Shares in Yara International jumped more than 5% after the fertilizer giant unveiled forecast-beating results and trumpeted a revival in demand for nutrients – except potash.

The group said that the new fertilizer season had made a "promising start", with European prices of nitrogen nutrients, of which it is the world's top producer, "substantially" higher than a year ago.

The market for phosphates was "tight", after demand "recovered well from the weak 2008-09 season".

"Fertilizer demand is backed by strong consumption growth for agricultural products and concerns that last year's record yields following favourable weather may not be repeated." said Jorgen Ole Haslestad, the Yara chief executive.

Odd one out

However, potash, the third of the big three nutrients, was missing out on the revival, the company said, noting industry data showing a drop of 1.2% in global consumption during 2009-10. Use of nitrogen and phosphate rose.

"Global fertilizer consumption has returned, except for potash," Yara said, adding that its own mixed fertilizer facilities had seen "subdued" demand for the nutrient.

The comments came as PotashCorp, the world's top potash group, reported a small fall, of 56,500 tonnes, in inventories of the nutrient held by producers in North America, which is one of the few regions where recoverable deposits are found in significant quantities.

Nonetheless, the inventories, which soared last year as farmers scrimped on fertilizers during the credit crunch, were, at about 2.4m tonnes, 12% above the five-year average.

Europe has a smaller potash industry, and Norway-based Yara, which buys in the nutrient, has been critical of potash miners for attempting to keep prices of the nutrient high, even as demand from growers crumbled.

Shares rise

Yara said that its earnings more than trebled to NOK3.72bn in the April-to-June quarter.

The improvement reflected the disposal of its stake in Fosfertil, the Brazilian phosphate group, which contributed NOK2.6bn to after-tax profits, as well as widening margins, boosted by the improved nitrogen performance and lower costs.

Earnings before interest, tax depreciation and amortisation (ebitda) were, at NOK6.6bn, ahead of the NOK6.0bn that investors had expected.

'Looking good'

Indeed, the results were termed a "decent beat" by Credit Suisse analysts, who took particular comfort in Yara's assertions of low inventories.

"The most important message in our view is the empty pipeline, which bodes well. The fundamental picture is looking good for 2011," the bank said, restating an "outperform" rating on Yara shares.

Per Haagensen, at Oslo-based Fondfinans, upgraded his estimates for Yara earnings for this year and 2011, and lifted by NOK30 to NOK250 his price target for the group's shares, on which he kept a "buy" recommendation.

However, Pareto restated a "sell" rating, saying that Yara was poised to lose a temporary advantage from cheap gas supplies.

The stock closed NOK11.00 higher at NOK222.50 in Oslo.