December 11, 2009 / 10:54 AM / 10 years ago

REFILE-UPDATE 3-Yara says high potash price hampering sales

(Corrects 10th paragraph to read “so (it) definitely makes sense” instead of “so there is definitely makes sense”)

* Farmers continue to delay NPK fertilizer purchases

* Says not interested in acquiring Germany’s K+S

* Says once considered bid for Terra, made no contact

* Market scenarios gives EPS of 15-35 crowns

* Shares rise 1.6 percent

(Adds Yara once considering bid for Terra Industries)

By Joergen Frich and Richard Solem

OSLO, Dec 10 (Reuters) - Yara International ASA (YAR.OL), one of the world’s biggest fertilizer producers, said on Thursday high potash prices were hampering sales to farmers, although demand for nitrogen fertilizer was picking up.

Yara said it was eyeing consolidation opportunities in the fertilizer sector and that it once considered a bid for peer Terra Industries Inc TRA.N but did not initiate any contacts. Yara said it was not interested in German K+S SDFG.DE.

“The last months we have seen demand for straight nitrogen fertilizer picking up, and the market has turned from being temporarily over-supplied to becoming tight,” Yara Chief Executive Joergen Ole Haslestad said in a statement.

However, he added that nitrogen, phosphorus, potassium (NPK) fertilizer remained Yara’s most challenging business area, as farmers continue to delay purchases due to high potash prices.

Potash inventories rose during the first-half of 2009, despite major production cuts, as farmers concerned about exorbitant pricing and hurt by the credit crunch deferred fertilizer application.

Buyers of the nutrient have also been staying out of the market in anticipation of big annual import contracts signed by China.

Yara said it wants access to more phosphorus and potash capacity, but Haslestad told Reuters on the sidelines of presentations to investors and analysts that the company was not considering a takeover of potash miner K+S.

“We have not considered that, that’s only a rumour,” Haslestad said. “Many alternatives around the world are much more interesting than buying into K+S,” he said, adding Yara would not buy mines on its own but could enter joint ventures.

Asked if Yara considered a bid for Terra Industries, spokesman Asle Skredderberget said: “It was considered but did not lead to any contact or anything — we had no interest in being in a bidding war in the U.S.”

“It is the management’s job to consider opportunities. The industry needs consolidation, we’re the biggest producer in nitrogen fertilizer and we have less than 10 percent global market share so (it) definitely makes sense,” he said.


Yara said at its capital markets day that a supply-driven market with an Eastern European swing scenario would translate into an estimated earnings per share (EPS) of 15 crowns ($2.60).

“The scenarios are not a prediction of future results, but are ‘what if’ examples based on selected fertilizer and energy price scenarios,” it said.

“The swing scenario is relevant if the fertilizer market is over-supplied and Eastern Europe is the highest cost producer. A slow-down in fertilizer deliveries like in the first three quarters of 2009 could give such a market situation,” Yara said.

It said continued growth in food demand and the need for improved agricultural productivity increased the probability of a return to a demand-driven market.

“A demand-driven scenario with $100 per ton urea margins yields an estimated EPS of 35 crowns,” Yara said.

Shares of Yara rose 1.6 percent to close at 258.70 crowns in Oslo trading on Thursday.

“The first impression is that this is in line with expectations,” analyst Per Haagensen at Fondsfinans said.

Yara said “the long-term fundamentals for fertilizer demand are strong as global grain consumption has proven robust during last year’s macro-economic slow-down, requiring continued improvements in agricultural productivity going forward.” (Editing by Rupert Winchester and Steve Orlofsky)

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