Yara Q4 net income decimated by weak commodity ferts markets

12 February 2014 10:32 Source:ICIS News

LONDON (ICIS)--Yara International’s fourth-quarter 2013 net income plummeted to Norwegian kroner (NKr) 59m (€7m) compared to NKr2.15bn during the final quarter of 2012, on the back of weak margins for commodity fertilizers, the Norway-based producer said on Wednesday.

Revenues were broadly steady year on year at NKr20.6bn compared to 21bn in the fourth quarter of 2012, while earnings before interest, taxes, depreciation and amortisation (EBITDA) was down 49% year on year at NKr1.84bn, the company added.

Jorgen Ole Haslestad, the fertilizer giant’s CEO, said the slump in profits was due in large part to drastically reduced commodity fertilizer margins.

“Yara’s fourth-quarter results reflect weaker commodity fertilizer markets,” he said.

"On the positive side, we report strong production volumes and deliveries, and the Industrial segment delivers higher sales and margins. Value-added product premiums remained robust compared with the strong decline in global nitrogen, phosphate and potash prices,” he added.

The company added that urea supply from China is driving pricing for the material, amid curtailments in eastern Europe and slower exports from North Africa. Phosphate and potash markets were also hit by reduced consumption in India, although general market conditions for phosphates improved in November.

Farm demand was also helping to support fertilizer demand despite weaker grain prices, Yara said, while western European nitrogen fertilizer industry deliveries were around 8% higher year on year. Demand remained strong for value-added fertilizer products including nitrates and nitrogen, phosphorus, potassium (NPKs), the company added.

US-headquartered analyst Bernstein Research noted that the results were below its expectations for the company, and that it is looking at aspects of the company’s business with increasing concern.

“We have become much more concerned about several near-term issues impacting earnings. Yara's key product prices have fallen further and faster than we expected in recent months. Moreover, falling crop prices have weighed on volume growth,” Bernstein said.

“We are also more concerned about long term volumes and margins. We see significant overcapacity when we couple our new analysis of demand growth with the wave of new supply and its low operating and capital costs,” it added.

(€1 = NKr8.35)

By Tom Brown