Yara’s Q2 net income up 22.4% on NPK, expansion announced

18 July 2014 11:19 Source:ICIS News

(Recast: Releads and updates throughout)

LONDON (ICIS)--Yara International’s increase in net income during the second quarter, up 22.4% year on year to Norwegian kroner (NKr) 2.29bn (€273m), came on the back of higher sales volumes in nitrogen phosphorus potassium (NPK), for which the company plans an expansion at its facility in Finland, it said on Friday.

Yara’s revenue in the second quarter was up just 0.64% year on year, to Nkr23.3bn, as the company saw sales volumes of urea, nitrate, calcium nitrate and urea-ammonium nitrate all decrease.

On the back of good NPK sales, Yara’s CEO, Jorgen Ole Haslestad, announced on Friday an expansion at the company’s site in Uusikaupunki in Finland which will increase capacity by 250,000 tonnes/year, to be completed at the end of 2015.

Yara’s earnings before interest, taxes, depreciation and amortisation (EBITDA) in the second quarter increased 4.6% to Nkr4.2bn. In line with the increase in net income, earnings per share (EPS) registered an increase of 23.5% to NKr8.26.

By products, Yara registered an increase in sales volumes for NPK from 1,818,000 tonnes in the second quarter of 2013 to 2,475,000 in the same period of this year, on the back of good deliveries and value-added premiums, the Norwegian fertilizer producer said.

Ammonia managed to increase sales volumes slightly, from 790,000 tonnes in the second quarter of 2013 to 827,000 registered in the same period of 2014. Sales volumes of diammonium phosphate (DAP) and monoammonium phosphate (MAP) were also up from 90,000 tonnes in Q2 2013 to 186,000 tonnes in the second quarter of this year.

Muriate of potash (MOP) and sulphate of potash (SOP) also increased sales volumes to 313,000 tonnes in the second quarter of this year, compared to 144,000 tonnes in the same period of 2013. What the company calls “other products” also increased sales from 1.04m tonnes in the second quarter of 2013 to 1.13m tonnes in the same period of 2014.

However, an early end of the spring in Europe made all other products within Yara’s offering decrease their sales volumes. Urea, the second-best selling product within Yara’s range, registered a fall in sales volumes to 1.76m tonnes in the second quarter of 2014, compared to the 1,97m tonnes sold in the second quarter of 2013.

Realised urea prices were down 9%, said Yara, whereas realised nitrate prices were up 5%, allowing the company to increase margins on that product.

As for nitrate sales volumes, they registered an important decrease from 1.78m tonnes in the second quarter of 2013 to 1.30m tonnes sold in Q2 2014.

Calcium nitrate (CN) sales volumes remained practically flat, from 384,000 tonnes sold in the second quarter of 2013 to 377,000 tonnes sold in the same period of 2014, while urea-ammonium nitrate (UAN) sales volumes were down by 62,000 tonnes to 407,000 tonnes in the second quarter of 2014 year on year.

Despite the fall in sales in a wide range in products, which the company attributed to a decrease in consumption following an early spring, Yara said it was optimistic looking ahead and stressed that lower gas prices will make the energy cost burden much lower in the remaining months of 2014.

“Lower European natural gas prices have improved the relative competitiveness of Yara's European ammonia/urea plants. Based on current forward markets Yara's second-half European energy costs are expected to be NKr1.65bn lower than a year earlier,” said the company.

During the Q2 conference call, Yara said it will also invest €50m in additional NPK capacity in Finland. Haslestad said the amount “represents about a quarter of the equivalent level of investment needed for a new plant”.

He said plans to expand NPK capacity at its Porsgrunn facility in Norway will be announced later in the year as the construction and engineering plans are currently out for tender.

(€1 = NKr8.40)

Additional reporting by Nurluqman Suratman

By Jonathan Lopez