an important joint venture in Libya. A JV will also be established with Praxair to further develop our industrial gas business.”
EBITDA for the second quarter was NOK 2,222 million, also up from last year’s NOK 1,682 million due to higher fertilizer sales volumes and higher urea prices, good nitrates and NPK prices, and increased margins for industrial products. In addition, the company said oil and gas costs in Europe decreased considerably as several supply contracts were revised, increasing Yara’s exposure to hub-priced gas. The company said hub-priced gas prices were substantially lower than oil linked product prices during the quarter.
“Competition in the European natural gas market is increasing due to new supply and increased liquidity at trading hubs,” said Enger. “Yara is taking advantage of this development and has secured increased flexibility in several European gas contracts.”
Yara said the second quarter saw strong demand-driven pricing for upgraded nitrogen fertilizer prices, and demand continued to be supported by strong prices for grain and other agricultural products. The company experienced increased prices for all products compared with last year, with urea prices leading the charge. The company said production performance was also strong, with increased sales from the Burrup plant, which was only partially in operation during last year’s second quarter.
Yara’s fertilizer deliveries increased 8 percent in the second quarter to 5.2 million mt, which the company said reflects favorable market developments in Brazil, characterized by early purchases and a strong market for corn and soybeans. Yara Brazil completed its merger with Fertibras in June, and is now the second largest fertilizer company “in a market fuelled by strong demand for corn from the U.S. ethanol industry and good prospects for its sugar cane industry, despite lower sugar prices,” the company said.
European fertilizer deliveries were down compared with a strong second quarter last year, Yara said, following drought in Germany and lower pre-season sales in the UK and Germany. The company said it maintained its market share in Western Europe despite these factors.
Yara said it expects the strong demand-driven fertilizer market to continue, noting that global grain stocks are low and a further drop is forecast by the end of the 2007/08 season. Yara also noted that grain prices remain at historically high levels despite some recent softening, suggesting solid farm profitability and fertilizer demand in the coming season.