Linked In
News In
Linked In

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Yara clings to hopes for EU fertilizer market revival

Twitter Linkedin

Yara International clung to hopes of a recovery in nitrogen fertilizer purchases by European farmers, despite a weak start to 2016 for volumes, which fuelled a 12% drop in the group's earnings.

The Norwegian-based company, which early this year forecast a "catch-up in [European nitrogen fertilizer] deliveries during the first half of 2016", acknowledged that revival had not materialised in the January-to-March period.

Industry-wide volumes in the quarter fell by 6% year on year - meaning deliveries for the July-to-March period (the first nine months of the 2015-16 fertilizer marketing season) were 4% down at a three-year low of some 5.7m tonnes.

The drop reflected wetness which has prevented some early fieldwork and the dent to farm demand from weak crop prices.

"Both weather-related delays and market sentiment have contributed to delayed purchasing," said Yara, whose own deliveries in Europe fell by 9% in the January-to-March quarter, led by an 18% slump in nitrate volumes.

'Nitrate price reductions'

However, the group restated expectations of a recover in demand, foreseeing a "catch-up in deliveries" during the current April-to-June period.

Industry volumes for the full 2015-16 marketing year, to the end of June, will come in "close to last year's levels", Yara said, although acknowledging that meeting this target required some price discounting.

"Nitrate price reductions are offered in some markets, to stimulate late-season demand."

Shares soar

The comments came as the group blamed its European performance for most of a drop of 5% in global deliveries in the January-to-March quarter.

Coupled with lower prices too, Yara reported a 9.8% drop to NOK25.1bn in its revenues for the period.

However, while underlying earnings before interest, taxation, depreciation and amortisation (ebitda) fell by 12.1% to NOK5.05bn, the drop was less severe than expected by investors, who had pencilled in a NOK4.9bn result.

Yara shares stood 5.1% higher at NOK348.30 in late-morning deals Oslo, earlier touching a three-month high of NOPK349.50.

'Challenging market environment'

The better-than-expected result reflected in part weaker costs of natural gas – nitrogen plants are major energy users - with the group foreseeing further declines to come, to NOK1.15bn in the April-to-June period, and to NOK1.0bn in the July-to-September quarter.

"Lower natural gas cost in Europe continued to improve Yara's competitive position during the quarter," said Svein Tore Holsether, the Yara chief executive.

However, he also flagged an improved operational performance, which had meant "both ammonia and finished fertilizer production running at high levels".

He termed the results "strong", given a "challenging market environment" marked by weaker prices and lower deliveries.

Chinese exports tumble

Yara also underlined the softer start to 2016 for fertilizer deliveries from China, which have a big impact on world market prices, with urea volumes down some 30% to 2.1m tonnes in the first two months of the year.

"Chinese urea production and export costs continue to be the main reference point for global nitrogen pricing, given China's position as both the highest-cost producer and largest exporter of urea," the group said

Chinese phosphate export volumes dropped 42% to roughly 300,000 tonnes.

However, Yara - while saying that current Chinese export prices of a little above $200 a tonne were "likely close to breakeven for high-cost producers - stopped short of forecasting an extended decline in export volumes.

"Price fluctuations can be expected also going forward, due to both seasonality and the significant spread in Chinese plants' cost bases."

By Mike Verdin

Twitter Linkedin
Related Stories

Festive staff shortages 'likely' as British growers cut ties with UK supermarkets

Faced with mounting concerns over labour shortages and fears they may not be able to fulfil retailer contracts, some British growers have sought to cut ties with UK supermarkets in favour of companies elsewhere in Europe.

Hard Brexit to have 'catastrophic' effect on European meat industry; new report

A hard Brexit will have a ‘catastrophic impact’ on the European meat industry, according to a report published by Europe’s meat industry body, UECBV, as the UK and EU continue negotiations.

Manufacturers stockpile agrochemicals in bid to keep post-Brexit prices down for farmers

Manufacturers of crop protection products are stockpiling agrochemicals in warehouses in a bid to keep input costs down for farmers after Brexit, according to the chief executive of the Crop Protection Association, Sarah Mukherjee.

Dairy groups sidestep shockwaves from GDT price slump

Indeed, shares in the likes of A2 and Beston soar. Still, that does not mean there are no losers from the dairy price falls...
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© 2017 and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069