Citi raises Yara 08 EPS estimate; downgrades 09

19 August 2008 14:20  [Source: ICIS news]

LONDON (ICIS news)--Citi raised its 2008 earnings per share (EPS) estimates for Norwegian fertilizer major Yara on Tuesday, but said it had downgraded the company's 2009 estimates on lower nitrogen, phosphorus and potassium (NPK) profitability.

The equity researchers said in a note to clients that higher nitrogen prices had driven an 8% EPS upgrade for 2008.

They said spot ammonia and urea prices were up 48% and 11% respectively since the beginning of the third quarter. Over the same time, average spot European gas prices have fallen 20%. Global nitrogen price forecasts in 2008 and 2009 were lifted by 5-7%.

“Farmer economics look strong and supply/demand in nitrogen fertilisers seems set to tighten with a lifting of Chinese export taxes,” said Citi.

However, lower NPK profitability driven by lower phosphate profitability lead to a downgrade in 2009 EPS estimates by 15%.

“We have reduced our 2008 and 2009 phosphate price forecasts by 2% and 15%, respectively, due to lower input sulphur costs and possibility of lower Chinese export taxes. Unlike urea, phosphate taxes are not expected to rise in Q4 and could fall 20-25%,” Citi’s analysts said.

“We believe the recent set back in Yara's share price is unjustified and reiterate our Buy rating,” said the analysts.

Yara’s share price was at Norwegian kroner (NKr) 309 ($56/€40) at 12:14 GMT at the Oslo stock exchange on Tuesday, down 0.32% from the previous close.

($1 = NKr5.42/€0.68)

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By: Hilde Ovrebekk
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