High fertilizer prices lift Yara Q2 earnings

17 July 2007 08:57  [Source: ICIS news]

SINGAPORE (ICIS news)--Norwegian fertilizer firm Yara on Tuesday posted a strong rise in second quarter earnings, and said it expects fertilizer demand to continue to grow amid depleting global grain stocks.

The company’s earnings before interest, tax, depreciation and amortization (EBITDA) rose 32.1% to Norwegian kroner (NKr) 2.2bn ($383.9m/€278.8m) in the second quarter from the same period a year ago on higher fertilizer prices, lower energy costs and a strong Brazilian market, it said in a statement.

Global grain stocks was expected to fall further by the end of the 2007/2008 season, Yara said, adding that this will boost farm profitability and fertilizer demand.

"Yara made good progress in the second quarter," Thorleif Enger, president and CEO, said in the statement.

"We have taken steps to acquire Kemira GrowHow and establish an important joint venture in Libya. A JV (joint venture) will also be established with Praxair to further develop our industrial gas business," he added.

Competition in the European natural gas market is increasing due to new supply and more liquidity at trading hubs, he said, adding that the company has secured increased flexibility in several European gas contracts.

Yara’s revenue rose 12.9% to NKr13.8bn in the second quarter from the same period a year ago as fertilizer sales volumes increased 8.2% to 5.2m tonnes mainly due to strong demand in Brazil, it said.

Higher prices for urea, nitrates and nitrogen phosphorous potassium (NPK), boosted earnings while margins for industrial products also increased, it added. Its total fertilizer and industrial products output rose 6.8% to 4.9m tonnes.

Energy arbitrage effects were NKr262m lower due to one-off gains last year related to European gas contracts, and electricity costs were lower throughout Europe, Yara said.

European fertilizer deliveries were down compared with a strong second quarter last year, reflecting lower pre-season sales at the end of the quarter, Yara said, adding that its market share in eastern Europe was maintained.

Yara stopped its ammonia plant in Brunsbuttel, Germany, for repairs to restart Argon production as the industrial gas was in demand and the impact from this was NKr47m, it said.

The company will also be taxed for its revenue from joint venture Qatar Fertilizer Co (Qafco) units from 1 January this year, it added.

Yara said freight costs rose following its ammonia fleet divestment last year and fixed costs were also up on bonuses, share-based compensation and transition costs related to the change to IBM as global technology supplier.

($1=Nkr5.73 / €1=7.89)

By: Florence Tan
+65 6780 4359

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