Yara Q2 2011

Norwegian chemical company Yara International ASA (OSE: YAR) reported strong quarterly earnings. The nitrogen fertilizer maker earned 7.82 NOK per share excluding net foreign exchange gain/loss and special items. EPS was up from 5.22 NOK per share last year. Last year there was large special items gains on Q2 from Fosfertil sale, so the headline number appears different. Improved margins drove the advance for the company.

Drought in Europe held back deliveries in April and May but the need for fertilizer has increased going forward. Yara expects global grain supply-demand balance to tighten further and believes this will keep crop prices elevated thus implying continued strong demand for Yara’s products. Domestic prices increased in China and export policy is stricter than last year.

Yara expects third quarter ammonia production to be in line with second quarter and finished fertilizer to run at full capacity. Nitrate inventories are low in Europe. Progressive export tax from China means export volumes will be more elastically following domestic prices. China is planning 110% urea export tax from November 1 2011. Yara is trading down 3.5% at midday.