Yara reports increased deliveries but weaker margin

Yara International ASA delivered weaker first-quarter results compared with a year earlier. "Yara reports a weaker result than a year earlier, reflecting lower fertilizer prices and margins. However, we delivered increased sales volumes, both for fertilizer and Industrial products," said Svein Tore Holsether, President and Chief Executive Officer of Yara.

"Our ammonia production was lower, underlining the need for our on-going efforts to improve operations. The Yara Improvement Program is on track and has already delivered 90 of the targeted 500 million US dollars of annual earnings improvement within 2020," said Holsether.

Deliveries of Yara-produced fertilizer including blends were 3% higher than in first quarter 2016. The growth was mainly driven by higher nitrates and compound NPK deliveries in Europe and higher compound NPK deliveries in China and Thailand, two of Yara's most important NPK markets outside Europe.

Adjusted for the divestment of Yara's CO2 business last year, Industrial deliveries were 17% higher than a year earlier, with growth for all products.

Lower realized prices and higher gas costs impacted both commodity upgrade margins and premiums for fertilizer and industrial products compared with a year earlier. Yara's average realized urea and nitrate prices decreased 5% and 15% respectively, while realized NPK prices decreased by around 10%. Yara's average global gas costs were 28% higher than a year ago.

The global farm margin outlook and incentives for fertilizer application remain supportive overall, and while grain prices are stable, prices for several key crops like sugar, coffee, oils and dairy products are higher than a year ago.

In Europe, first quarter nitrogen industry deliveries were 6% higher than a year earlier, but with a slower trend in March as weather-related delays and lower global nitrogen prices delayed purchasing. However, Yara expects normal nitrogen consumption for the European spring season overall.

Yara has established a corporate program to drive and coordinate existing and new improvement initiatives, which will deliver at least USD 500 million of annual EBITDA improvement by 2020, of which an estimated USD 150 million will be realized in 2017.

To meet growing demand for premium products in particular, Yara is expanding capacity in several plants, with most of the projects due to be completed during 2017 and 2018. Applying current market prices, these projects are expected to generate approximately USD 600 million of annual EBITDA improvement (NOK 6 net income per share) by 2020 when fully operational.