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Yara profit warning sends shares to one-year low

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Shares in the Norwegian fertilizer producer Yara International touched year-lows, as it issued a profit warning, and reports falling volumes.

Yara, the world's top nitrogen fertilizer producer, announced an asset impairment charge for plants in France and Trinidad, as well as a profit warning over lower sales and production volumes.

The impairment charge of NOK1.15bn, will be recognised in Yara's full-year results, due out on February 1.

The results will show earnings before interest, tax, depreciation and amortisation (ebitda) of NOK3.5bn, well below the NOK4.3m a year before, and the NOK4.3bn that investors have been expecting.

Yara shares tumbled 4% at one point to touch one-year lows on the news.

Lower sales and volumes

In addition to the impairment charges on the two facilities, Yara warned that its results "are impacted by lower sales and production volumes compared with a year earlier".

Yara said the weaker results were "mainly for ammonia and urea," after "significant production outages".

Yara reported its ammonia and urea deliveries as both down approximately 160,000 tonnes compared with a year earlier, while sales of nitrates were down approximately 100,000 tonnes".

Limited opportunities

The Montoir plant, in France, will receive an impairment charge of around NOK550m.

Yara said the plant "has limited export opportunities and is exposed to lower profitability in its home market, given lower grain prices and also lower phosphate and potash demand".

And the impairment charge for Yara Trinidad is around NOK380m.

The plant suffers from frequent gas supply curtailments, Yara said, and also has "lower energy efficiency than Yara's average".

Falling nitrogen

Prices for nitrogen fertilizers have been plummeting.

This week Canada-based broker Raymond James forecast urea prices in the port of Tampa, Florida, to average $271 a tonne over the whole of 2016, down 15% year-on-year, with the lowest prices seen over the first three months of 2016, with prices averaging $248 a tonne.

Ammonia prices in New Orleans were forecast down 12% over 2016, at $400 a tonne, with prices in the first three months averaging $350 a tonne.

Raymond James noted some "alarming price trends in domestic urea in recent weeks," with cheap Chinese supplies thanks to declining coal prices and the falling renminbi.

Yara shares were trading down 3.1% at NOK323.5 in morning deals in Oslo.


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