Strong fertilizer sales, buoyed by robust crop prices, helped Yara International offset soaring energy costs to trounce analysts' profits forecasts for the first quarter, sending its shares up more than 4%.

The Norwegian group, the world's biggest maker of nitrogen-based fertilizers, said that its bills for oil and gas, key raw materials, were 44% higher in Europe during the first three months of 2011 than a year before.

And it warned that higher prices for gas and oil, swollen by Middle Eastern and North African unrest, would continue to bite, raising energy bills by NOK1bn in the April-to-June period, compared with a year before, and NOK900m in the July to September period.

Forecasts beaten 

However, concerns over the higher energy prices, over which Yara alerted investors in a profits warning in February, were countered by the group's unveiling of earnings before interest, tax, depreciation and amortisation, or ebitda, of NOK4.28bn ($814m)

The result was 32% higher than a year before, and NOK420m above analysts' expectations.

"Improved fertilizer prices linked to tight agricultural markets have more than compensated for increased energy costs from last year," Horgen Ole Haslestad, the Yara chief executive, said.

Yara shares stood 4.6% higher at NOK306.40 in lunchtime deals in Oslo.

China factor

The increase in sales reflected growth in both prices and volumes, which rose notably outside the home European market, jumping 18.6% to 2.54m tonnes.

By price, Yara achieved a 50% increase in values of nitrate fertilizers, and a 32% rise in the combined nitrate, phosphate and potassium nutrient NPK.

The exception was urea, for which demand was sapped by stockpiling towards the end of last year, ahead of a increase in China's export tax on the nutrient from December 1.

China's urea exports so far in the fertilizer year, which started in July, have risen by more than 50% to 6.9m tonnes.

"Many key markets were well supplied into first quarter 2011, and demand slowed," Yara said.

'Strong incentives' 

However, urea prices had recovered since the end of March, rebounding by more than 10%.

And Yara in its outlook statement, while failing to spell out profits forecasts, highlighted the boost to nutrient sales given by elevated crop prices.

"The historically high price levels for agricultural commodities give farmers strong incentives to utilise all arable land and increase fertilizer applications," the group said.

"The higher planting expectations and continued agricultural price increases indicate strong grain consumption growth and concerns about whether agricultural supply will be sufficient to meet demand in 2011 and 2012."