July 16, 2010 / 6:48 AM / 7 years ago

UPDATE 3-Yara seeks to triple market share through M&A

* CEO seeks 20 pct market share in nitrogen fertilisers

* Yara to go after M&A opportunities

* Analysts say smaller acquisition strategy likely

* Q2 EBITDA hits record 6.59 bln crowns vs 6.0 bln avg fcast

* Shares up 5.3 pct, highest level since April

(Recasts with CEO interview, analyst, background)

By Wojciech Moskwa and Joachim Dagenborg

OSLO, July 16 (Reuters) - Norwegian fertiliser maker Yara International ASA (YAR.OL) is aiming to triple its market share to about 20 percent through consolidation in the global industry, which it says has turned a corner after a bad year.

Cash-rich after its $4.1 billion bid for U.S. rival Terra Industries was trumped in February by CF Industries (CF.N), Yara says the fragmented sector must consolidate to smooth the cyclical fertiliser market and maintain decent margins.

"There should be fewer players in the market... you can be sure that we want to play a part in the consolidation process that will come," Chief Executive Joergen Ole Haslestad told Reuters in an interview on Friday.

"We have a (global nitrogen-based fertiliser) market share of 6.5 to 7 percent. In a normal market we should have a market share of about 20 percent," he said, adding that it was impossible to say when Yara would reach this threshold.

Yara said the nitrogen-based fertiliser market, where it was already the world's biggest player, was more fragmented compared with markets for fertiliers based on phosphates or potash.

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For a graphic on Yara vs peers: r.reuters.com/bas87m

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Haslestad would not name companies which Yara was interested in acquiring, but told a news conference: "We will go after opportunities when they come."

Analysts said that after a number of mega-deals in the fertiliser sector Yara may have to focus on smaller acquisitions or purchases of unlisted companies as leaders seek to secure strategic supplies and fill geographical gaps.

"Gaining 20 percent will not be easy, because there are not enough (big) candidates for takeovers, especially after Terra was bought up," said one Yara analyst who declined to be named.

Yara's scuppered Terra deal would have boosted its U.S. presence at a time when unconventional gas discoveries lowered historically-high North American energy prices -- a major factor in the production of fertiliser.

RECORD EBITDA

The world's sixth largest fertiliser group by market value posted above forecast second-quarter core earnings on Friday and said the 2010/2011 growing season was "promising" with strong demand for agricultural products after a slump in consumption.

This signals that margins could remain healthy even if energy costs climb.

"Global nitrogen prices have increased as demand has picked up, and European nitrate prices have started substantially higher than at the beginning of the previous season, supported by low inventories," he said, adding that Yara was operating near full capacity and would again do so in the third quarter.

Haslestad said demand was backed by "strong consumption growth for agricultural products and concerns that last years' record yields following favourable weather may not be repeated".

April-June earnings before interest, tax, depreciation and amortisation (EBITDA) rose to a record quarterly high of 6.59 billion crowns ($1.06 billion) from 1.26 billion a year ago.

The result beat an average forecast of 6.0 billion from a Reuters poll of 15 analysts. Second-quarter earnings were boosted from a year ago by a previously announced 2.6 billion crown sale of Brazilian phosphate producer Fosfertil.

"This was much better than what the market expected," Handelsbanken analyst Anne Gjoen said.

"The most important thing is that... stock levels for NPK are low and they are running at full capacity without inventories building up."

Yara said urea prices had increased "significantly" since late in the second quarter but warned that further price hikes could be capped by a wave of cheaper Chinese exports.

Yara shares surged 5.3 percent to 222.7 crowns by 1222 GMT, hitting their highest level since April 26 and outpacing a 0.64 percent rise on Oslo's main .OSEBX index.

$1=6.192 Norwegian Crown With additional reporting by Gwladys Fouche and Terje Solsvik; editing by David Cowell

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