Shares in Yara International plunged, wiping $1bn from its stock
market value, after the fertilizer giant unveiled a 97% plunge in profits and warned
it was considering plant closures, thanks to low nutrient prices.
The Norwegian-based group, the world's biggest nitrogen fertilizer
maker, said that lower nutrient prices – which for urea averaged $314 a tonne
during the October-to-December period, down 18.4% year on year – had already
seen some its commodity nitrogen plants "come close to curtailment" during the
While prices have recovered this year, "Yara will continue
to evaluate the need for temporary or permanent capacity curtailments on an
ongoing basis", said the company, which produced 26.0m tonnes of fertilizers in
2013 at more than 20 sites in Australia, Brazil, Canada, Europe, Libya and Trinidad.
Any closure decisions would be based on "both market price
developments and investment decisions", Yara said, highlighting a quest to
boost cost efficiency "throughout the business".
The low prices of commodity fertilizers had already prompted
capacity shutdowns by rivals in North Africa, Ukraine and China, whose ramp up
in imports has been viewed as fuelling the tumble in urea prices from levels of
some $500 a tonne two years ago.
China's urea exports soared 20% to 8.3m tonnes last year,
despite a sharp reduction in the October-to-December quarter, of 37% to 2.7m
tonnes as the price decline prompted by "supply driven" market conditions hit
Ukraine exports in October and November plunged 62% to
"The highest cost producers, like Ukraine and China, needed
to curtail production to balance the market," Yara said.
"An average price at $314 per ton fob Black Sea has resulted
in significant production curtailments in Eastern Europe, and it also implies
an export price level from China unattractive for the highest cost producers
'US corn uncertainty'
Although demand had picked up in Yara's important European
market, where deliveries rose 8% year on year in the October-to-December period,
US volumes tumbled 13%, amid some doubts over the extent of spring sowings of
corn, a particularly nutrient-hungry crop.
"Uncertainty linked to the planted corn acreage for 2014 due
to lower corn prices have added to the general risk aversion among buyers," the
Yara's inventories of fertilizers had ended the year at 5.0m
tonnes, up roughly 20% year on year, although this reflects too the acquisition
of Bunge fertilizers assets in South America.
Its production volumes, at 6.62m tonnes in the fourth
quarter, were up 6.2% year on year.
The group's market assessment came as it unveiled earnings
of NOK50m for the latest quarter, down from NOK2.15bn a year before, and well
below market expectations of a NOK714m result.
Although this result, on revenues down 1.9% at NOK20.57bn,
reflected a huge dent from one-off factors - including NOK253m in foreign
exchange losses - Yara's operating profit, down 75% at NPK 544m, also fell short
of analyst expectations of NOK888m.
Yara shares tumbled 8.8% to NOK244.5m in morning deals in
Oslo, before recovering some ground to stand at NOK248.30, down 7.4% on the
The comments come at a time when Yara is already under
pressure over its handling of corruption, after a bribery scandal landed it
with a NOK295m fine and led to the indictment of several former and current
Local government pension fund KLP has urged the Yara
chairman, Bernt Reitan, to step down.