Yara reports strong production, lower commodity fertilizer margins

Yara International delivered weaker third-quarter results compared with a year earlier. Net income after non-controlling interests was NOK 709 million (NOK 2.60 per share), compared with NOK 821 million (NOK 3.00 per share) a year earlier. Excluding net foreign exchange gain and special items, the result was NOK 3.21 per share compared with NOK 3.43 per share in third quarter 2016.

Third-quarter EBITDA excluding special items was NOK 2,728 million, down 8% compared with a year earlier as higher energy costs and a weaker US dollar more than offset the impact of higher deliveries.

"Yara reports a strong production performance for the quarter, with several production records and the Yara Improvement Program delivering ahead of schedule," said Svein Tore Holsether, President and Chief Executive Officer of Yara.

"Our financial results are weaker than a year earlier due to lower commodity fertilizer margins. Although prices picked up towards the end of the quarter, we continue to see the market as fundamentally supply-driven, and therefore remain focused on strengthening our own operations," said Holsether.

Total fertilizer deliveries were 6% higher than in third quarter 2016 driven by higher urea deliveries in North America and continued growth in Brazil. Industrial deliveries were 6% higher than a year earlier. Yara's production system performed well during the quarter, with ammonia and finished fertilizer production respectively 7% and 8% higher than a year earlier. Yara's average realized nitrate prices increased 10% while realized NPK and urea prices were respectively 3% and 2% higher than a year ago.

The global farm margin outlook and incentives for fertilizer application remains supportive overall, and the price trend for cereal, meat and dairy has been positive year to date. In Europe, third-quarter nitrogen industry deliveries were 1% higher than a year earlier. Yara saw strong order-taking during the quarter, triggered by the tighter situation globally for nitrogen, and as a result Yara enters fourth quarter with a longer nitrate order book than normal. The time lag between market prices and realized prices on Yara's fourth-quarter deliveries is expected to be approximately 3 months. Based on current forward markets for oil products and natural gas, Yara's spot energy costs for the next two quarters are expected to be approximately NOK 430 million higher than a year earlier.

The Yara Improvement Program is on track to reach at least USD 500 million of annual EBITDA improvement by 2020, of which USD 210 million has been realized as of third quarter 2017.

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