Fertiliser company Yara has reported weaker financial results for the first three months of 2023 compared to a strong first quarter in 2022.
The latest quarterly report shows steep market price declines impacting both sales volumes and margins.
First-quarter earnings before interest, taxes, depreciation, and amortiSation (EBITDA) excluding special items was $487 million, compared with $1.35 billion a year earlier, mainly reflecting reduced margins and lower deliveries.
Net income attributable to shareholders of the parent was $104 million (0.41c/share) compared with $944 million ($3.71 per share) in the first quarter 2022.
Yara Q1 2023 results
The main elements of the first-quarter results are:
- Weaker results compared with strong Q1 2022, with steep market price declines impacting both sales volumes and margins;
- Production curtailments of around 0.6Mt ammonia and 1.3Mt finished fertilisers for the quarter;
- Improved operating cash flow including operating capital release;
- Tighter nitrogen market into second quarter, with strong European demand at new season nitrate prices.
President and chief executive officer of Yara, Svein Tore Holsether said: “Declining market prices led to lower deliveries and margins in the first quarter, impacting results compared to a strong first quarter last year.
“However, we see a tighter nitrogen market into the second quarter, with strong European demand at new season nitrate prices and strong farmer affordability metrics indicating higher nitrogen application rates.
“I am also pleased with our strategic progress to decarbonise agriculture and serve new clean ammonia segments, announcing our cooperation with Enbridge to construct a world-scale low-carbon blue ammonia production facility near Corpus Christi, Texas,” he added.
Outlook
According to Yara, the energy transition, climate crisis and food security have become top priorities globally and with its leading food solutions and ammonia positions, Yara claimed that it is uniquely positioned to drive these transformations.
While consumption patterns for nitrogen are typically more stable than those of other crop nutrients, the current operating environment has increased short-term demand fluctuations, Yara added.
Yara responded to these fluctuations with partial curtailments of European production capacity when needed, and said it will continue to use its global sourcing and production system to import ammonia to Europe and supply global customers where possible.
Based on current forward markets for natural gas and assuming stable gas purchase volumes, Yara expects its gas cost for the second quarter 2023 to be $650 million lower than a year earlier.
The quarterly report explained that a declining price environment towards the end of 2022 and through the first quarter made farmers and distributors delay purchases, leaving season-to-date European nitrogen industry deliveries an estimated 7% behind a year earlier.
However, Yara stated that the start of the second quarter has seen a tighter nitrogen market, with strong European demand at new season prices and improved farmer affordability metrics indicating higher nitrogen application rates.