Yara reports rise in fourth quarter earnings

Yara has today (Tuesday, February 8, 2022) reported improved fourth-quarter results as increases in prices more than offset the impact of higher energy cost.

Fourth-quarter earnings before interest, taxes, depreciation, and amortisation (EBITDA) excluding special items was $765 million (£565 million) compared with $511 million (£378 million) a year earlier.

Net income was a negative $26 million compared with a positive $246 million a year earlier, as Yara recognised impairment losses of $250 million, of which $232 million is related to the Dallol mining project in Ethiopia.

Excluding currency effects and special items, basic earnings per share was $1.19 compared with $0.76 per share in fourth quarter 2020.

Yara (the group) consists of Yara International ASA and its subsidiaries. Yara International ASA is a public limited company incorporated in Norway.

Yara fourth quarter results

According to Yara, The main elements of the fourth-quarter results are:

Increased margins reflect business model resilience;
7.9% ROIC, in line with a year earlier as impairments offset margin growth;
NOK 30 per share annual dividend proposed; total NOK 58 per share cash returns paid and proposed for 2021.

President and chief executive officer (CEO) of Yara, Svein Tore Holsether said: "Yara delivers strong returns in a volatile environment, with EBITDA excluding special items up 50%. I would like to give credit to our entire organisation for a solid effort.

“We propose a NOK 30 per share dividend to the annual general meeting [AGM], bringing our total cash distribution to shareholders for 2021 to NOK 58 per share."

Fourth-quarter operating income was $148 million, compared with $210 million a year earlier. Net income attributable to shareholders of the parent was $41 million ($0.16 per share) compared with $246 million ($0.93 per share) a year earlier.

The company has said that its industry fundamentals are robust, as the twin challenges of resource efficiency and environmental footprint require significant transformations within both agriculture and the hydrogen economy.

Its latest report to investors states that leading food solutions and ammonia positions are well placed to both address and create business opportunities from these challenges.

The report states that average urea prices were almost three times higher than a year earlier, with Yara’s realised prices also increasing strongly, but not to the same extent as spot traded prices.

Yara said that this reflects normal seasonality, as producer order books tend to be longer in the autumn, and that sharp spot price increases, if sustained, take time to feed through to other markets and products.

Market outlook

The latest results also state that Yara’s market environment is supportive, with higher nitrogen prices globally reflecting both strong demand and a tight supply situation.

However, high and volatile natural gas prices continue to pose a challenge for the nitrogen industry in Europe, adding to global food security concerns in a situation with already tight supply across the main nutrients, the report added.

As a result of the high gas prices Yara curtailed production at several of its European ammonia facilities in the fourth quarter, but production is currently running as normal.

Yara said that it is committed to supplying its customers provided that sufficient margins are available. The situation going forward will depend on market developments, especially for ammonia globally and natural gas in Europe.

Nitrogen in 2022

The report also states that global nitrogen prices have strengthened significantly in the past year driven by strong demand and limited supply additions.

Industry consultant projections show increased nitrogen capacity growth in 2022, however the demand outlook remains strong according to Yara, driven by solid demand fundamentals and low global inventories.

In Europe, nitrogen deliveries for the first half of the 2021/22 season are estimated to be 17% behind a year earlier. Deliveries have been slow also in January, but are expected to pick up shortly, as the main application gets underway in key markets, according to Yara.