- Q1 adjusted EBITDA $487 mln vs $858 mln forecast
- 58% of European ammonia capacity idle at end-April
- Steep price decline, farmers delaying purchases
- Shares drop 5.5%
According to Reuters article published on April 28, 2023, Yara (YAR.OL) has idled more than half of its European ammonia production capacity due to a steep drop in fertiliser prices and reported first-quarter earnings well below forecasts on Friday, as farmers delayed purchases hoping for even lower prices.
The weaker results were due to steep market price declines, impacting both sales volumes and margins, the Norwegian company said, while flagging demand had returned in April.
Yara's shares were down 5.6% to 423.30 Norwegian crowns at 0808 GMT, underperforming a 0.7% drop in the Oslo benchmark index (.OSEBX).
The momentum has fizzed out for European fertiliser makers following a supply squeeze of essential crop nutrients last year due to the war in Ukraine. Furthermore, global production capacity is expected to increase above the historical trend in 2023 and 2024.
Yara said on Friday it had continued to curb production in Europe, idling an annual capacity of 2.8 million tonnes of ammonia, or 58% of its European capacity, and 3.9 million tonnes of finished products, or 23% of its European capacity, by end-April.
In the first quarter, 44% of its European ammonia capacity, and 52% of finished fertiliser capacity, was shut.
"Even though energy prices have been lower than last year, prices on ammonia and finished products are down even more, and that is reflected in our numbers," Chief Executive Svein Tore Holsether told Reuters.
Farmer economy metrics are now very favourable, however, with food prices in relation to fertiliser prices historically high, indicating higher nitrogen application rates.
"(The farmers) have waited to buy fertiliser and every day they have waited they have gotten a lower price, but now the market is tightening, there is a rush and then there is a risk for bottlenecks," Holsether added.
Yara said January-March earnings before interest, tax, depreciation and amortisation (EBITDA), excluding one-offs, fell to $487 million from $1.35 billion a year earlier. Analysts in a company-provided poll had expected a profit of $858 million.
Revenues dropped 30% in the quarter.
One of the world's biggest fertiliser makers, Yara last year capped its European ammonia production due to a surge in gas costs. Natural gas is a key feed stock in ammonia production.
