Yara's fertilizer sales, output, profit fall

OREANDA-NEWS. February 15, 2016. International fertilizer producer and trader Yara's drop in fourth-quarter profit reflects difficult international fertilizer markets and the firm's production problems.

Profit fell by 77pc compared with fourth-quarter 2014 to 403mn kroner (\\$47mn), which Yara attributes largely to NKr1.15bn of impairment charges on its Montoir, France, and Trinidad plants.

The fall in profit came despite lower energy costs and the strengthened dollar — average gas and oil costs in Europe were \\$6.2/mn Btu in the quarter, down from \\$8.5/mn Btu a year earlier. The fourth-quarter average price for front month gas at the UK NBP hub was \\$5.8/mn Btu. And the dollar's appreciation against the krone added NKr1.46bn to Yara's fourth-quarter results.

But sales fell by 5pc compared with a year earlier to 8.36mn t — with fertilizer sales down by 7pc to 6.15mn t, and urea falling by 20pc to 1.48mn t — as a result of prolonged maintenance turnarounds at Yara's plants in Ferrara, Italy, and Belle Plaine, Canada.

NPK sales rose by 3pc to 2.47mn t, with compounds up by 1pc to 1.11mn t and blends up by 3pc to 1.24mn t.

Nitrate sales (excluding calcium nitrate and UAN) fell by 7pc to 1.49mn t. Calcium nitrate sales fell by 3pc to 300,000t and UAN sales were down by 13pc to 203,000t. MOP and SOP sales rose by 28pc to 300,000t, although sales of DAP-MAP dropped by 28pc to 175,000t.

Prices for Yara's fertilizers were also down. Compound NPK prices slipped by 13pc compared with a year earlier, while nitrate prices were 15pc lower. Urea prices were down by about 20pc.

Deliveries were weaker generally, except in Latin America where they rose by 4pc year on year to 2.78mn t in the fourth quarter, reflecting Yara's acquisitions in the region.

The firm's deliveries in Brazil grew by 2pc (excluding the Galvani acquisition) even as Brazilian demand fell — perhaps reflecting the increasingly concentrated nature of distribution in the country.

European deliveries fell by 8pc to 2.08mn t, as turnarounds at European plants limited availability. North American deliveries dropped by 28pc to 549,000t as US imports declined. Deliveries to Asia-Pacific were down by 7pc compared with fourth-quarter 2014 to 445,000t, while African deliveries fell by 30pc to 286,000t.

Yara production dipped by 1pc in the fourth quarter to 5.49mn t, while total production including stakes in other producers fell by 5pc to 6.17mn t. Compound NPK production was flat at 1.21mn t. But, adjusted for the GrowHow divestment, Urea production fell by 10pc, because of plant turnarounds, and ammonia production was down by 4pc as a result of a long unplanned shutdown at Pilbara, Australia, and some European sites.

The industrial sector remained a source of growth for Yara in the fourth quarter, with AdBlue deliveries reaching more than 400,000t for the first time. But overall industrial margins were down, as demand from the mining sector for technical grade AN slows.

Yara expects European fertilizer deliveries to rise to a more typical level in January-June, with farm margins supporting fertilizer application. Phosphate and potash demand for commodity crops is expected to be weak, because farmers may choose to skip application for a season. But higher-value crops are expected to drive demand growth for nitrates and NPKs.

And the company expects to benefit from further reductions in its European gas costs in the first half of 2016, predicting savings of NKr2bn from average costs of \\$5/mn Btu and \\$4.6/mn Btu in the first and second quarters, respectively.