UPDATE 2-Norway's Yara beats Q3 forecasts, keeps cap on ammonia output
By Reuters Staff
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OSLO, Oct 20 (Reuters) - Fertiliser maker Yara posted stronger than expected third-quarter core profits on Wednesday but said high gas costs would continue to curtail the Norwegian company’s ammonia output.
July-September earnings before interest, tax, depreciation and amortisation (EBITDA), excluding one-off items, rose to $765 million from $558 million a year earlier and topped the $738 million expected by analysts according to a Refinitiv poll.
Yara said higher prices for its products more than offset lower deliveries and increased input costs.
Last month, Yara cut its ammonia output in Europe by 40%, equivalent to 1.9 million tonnes, as soaring gas prices made European ammonia production unprofitable.
The front-month gas price at the Dutch TTF hub, a European benchmark, has almost quadrupled this year to record levels, amid high demand as economies recover from the pandemic and below-average levels of gas in storage at the start of the winter heating season.
Natural gas is the most important cost input for nitrogen-based chemicals and fertilisers, including ammonia.
Yara said it expected to pay $850 million more for natural gas in the fourth quarter than a year earlier, and $950 million more in the first quarter of 2022 compared with the same period of 2021.
However, since Yara is cutting ammonia output in Europe, it is buying less gas and so the cost impact, Yara said, would depend on the duration of the curtailed output.
Yara said it expected an “even tighter market situation” for nitrogen in 2022 due to strong demand and curbed output in Europe.
“European nitrogen production is essential to global food security, and we are therefore concerned about the impact current European natural gas prices will have, especially for the world’s poorest regions,” CEO Svein Tore Holsether said in a statement.
Yara has capacity to produce 8.6 million tonnes of ammonia a year across its plants annually, with more than half of this - 4.8 million tonnes - in Europe.
It has an overall production capacity of just under 23 million tonnes of finished products used to fertilise crops but also as explosives and cleaning exhaust from diesel engines, among other applications.
Almost three-quarters of Yara’s finished products are made in Europe, home to the company’s two biggest plants, in Sluiskil in the Netherlands and Porsgrunn, Norway. (Reporting by Victoria Klesty and Gwladys Fouche; editing by Nora Buli and Jason Neely)