Fertiliser Price Plunge Puts a Dent in Yara’s Q2 Revenues

Yara Experiences Q2 Financial Impact from Falling Prices, Forecasts Q3 Recovery
Fertiliser Price Plunge Puts a Dent in Yara's Q2 Revenues

Yara, one of the world’s largest fertiliser manufacturers, has reported that its financial results for the second quarter (Q2) of this year have been affected by declining prices. However, the Norwegian company remains optimistic about a recovery in Q3 based on the latest price trends. According to the financial results released on Wednesday, July 19, Yara’s Q2 earnings before interest, tax, depreciation, and amortisation (EBITA), excluding one-off items, were $252 million, compared to $1.4 billion in the same period last year. The company attributes this 83% drop to lower margins resulting from falling selling prices, although this was partially offset by a decrease in energy costs and improved volume/mix.

Since the fourth quarter of 2022, fertiliser prices have been on a downward trajectory, leading to a low-margin environment for the industry, Yara stated. While total product deliveries were 2% lower than the previous year, there was an increase in the share of premium product deliveries. Yara’s Q2 revenue was $3.9 billion, down from nearly $6.5 billion in the same period in 2022. The company’s financial documents also revealed that revenue for the first half of 2023 (H1 2023) stood at $8.1 billion, compared to $12.3 billion in the first six months of 2022. Operating income in Q2 recorded a loss of $250 million, in contrast to a figure of $1.2 billion in 2022. The results further indicated that ammonia and finished fertiliser production are currently below 2022 levels.

In response to the latest financial results, Svein Tore Holsether, President and Chief Executive at Yara, acknowledged the impact of the declining price trend on the company’s Q2 results. He noted that the industry has been pushed into a low-margin environment in 2023. However, Holsether expressed optimism about the future, stating that recent price developments indicate stronger demand. He highlighted Yara’s flexible business model, which has proven resilient in the face of price volatility and changes in raw material sourcing.

Holsether also commented on the recovery of volumes in the European nitrogen industry during the second quarter and stated that Yara’s season-to-date deliveries were in line with the previous year. He suggested that this indicates an increase in fertiliser application rates for the current season, despite supply overhangs from the previous season. The Yara CEO further stated that recent price developments point to stronger demand and a tighter urea market in the coming months, despite significant capacity additions. He added that favorable farmer incentives and low producer stocks in Europe create a positive outlook for nitrate markets. Based on the latest price trends for phosphate and potash, Holsether believes that margin recovery is likely in the third quarter.

Overall, Yara’s Q2 financial results reflect the challenges posed by falling fertiliser prices, leading to lower margins. However, the company remains optimistic about a potential recovery in the coming months based on the latest price developments and strong demand projections.