The late northern hemisphere spring and weak grain markets are curbing the fertilizer market's revival, Yara has warned, adding that government subsidies were also to blame for a slip in nitrogen prices.
The Norwegian group, the world's biggest nitrogen fertilizer company, revealed a 70% jump to NOK1.53bn in earnings for the first three months of the year, helped by an end to the steep writedowns to inventories suffered last year as nutrient values tumbled.
However, it warned over a pick-up in sales volumes, as the prolonged winter in Europe and North America prompted farmers to push back, and potentially ditch, fertilizer applications.
The outlook statement was "more careful than for a long time", analysts at SEB Enskilda said, with Oslo broker Pareto terming it "lacklustre".
Yara shares closed down 3.3% at NOK223.60 in Oslo, after earlier touching NOK219.60, their lowest since November.
Recovery factors
"A late spring will mainly imply a delay of fertilizer sales from first and to second [quarters], but can also reduce overall demand for the season as the growing phase is shortened," the group said.
"Distributors are delaying purchases until they see farmers ordering for the second application."
The extent of the recovery in fertilizer deliveries depended on how quickly weather conditions "normalise" and on the strength of crop markets.
"Grain prices are still depressed, and incentives to maximise yields are lower than in spring 2008," the peak of the fertilizer market.
Nitrogen setback
The group also renewed an attack potash groups for maintaining "still-high" prices of the nutrient, which Yara incorporates into compound nitrogen, phosphate and potash (NPK) fertilizers.
"We see a clear risk that NPK deliveries may not fully recover this season," Yara said.
And it flagged the "temporary setbacks" of government help in India and Ukraine for fertilizer groups through support over supplies of natural gas, a key raw material.
"These developments, combined with a late northern hemisphere spring… may explain the current slight weakening in the global nitrogen market."
Importance of pricing
The group also noted that phosphate prices had retreated from mid-March highs, a decline Jorgen Ole Haslestad, the Yara chief executive, attributed to the workings of a "normal" market.
"When prices are getting too high, purchasing of products is reduced," for both phosphate and potash, he told analysts.
Group revenues slipped 8.8% to NOK15.6bn in the January-to-March period, the sixth successive quarter to show a year on year decline.
Nonetheless, Mr Haslestad said markets had improved "substantially" from last year's slump.
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