Yara caps a record year with a strong quarter

Yara International ASA (OSE: YAR) communicated of strong fourth quarter results on improved margins and good farm profitability.. Demand was particularly strong outside of Europe. Fourth quarter sales topped 20 billion NOK handily with operating income printing at 3.386 billion, which is pretty much double that of last year years, but special items (16% in Yara Praxair divestment) cloud comparison. Excluding net foreign exchange loss and special items, EPS was 8.82 NOK per share vs. 6.25 in Q4 2010.

The 2011 annual result is the highest so far for Yara. Annual EPS with special items is just an inch below 42 NOK (it also includes Q3 Rossosh divestment, excluding special items the full-year EPS is just under 35 NOK, which is also easily the best number to date). The Board is proposing a dividend of 7 NOK a share for 2011. The dividend has been growing steadily and this represents a 27% hike vs. 2010.

The company did not add anything new to the Yara Pilbara situation, besides saying that it was important to secure control. The company is evaluating a world-scale ammonia/urea expansion in Yara Belle Plaine. Yara Belle Plaine Inc currently produces nitrate-based fertilizer in Regina, Saskatchewan, Canada. The large consumption area, existing infrastructure and good logistical positioning speak in favour of the investment.

Fertilizer deliveries were weaker. There was a 21% decrease in Western Europe on nitrogen fertilizer sales in Q4. Global phosphate and potash demand is hurting upon reduced use in India. Production has been curtailed to mitigate price effects. Overall there was a considerable drop in December but demand rebounded markedly in January.

Yara says good farm margins suggest normal spring nitrogen consumption in Northern Hemisphere. January pick-up in European nitrogen markets is positive but year-on-year deliveries might still be lower. Yara says that continued ”healthy” crop prices and margins are required to avoid a decline within the next 12 months. The stock is up slightly just under 260 NOK, having nearly touched 270 early on.