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Yara Slides as Weak Urea Price Outlook Hits Earnings: Oslo Mover

Yara International ASA (YAR), the largest publicly traded nitrogen-fertilizer maker, dropped to a 15-month low in Oslo as an oversupply of urea drives down prices, curbing earnings for producers.

Shares in the Oslo-based company fell as much as 3.9 percent to 232.2 kroner, the lowest intraday level since June 25 last year. The stock traded 1.1 percent lower as of 1:10 p.m. in the Norwegian capital with about 326,000 shares having been traded, equivalent to 39 percent of average daily volume during the last three months.

“Yara’s earnings will be weak in 2014 through 2015, driven by soft urea prices,” Sigurd-Erik Nissen-Meyer, an analyst at Pareto Securities AS, said in a note. The company’s profit will drop to 20.5 kroner ($3.42) a share next year based on a Yuzhny price, a benchmark, of $320 a metric ton, according to Pareto. That compares to earnings per share of about 27.3 kroner this year, according to the average of 22 analyst estimates compiled by Bloomberg.

Yara, in which the Norwegian government owns a 36 percent stake, is facing lower prices for its nitrogen fertilizer amid increased urea exports from China. The company’s upstream operations convert natural gas and nitrogen into ammonia, which forms the basis for all nitrogen fertilizer.

Yara shelved a planned expansion of its Belle Plaine plant in Canada to stem rising costs and prevent a surplus of urea, it said on June 14. Urea prices have fallen about 27 percent to $310 a ton since Feb. 4, according to Green Markets prices compiled by Bloomberg.

The Norwegian company is also facing increased competition from suppliers of potash after a partnership between Belarus producer Belaruskali and OAO Uralkali of Russia fell apart at the end of July.

Yara’s third-quarter adjusted earnings before interest, tax, depreciation and amortization will decline 24 percent to about 3.2 billion kroner from a year ago because of lower fertilizer prices, higher fixed costs and increased North American gas prices, Pareto’s Nissen-Meyer wrote.

To contact the reporter on this story: Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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