23 July 2012 13:10 [Source: ICIS news]
LONDON (ICIS)--Investment bank Credit Suisse on Monday raised its target share price for Yara International after the Norway-based fertilizer producer's second-quarter earnings beat expectations.
Credit Suisse raised Yara’s target share price to Norwegian kroner (NKr) 297 ($49, €40) from NKr282 and reiterated a “Neutral” rating for the company.
“Yara beat expectations in Q2 benefiting from its flexible production system to maximise margins in a quarter with volatile prices,” the investment bank said.
“We reiterate our Neutral rating believing the share pricing in a good balance between the tailwind from near-term strong grain prices and medium-term headwinds from increasing nitrogen supply,” Credit Suisse added.
Yara on 18 July said upstream operations delivered its second “best ever” quarter thanks to a combination of high volumes and prices.
The company posted a 26% year on year jump in second-quarter net income to Norwegian kroner NKr2.80bn as it benefited from better margins and more fertilizer deliveries due to “tight balance in most agricultural markets”.
Second-quarter sales increased 15% year on year to NKr21.4bn, while earnings, before interest, tax, depreciation and amortisation (EBITDA) excluding special items surged 47% year on year to NKr5.20bn.
Looking ahead, Credit Suisse said urea prices are expected to remain volatile, although prices have come down sharply from the peaks in second-quarter trading.
“The recent spike in grain prices should lend support to [urea] prices but we do not expect urea prices to sustainably follow corn higher,” it said.
Credit Suisse added that it expects new low cost-capacity from the Middle East and ?xml:namespace>
“Falling nitrogen prices should directly hurt Yara's margins at its own production facilities and weigh on margins in Yara's global downstream operations,” it said.
($1 = NKr6.09, €1 = NKr7.38)
Additional reporting by Richard Ewing
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