Citi raises Yara EPS estimates on record Q2

16 July 2008 11:11  [Source: ICIS news]

LONDON (ICIS)--Equity researchers Citi has upgraded its 2008-2010 earnings per share (EPS) estimates for Norwegian fertilizer major Yara following the company’s record Q2 results, it said on Wednesday .

Citi’s EPS estimates for the company were raised 6% to Norwegian kroner (NKr) 48.01 in 2008, 4% to NKr 61.79 in 2009 and 11% to NKr 54.08 in 2010.

Yara more than tripled its second-quarter operating profit to NKr 4.75bn ($938m/€591m) from NKr 1.33bn on strong demand for its fertilizers.

The company’s net income also tripled to NKr 4.42bn from NKr1.42bn in the previous corresponding period.

Citi said that despite a record quarter that beat consensus expectations, and a bullish short- and long-term outlook from management, the shares have come under pressure.

This has been due partly to broader stock market pressures but also to some concerns that soaring fertilizer prices might start to curtail demand despite high grain prices.

“Nonetheless, underlying fundamentals for fertilizer demand and pricing continue to strengthen,” the analysts said.

They added that while energy costs would be higher in the second half and there could be a slight fall in NPK demand, this would be more than offset by rising urea and nitrate prices.

“Expectations of a shift from soy to corn in the US 2009 planting season, given the flood damage to the 2008 harvest, raises our expectation for nitrogen demand into 2009; the 135% export taxes curtailing Chinese exports and the delay to new Middle East capacity means that nitrogen capacity is currently sold out,” they said.

“Beyond 2008 we also believe the outlook is strong,” the analysts added.

($1 = Nkr5.06/€1 = NKr8.04)

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By: Hilde Ovrebekk
+44 20 8652 3214



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