Yara upbeat as first-quarter soars past forecast, shares surge

Norway's Yara, one of the world's biggest fertiliser groups, posted above-forecast first-quarter results on Friday and said short- and long-term prospects for its markets were sound, boosting its shares. Yara's shares were up 13.8 percent at 396.50 crowns at 1046 GMT, while Oslo's benchmark index was up 1.1 percent.
Now worth $22 billion, Yara said global food markets were tight and fertiliser capacity was growing slower than demand, so margins remained fat despite rising energy prices.
Operating profits rose nearly 170 percent year on year to 2.86 billion crowns ($577.6 million) in January-March, beating all forecasts in a Reuters poll of 13 analysts whose average estimate was 1.85 billion crowns and highest 2.15 billion.
"This has indeed been a remarkable quarter," Chief Executive Thorleif Enger told a news conference. "There is reason to be optimistic ... both on a one-year basis and longer term."
Analysts said the results highlighted improving prospects for the fertiliser market, lifted by surging global demand for biofuels, a sector which absorbs much grain and creates more incentives for farmers to use fertilisers and boost production.
"One is starting to realise that this market will stay tight not only for one quarter, but perhaps for several years," analyst Eivind Bergkaasa at Arctic Securities said. Bergkaasa said the effect of Yara's leading position in Europe was materialising in the results. "The market is really tight, and when new capacity looks to be even more delayed, the underlying market is tightening even further."
Yara said start-ups of new production capacity are running at lower rates than demand growth, making prospects for the fertiliser market healthy. "On the whole, the results were very strong," said analyst Christian Must at Fondsfinans.
Yara said results for the first quarter were boosted by a substantial margin expansion. "What has been particularly pleasing has been the development in NPK," Enger said.
NPK fertiliser is a mix of the three major nutrients - nitrogen, phosphorus and potassium - and is one of Yara's key products. NPK prices surged 73 percent in the quarter, with margins up 60 percent compared with last year on the back of rising values for all three nutrients. The main fertiliser products saw, on average, a price increase of 54 percent. Enger said the recent announcement of a 135 percent Chinese fertiliser export tax would further tighten the global market.